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Execute a good contract to minimize the risk of working with a third party

On Behalf of | Oct 20, 2020 | Business Formation

As a business owner, you probably rely on third-party contractors for at least some of your business needs. Whether it’s outsourcing marketing tasks or working with a third party to purchase products for your store, it’s important that you have a good, solid contract with them.

Not having a good contract could mean that you suffer financial losses if anything disrupts the supply chain or causes a security breach. That’s why you want to have a third-party management program.

A third-party management program is designed to minimize the risk of working with third parties. To set up a third-party management system of your own, you should:

  • Take time to assess the risks of working with third parties
  • Screen all potential contractors or third-party businesses
  • Talk to your attorney about creating an effective contract for third-party contractors, so you know that they’ll be held to your company’s standards

The goal of any business owner should be to mitigate risk when working with others. That means working with businesses and individuals whom you trust.

A good contract will go a distance towards protecting you and your third-party vendors. Your contract should establish the start and end dates of your work together, what they will supply and what you will supply. There should be specifically outlined dates for payments or deliveries, so you can hold the contractor to the deadlines as needed.

Contracts are essential, because they prevent misunderstandings and specify both parties’ rights. Having a contract in writing is a must, because while verbal contracts may be acceptable, the reality is that they are difficult to prove and aren’t necessarily as thorough as one drawn up by your business attorney.

As a new business owner, it’s a good time to talk to your attorney about how you’d like to build relationships with third-party contractors or vendors. They can help you create a contract that you can use with all new parties or with a specific party with whom you’d like to work. If you’re offered a contract, remember that you should always have your attorney review it before you sign it. Protect yourself and your business by following that rule.