As a business owner, you understand the critical role that suppliers play in delivering services or products to your clients. But how do you ensure that your supplier contracts are still aligned with your business needs and goals? In this article, we'll walk you through a comprehensive scope review, performance evaluation, financial assessment and legal considerations to help you make informed decisions about your supplier contracts. With our guidance, you'll be equipped to optimise your supplier relationships and secure the best deals for your business.
1. Scope the review
Does your business still need the services or products? Does the current scope of services or products meet your current and future needs? If the supplier contract is an important part of you delivering services or products to clients or to a specific client then you should look at the supplier contract and client contract in parallel to ensure that the scopes cover your obligations to the client.
2. Performance review
Is the supplier doing what they should under the contract? Do you have a good relationship with them and how responsive are they to questions, requests and complaints? Are you getting the best services or products to meet your needs or could you get something better elsewhere? Look at the market to see what else is out there, and consider using that information in any discussions with the supplier about renewing the contract.
3. Financial review
Are you still getting a good deal or could you get a better deal elsewhere? Are there any payment review clauses? You may be due a discount or a reduction for being a customer for a period of time. If the supplier has not been performing as they should have been, you may be due a refund or credit for poor or non- performance. Make sure that you know the payment terms and have internal process in place to comply with it, otherwise you may be at risk of interest penalties or in extreme cases, termination of the contract.
4. Legal review
Are you reliant on the supplier having certain accreditations, permissions or qualifications in place and do they still have these? There could be a knock-on effect if you have an obligation to your clients to ensure that subcontractors have certain legal accreditations, permissions or qualifications in place.
5. Termination/renewal review
Are there any break clauses or rights of termination that could be used? Is there an auto-renewal clause? How critical is this contract to your business? Would there be any knock-on effect for your ability to perform your client contracts? If the contract was terminated by the supplier, do you have a contingency or alternative supplier you could use? Do you need to take any action to ensure renewal of the contract or if you want out of the supplier relationship to prevent any auto-renewal or to terminate the contract?
Reviewing supplier contracts
A general summary to consider for all contracts:
- Is the key contact information still accurate?
- Has anything significantly changed in law that needs to be addressed?
- Remember your suppliers may be carrying out the same process, so it’s important that you look honestly and objectively at your own performance as well as theirs
- Make sure you schedule the next review date and it is scheduled well in advance of any auto-renewal dates
Get legal assistance from LawBite
By conducting thorough scope, performance, financial and legal reviews, you can ensure that your supplier contracts are in sync with your business objectives. Remember to keep an eye on termination and renewal clauses to maintain control over your business's future. As you plan ahead, consider the general summary of key considerations we've provided and always schedule the next review well in advance to avoid any unwanted auto-renewals.
At LawBite, we're committed to empowering entrepreneurs like you with the knowledge and resources to thrive in the legal landscape. Through our contract review service, we can assess any existing agreements you have in place and recommended alterations that work in your favour. To find out more, book a free 15 minute consultation with one of our expert contract lawyers or call us on 020 3808 8314.