Technically, it’s still winter, but in New Orleans, the weather has been incredibly mild and it seems like we’re entering spring. That has me thinking of spring cleaning.
1. Inspect your contracts
Contracts may be the most important legal area of your small business. Contracts control the relationship with your employees, contractors, service providers, manufacturers, distributors, suppliers, and most importantly, your customers. Make sure that your contracts are up-to-date and have been reviewed by your attorney. If it’s been a while since it’s been looked at, consider getting the contract a checkup. If you’re spending a significant amount of time drawing up a contract for each new relationship, it may be time to consider purchasing a form contract that can be quickly custom tailored for each relationship with a few blanks. A good, solid contract can make or break any litigation. Including a provision requiring a breaching party to pay attorneys fees is a great idea.
2. Review insurance policies
Has your business grown since you purchased or renewed your policy? Have you expanded? Do you still need the same amount of coverage? When was the last time you asked for a discount? Make sure your policies are up to date and reflect the value of your business and any investments you’ve made in the business. Consider asking about an umbrella policy, which covers events which aren’t covered by your other policies.
3. Make sure you have trustworthy advisors
Every small business owner should have an accountant, lawyer, and insurance agent on their contacts list. When the cash register numbers aren’t matching up, a catastrophic event occurs, or one of your employees is causing trouble, one of these professionals needs to be contacted as soon as possible. Even if you don’t need their services yet, make sure you have someone at the ready. When you do need help, you don’t want to be pressured into choosing the wrong person to help, and you don’t want to waste time trying to find the right person.
4. Review your collection policy
If you’re in retail or a cash business, this may not be much of a problem; however, if you perform work and invoice your clients later, collections are crucial. Lowering your accounts receivable and turning it into cash can become a job in and of itself for your small business. Create a collection policy and stick to it. Make sure your clients are aware of it. Maybe provide incentives (10% off) to those who pay within 3 days of an invoice. Show them how much the discount is. You may want to consider adding a provision for recovering the costs of collection.
5. Make sure any litigation is cost-effective
Litigation can be driven by emotion, feelings, ego, or revenge. Don’t do this. Ultimately, all litigation, including the costs of your attorney (and the other attorney if you may be held liable for attorneys fees), needs to be balanced against your bottom line. Is it worth it? Does it make business sense? If it’s not a smart business move, try to find a way out of it.