The Importance of Getting It In Writing
You finally landed that client or found the consultant you needed and are ready to get started on the project. It's tempting to move forward with just a handshake. After all, time is money, and everyone trusts each other, right? If not, you wouldn’t go into business together.
It's worth the time to create and sign a written contract before you do any work. More than a binding legal agreement, a consulting contract also serves as an important point of reference for both consultant and client, eliminating the frequent harm caused by simple confusion or honest misunderstandings.
A good written agreement will:
Define the Scope of Work
When buying or selling consulting services, you are likely to discuss a variety of activities that could be tackled. In fact, a client's wish list can quickly grow quite extensive, and the consultant might start seeing dollar signs. When it comes time to complete the job, it helps to have a clearly defined scope of work in the contract, which outlines what tasks will be tackled. Anything not in scope has not been contracted. Having a written description of services to be performed prevents future disappointment or confusion.
Identify Expectations and Responsibilities
There's more to a contract than a simple regurgitation of boiler-plate legalese found on the internet. Although standard legal “terms and conditions” are important, a well-written contract goes beyond them to clearly state the responsibilities of both the consultant and the client. What results does a client expect from the consultant? Does the client understand that certain performance issues and time frames are dependent upon the client providing specific information in a timely manner or otherwise having resources available to the consultant? How and when is billing to be resolved? Are expenses paid up-front or reimbursed? During the course of the relationship, should there be a disagreement or misunderstanding, both parties can easily refer back to the written document and quickly resolve the issue without acrimony.
Establish the Relationship
A written agreement can be an important method for establishing the nature of the business relationship. This protects all parties. For example, a consultant typically works as an independent contractor. A binding legal agreement could prove especially beneficial to the client should they need to prove to the IRS that the consultant is not an employee. A mutual description of the relationship also makes it clear that no one party has the power to dictate terms.
These benefits don’t apply simply to consulting. Any good business consultant will advise you to use this same reasoning with all your providers and service partners.