Contracting is a requirement for most businesses. Without a contract, the company and its leaders may not be legally protected in any operations the company will take. As you know, contracts are pretty complicated and lengthy; that’s why most companies choose to have attorneys or a contract management team in place to oversee the portfolio.
However, as a company leader yourself or a business owner, knowing the basics of contracting in your company is non-negotiable. One of the many things you must know is how often certain contracts should be reviewed or updated. Even if you have a team of experts that manages your contracting requirements, it’s still best to learn about these things so you can know how to improve contract management in your company.
Here’s a general guideline as to when to update certain types of contracts so your company can manage them effectively:
1. Contracts That Need an Update Every Two Years
Updating of contracts will vary depending on the nature and scope of each agreement. But generally, your company’s documents that are actually contracts, such as operating agreements and other general records, need an update every two years. If circumstances may happen between the agreement, the span of two years will not apply. You need to review your contract to make the necessary changes. Updating of contracts prior to the second anniversary usually occurs when a partner needs to depart, or there’s a need to change ownership.
2. Contracts That Needs an Update Annually
Since contracts have different scopes and nature, it’s hard to tell when each of them should be updated. But, if you’re unsure, the best time is annually. Most contracts usually have one-year terms, including leases, licensing agreements, and non-disclosure and confidentiality agreements. Always review your contracts annually, even if some are intended to last for more than a year, just to be sure.
3. Contracts That Needs an Update Biannually
Some contracts need an update more frequently, especially if financial matters are involved. Updating them twice a year will be your safest course of action because a substantial amount of money is at stake. You would want to ensure that your company is on track to fulfill all obligations to avoid any disputes in the agreement. Contracts that may fall under this category may include financing instruments and professional services agreements.
4. Contracts That Needs a Quarterly Update
While companies can review contracts annually, there’s nothing wrong with being proactive and checking them quarterly. This way, you can avoid larger issues that may arise in the future because you’ve gained enough oversight to catch matters. The quarterly review is doable for contracting with vendors and suppliers and for companies with a lot of payroll and taxes to take care of.
5. Contracts That Needs a Monthly Update
The monthly update is probably the most tedious task, but some contracts really require a monthly review. Contracts that require a monthly update might be those with a short duration, contracts of extremely high value, or contracts with somewhat unreliable partners. These contracts will require you to perform diligent oversight and frequent communication, so you need patience so the arrangements will run smoothly.
Updating and managing contracts is a tedious process for any business. However, it is strictly necessary because contracts are your weapon to minimize your and your business’s risks. It will serve as your proof in case the expectations of one’s party are not fulfilled. Fortunately, you can make contract management more seamless with the help of useful and affordable software solutions available.
If you are looking for the best contract management solutions for your company, you’ve come to the right place! Anapact can provide you with the best and easy-to-use contract management software to reduce risk, ensure compliance, and make the most of your contract documents in your company. Get a demo today!