We contract with people on a daily basis. In order to ensure that these relationships are productive and effective we need to engage in agreements, contracts and procedures which will safeguard the objectives of all concerned. In this article, Nikki Viljoen explores the dynamics of contracting, partnerships and procedures.

There are many different types of contracts that exist in every small business. For example, there is a contract between you and your supplier, you and your service provider, you and your client. It is essential that you are properly covered with the correct indemnities when entering into agreement with others.

Contracts between you and the client
Make sure that the agreement is not just a handshake. Make sure that you understand (in plain English) exactly what it is you have signed and what the consequences are should either of you renege on the deal. For example, some franchisors insist on this, that you are legally and contractually obliged to register for VAT, irrespective of whether you do the minimum turnover or not. Go through the contract point by point, and make sure you understand and are comfortable with the terms and conditions.

Contracts between you and a partner
Why do you need a partner? What are they going to be doing? What are their responsibilities? What are their expectations? What are your expectations? Who gets what? Who does what? Who pays for what? Who is paid for what? If the whole venture goes ‘belly up’ how do you get out of it? These are all questions that need to be asked before you ‘get into bed’ with a partner! Be clear about what you want out of the deal; be clear about what they want out of the deal. Above all – be fair!

Remember, your document should cover the following:

  • How you put the whole thing together. Who pays for what and how much.
  • Segregation of duties – what the responsibilities are for each person. For example one person may be excellent on the financial side and the other on the marketing side. This should be stipulated.
  • Be clear on the money issues. One of you may feel you are doing more than another – in this case why not put the whole thing into percentages? Alternatively each partner gets a fixed amount. Whichever way you decide, make sure that all information is documented and that each partner is clear on what is happening to the finances.
  • If the union needs to be dissolved, for whatever reason – document what is going to happen and how and put it into the contract.

Written Procedures
It is a good idea to write down how you do things or how you want things done. This will also assist you in doing the admin in the same manner every day.

When you do hire staff, the manner you want things done will be documented and there can be no misunderstanding on how things must be done. A good way to do this is to write down firstly what you do every day, (for example – banking) every week (for example bank reconciliations), every month (testing of alarm) and so on. This will give you a good checklist that can be signed off as and when you perform the tasks and ensures that nothing gets left off or left behind, so to speak. Once you have established the tasks that need to be done on a regular basis, it is much easier to then put together a documented procedure on how you want the tasks to be done. Remember to keep it simple and in a logical or chronological order of events.

This is very important, particularly in the instances where you have staff. Once they have gone through the document several times and you are confident that they know what it is that they are required to do, there can be no mistake about what is required of them and how they are to perform the various tasks. This step safeguards you and the staff member – both of you are protected from each other! You now have the procedure – it is implemented and the staff member knows exactly what he/she is supposed to do.

The staff also need to be made aware of the consequences of their actions or inactions as the case may well be. The consequences must ‘fit the crime’ and they must be fair for all. Be careful when you don’t discipline for a misdemeanour as you may be setting a precedent, and once set they are extremely difficult to unset. You have to be seen as being fair and just and you have to be consistent.

Insurance
Is your business adequately insured? Are you adequately insured? When I say adequately insured, I mean are you insured for the right stuff? Remember, insurance is a relatively broad thing – there is short term insurance and long term insurance.

Make sure that your short term insurance is correct – that’s you insuring for the all the ‘nuts and bolts’in your business i.e. your computer and printer, your office furniture and so on. Then of course there is the long term insurance – if you have a partner (and this includes your wife/husband and/ or significant other) in the business, or even just your staff members, you need to be insured in case something should happen to you. It is a good idea at this point to make sure that your will is in order and that everything has been left to whomever it is that you want to leave it to. Make sure that you go to someone who knows what they are doing in terms of your will. Someone who does and/or specialises in Estate Planning and Trusts would be a good idea.

About the author: Viljoen Consulting is owned by Nikki Viljoen. Nikki is an Internal Auditor and Business Administration Consultant. Although the economy is supposed to be grown by entrepreneurs and SMME-s, these are the very people who are most at risk in terms of noncompliance and ‘white collar crime’. Nikki has developed a ‘start up’ workshop for new businesses that focuses on making the new business owner aware of what legislation needs to be adhered to as well as everyday tips on Administration.

Small Business Forum

The Small Business Forum is an independent network of entrpreneurs and small business owners established to encourage and support the creation, growth and development of small business in South Africa.

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