Check up on suppliers & review your contracts

The term "credit crunch" has been so widely used over the past year that it has been added to the latest edition of the Oxford English Dictionary. It is a phrase depicting the current social and commercial economy; but for someone involved in managing the contracts at your organisation, it is something you can help control.

To combat the worst effects of this ongoing financial crisis, companies should evaluate the financial health of their customers, suppliers and double-check all contracts.

Many businesses are affected by the current economic climate, which includes your customers and suppliers, but also their customers and suppliers. This means it is increasingly more important to review any business that a contract is held with and ascertain if their financial stability is under threat or at risk.

After reviewing the status of each business, it is imperative that you are aware of all terms and conditions that could affect the way you are doing business. For example, find which contracts include termination clauses in the event of financial distress.

5 Top tips for businesses:

1    Ensure you have robust agreements in place with important customers and suppliers, and review these regularly in regards to each party's obligations and liabilities.
       
2    Understand whether the contract terms can be improved in relation to financial distress.
       
3    Review contract compliance:
Make certain your paperwork is in order and accessible in case any party should start to look for ways to get out of the contract.
       
4    Carefully monitor activities relating to the contract:
Check if your suppliers are being slow to pay or are trying to engineer their way out of commitments.
       
5    Be prepared for problems:
If you are reliant on certain customers & suppliers, make sure you have a realistic contingency plan in place.