What Is a Verification of Employment Letter?

What Is a Verification of Employment Letter?

If you own a business that employs people, you’ve got to assume a wide range of responsibilities. A lot of those responsibilities are pretty obvious, like conducting payroll or fulfilling new tax requirements.

Yet every so often, an employee will come to you asking for something that might seem a bit less straight-forward — such as the provision of evidence of employment to help them secure a bank loan or snag a new tenancy.

But this sort of request is actually a lot more common than you might think. And when it happens, the easiest way to help out is to issue a Verification of Employment (VoE) letter.

What is a Verification of Employment Letter?

A VoE letter is a short document that an employee can use to prove they are currently employed at a particular company. Banks and mortgage companies will often request potential borrowers to produce a VoE letter before they agree to offering a loan, and landlords will usually ask for a similar reference before letting a property out.

At the end of the day, lending institutions and other agencies ask for VoE letters to prove the individual in question is on top of their finances or will be in a position to make regular payments to repay a debt obligation. If you employee foreign nationals, a VoE letter could also be a crucial visa requirement.

Bearing that in mind, chances are most of your employees will need to ask for a VoE letter as some point over the course of their work. It’s not something individuals need very often, but it isn’t a rare request. What’s more, it can be a very important request.

As an employer, you aren’t legally obliged to issue a VoE letter in most situations. Various states have different rules relating to when and how these references are issued. That being said, these rules are generally quite similar – and it will only take a few minutes out of your day in order to write one.

What Information is Included in a Verification of Employment Letter?

A VoE letter isn’t an ordinary, long-winded employment reference. The organizations requesting a VoE letter typically only want employers to confirm a few of the key facts relating to an individual’s employment. These include: the date employment began, the individual’s name and title, their salary and how often they are paid and whether the employee is part-time or full-time.

The letter itself follows the style of an ordinary business-style letter – but if you’d like to see an example or two, there are plenty of websites that offer easy-to-use templates. If your business has official stationary, this is a good time to use it – and you should generally include business contact details in case the ultimate recipient of the VoE letter has further questions concerning the letter.

You should also seal the envelope before issuing it to your employee.

It might not seem like much, but VoE letters can make a world of difference to an employee’s personal life. That’s why authorship of these letters is a relatively crucial admin task that comes hand-in-hand with taking on staff.

Laptop Photo via Shutterstock

This article, “What Is a Verification of Employment Letter?” was first published on Small Business Trends

100+ Time Saving Tips for Small Businesses

100+ Time Saving Tips for Small Businesses

When you’re a small business owner, time is always working against you. There’s a lot to get done and you typically don’t have a big staff, or a staff at all, to help.

You could try working more hours, but that can actually work against you. You can hire employees, but that’s not always financially feasible.

100+ Time Saving Tips for Small Businesses

Or, you can use the time saving tips below to work more efficiently and boost your time management skills.

Prepping for Better Time Management

These time savings tips are more effective when implemented on top of a solid foundation. Here are some ways to get your mind and body ready.

100+ Time Saving Tips for Small Businesses

The Enemies of Time Management

No matter how good your intentions, sometimes things get in your way.

100+ Time Saving Tips for Small Businesses

If you want to make the most of these time saving tips, you need to watch out for the factors that will prevent your success:

Procrastination: Friend or Foe?

Sometimes, it pays to put off an action or decision. In these cases, procrastination can help you.

On the other hand, procrastination can be one of the greatest enemies of time management. Try these tips to get your procrastination under control.

100+ Time Saving Tips for Small Businesses

Time Saving Tips

Here’s the first round of tips in this post. Each link leads to a post that will help you improve your time management skills and get more done in your day.

100+ Time Saving Tips for Small Businesses

One More Book

Aside from the book mentioned earlier, the book, Deep Work: Stop Being Shallow With Your Minutes is another resource that “deals with the paradox of time management in the age of social media.”

Time Saving Tips for Social Media

One of the best places to reduce time spent in your small business, without reducing quality or quantity, is with social media.

100+ Time Saving Tips for Small Businesses

There are many ways to save time and become more efficient when using social sites, all without becoming a “social media robot.”

Using Cloud Computing to Save Time

You can also move to the cloud use the cloud to save time on everything from your everyday tasks to more long-term projects.

Using Automation to Save Time

Automation enables you to save time like nothing else. Here are some posts to help you make the most of automation tools.

100+ Time Saving Tips for Small Businesses

Next Generation Automation: Chatbots

Chatbots use artificial intelligence and machine learning  to provide customer service and even sales support.

100+ Time Saving Tips for Small Businesses

Here’s what you need to know about these time saving tools:

Managing Time Through Delegation

If you’re lucky enough to have employees, you can manage your time, and theirs, using delegation. Here are some time saving tips related to doing just that:

100+ Time Saving Tips for Small Businesses

Managing Time Through Outsourcing

On the other hand, if you’re a solopreneur or have a small staff, outsourcing is a solid way to get more done over the same time period. Here are some time saving tips related to that approach:

100+ Time Saving Tips for Small Businesses

Good Project Management = Time Saved

Using tried and true project management techniques can save time, every time. If you’re looking for a way to implement project management practices, here’s a list of 20 project management tools.

100+ Time Saving Tips for Small Businesses

Time Management Tools and Apps

Happily, you have your pick of online tools and mobile apps to use for managing your time. Check out these posts for suggestions:

100+ Time Saving Tips for Small Businesses

Tracking is the Key to Successful Time Management

It’s hard to understate the importance of time tracking. After all, if you don’t track how you use your time, how can you manage it?

100+ Time Saving Tips for Small Businesses

This article, “100+ Time Saving Tips for Small Businesses” was first published on Small Business Trends

6 Ways Work Friendships Benefit Your Business – and 7 Ways to Encourage Them

6 Ways Work Friendships Benefit Your Business -- and 7 Ways to Encourage Them

You want your employees to get along with each other — but do you want them to actually be friends? While you might think that friendships between employees will lead to goofing off and gossip, studies by The Gallup Organization have found just the opposite. Having close friends at work confers a variety of benefits not only on employees, but also on the companies they work for.

Work Friendships Benefit Employees

  • Gallup says employees who have “a best friend” at work are seven times more likely to be fully engaged in their jobs.
  • The same study reports that close friendships at work increase employee satisfaction by 50 percent.
  • Workplace friendships are especially important to women. In a recent Gallup poll, two-thirds of women say social interaction is a “major reason” they work.

Work Friendships Benefit Your Business

  • Employees who feel a deep connection with their team members are more likely to take positive actions that benefit the business, Gallup says.
  • When employees have good friends at work, it positively affects company profitability, safety, inventory control and customer loyalty.
  • Employees who have a best friend at work are less likely to leave their jobs.

How to Encourage Work Friendships

Despite the importance of close friends at work, many businesses are falling short in terms of helping employees connect. What can you do to encourage friendships among your employees?

While you can’t (and shouldn’t) force people to become friends, you can provide more opportunities for them to get to know each other and develop friendships naturally. This is a topic I know a little bit about: In my previous life as a manager, I supervised several “generations” of employees who were close friends, socialized outside work and, in many cases, are still friends 10 or 20 years later. In fact, I started my business with two of my friends. Here are some ideas:

1. Use a buddy system to welcome new employees. Pairing a new hire with someone who can show him or her the ropes, both formally and informally, encourages friendships. Look for buddies who are outgoing and friendly, and can introduce the new employee to lots of other people.

2. Break bread together. Everyone loves to eat. Bring in lunch once a week, order pizza every Friday or throw a monthly potluck. Talking over a meal is a great way to build friendships.

3. Hold offsite meetings. Once or twice a year, get your team offsite for a day or a weekend. In addition to the strategic planning or training, allow plenty of time for just hanging out and having fun.

4. Get active. Try holding a wellness challenge where teams of employees compete. Encourage employees to walk together at lunch instead of sitting at their desks — or get out there and lead a group yourself. Have an afternoon “dance party” where everyone gets up from their desks and dances around for 15 minutes. Doing silly stuff together loosens people up and builds bonds.

5. Play games. From trivia contests to sports-related office pools to “Guess whose baby picture that is” contests, games get people talking to each other. (My employees once held a contest to guess who had the biggest head.)

6. Team up. A company softball or volleyball team in a local recreational league can build bonds outside of work, and even employees who aren’t athletic can cheer their co-workers on.

7. Plan monthly outings. After-work activities like going bowling, playing pool or rock climbing can be a lot of fun. Instead of planning it yourself (which can come off forced), put employees in charge of choosing and organizing the events.

With all these activities, the point is not so much the activity itself, but the space in between when people start talking. Don’t schedule every moment of an event — give people some downtime to interact naturally.

The number-one way to build employee friendships: Model them yourself. Take a real interest in your employees. Spend time getting to know them and learning about their lives. Yes, there’s work to get done, but it’s also important to build relationships with the people who help you do it.

Co-workers Photo via Shutterstock

This article, “6 Ways Work Friendships Benefit Your Business – and 7 Ways to Encourage Them” was first published on Small Business Trends

Top 10 Ways to Create an Inspiring Workplace (Video)

Inspiring and motivating your small business employees takes both science and leadership.

On the one hand, there are specific actions you can take to make your office more inspiring on a day-to-day basis.

On the other hand, there are things that only you as the leader of your team can do to motivate your employees to work at their peak performance.

Both sides of the equation are explored in the top 10 ways to create an inspiring workplace video above.

Tips to Create an Inspiring Workplace

The video kicks off by suggesting some ways you can create an inspiring work environment using approaches grounded in science including:

  • Organizing your workspace: de-cluttering your work environment also helps de-clutter your brain. It lowers the number of distractions while enabling your personal processes to work smoothly with nothing in the way.
  • Improving your view: there’s no reason you or your employees should spend the work day staring at pinned-up memos and empty walls. Encourage folks to hang images that motivate them, from inspiration quotes to pictures of family and places they want to visit.
  • Using smell: smells can calm you down or fill you with energy. No matter which you are trying to accomplish, make sure you have something on hand to provide the boost you need.

After the science comes leadership and that’s where you come in. Some ways you can inspire and motivate your small business employees include:

  • Promoting personal growth: show your employees you care about their careers with opportunities to learn new skills. And, this is one employee benefit that will help your company as well.
  • Recognizing achievements: make sure to call out employees when they’ve achieved something. The motivation from such recognition can keep people going for months.
  • Monitoring and measuring: to assure your employees remain inspired, make sure to check in with them every now and then to get their feedback.

All 10 of the ways to create an inspiring workplace discussed in the video above take time and effort, but the payoff is a motivated, productive workforce.

Make sure to also check out the full list of 20 power packed tips to create an inspiring workspace.

This article, “Top 10 Ways to Create an Inspiring Workplace (Video)” was first published on Small Business Trends

5 Ways to Go From Co-Worker to Boss and Get R-E-S-P-E-C-T

It’s not uncommon to start in a non-management position, then work your way up to management within the same organization. Management is often the next level that employees pursue, and since these individuals are already employed with the company, their experience makes it that much easier for them to reach the top.

While advancing to a management role is not always difficult, it’s certainly a challenge when tasked with supervising those who were your former lunch buddies and happy hour partners. The truth is, once the dynamics of the working relationship change, the individual in the management role has a higher level of responsibility and accountability that should not be compromised.

Here are five key tips to help you make a smooth transition from co-worker to boss:

 

1. Gain a Clear Understanding of the Management Role You Have Accepted

 

As the saying goes, to who much is given, much is required. Speak with your immediate supervisor and learn the expectations for your new management role. You have to be mentally prepared for it. No longer can you think like an employee who is responsible only for yourself, but as a member of management that is responsible for leading others, enforcing policies, and holding individuals accountable.

Now that you are responsible for supervising and advising others, you must lead by example. You are going to be constantly evaluated by your staff both above and below you. Your former co-workers are watching you closely to see how you will change, and your supervisor is watching to see if you can handle the new job as the boss.

 

2. Discuss With Your New Supervisor the Need for Support Throughout Your Transition

 

Communication is key to being successful at work. Inform your manager of how you plan to run your team, and learn if they have any objections. It’s important to ensure that you have your manager’s support, and that you are all on the same page.

 

3. Have Honest Conversations With Former Co-Workers About How Your Working Relationship Will Change

 

Don’t assume that your former co-workers will understand the need for your working relationship to change, now that you are their manager. This is why you should speak to each one individually, and let them know that with your new management role, you are held to a higher accountability standard. Therefore, your working relationship will need to change, as well as your day-to-day interactions. Instead of waiting for conflict to arise, be proactive and let them know what to expect. Don’t forget to make it clear that it’s not personal, but business.

 

4. Schedule a Meeting With All Your Staff A.S.A.P. to Discuss Your Expectations

 

Being promoted from fellow co-worker to manager is guaranteed to initiate chatter and concern. This is why it’s important to meet with your staff and explain the nature of your new role, the expectations that your management has set for you, and the expectations you have for your staff. Keep in mind that not only is this a transition for you, but also for them.

 

5. Be a Fair, Consistent, and Transparent Manager

 

Management is not as easy as it seems, but it doesn’t have to be hard. To be a good manager, you must be fair and treat all employees the same. You must be consistent. Employees pay close attention to how you interact with all staff. Nonetheless, since you have preexisting relationships with some, you have to be extremely mindful of not favoring those individuals in any way.

Finally, be as upfront with your employees as possible. Oftentimes, employees know more than you think, and they will test you in ways to see how honest you will be with them. Although they may not like all of your decisions, they will respect you for being fair, consistent, and transparent. 

 

Nicole K. Webb is founder of NK Webb Group, which specializes in career ownership and workplace development. Visit her company’s website by clicking here. Follow her on Twitter @nkwebbgroup1. Pick up a copy of her book The Workplace Playbook

Is There a Profit Crisis in Your Small Business? If So, Here’s How to Face It

Here's How More Small Businesses Can Make a Profit

Think there’s not a profit crisis?  The Small Business Administration conducted a recent study and found that of the 28 million small businesses in the US, about 83 percent are not profitable.  That’s a shocking statistic.  The vast majority of small businesses lose money.  That means these small businesses are likely to close, ending job opportunities and reducing incomes for millions of families.

How do so many small businesses fail to turn a profit?  It turns out that it’s because of the way we think about profit — our profit mindset.  We talk about “year-end profit” or “the bottom line.”  We consider profit to be whatever is left over after we pay all our bills.

The problem?  Too often, there’s nothing left over.

We think of profit as an event — something we will eventually, at long last achieve.  It’s just over the next hurdle, just around the bend.

The trouble?  Profit isn’t waiting for us to arrive.

How to Make a Profit

What we need in order to solve the profit crisis is a new perspective — a completely new way of thinking about and achieving profitability for our companies.  And here it is:  You take your profit first.

Every single bit of revenue that comes into your company becomes a step toward profitability.  When you get a check, you deposit a predetermined percentage into a separate account that’s designated as your profit account.  You open this account at a new bank, and you don’t link it to a debit card.  You don’t pull funds from it to pay bills.  This is your profit account, and you fund it first, every single time money comes in.

Now you may be just barely getting by right now, and you may worry that you won’t be able to pay your bills if you start setting aside profit first.  But here’s the secret … you’ll find a way.  You’ll become more frugal.  You’ll drum up more business.  You’ll learn to do more with less.  Think about it — if you lose a client (and future revenue) you don’t just close up shop, right?  You find a way to make it work.

Now I know that putting profit first works.  I’ve seen hundreds of companies all over the world transform themselves into lean, specialized, profitable businesses.  But for people who are apprehensive, I suggest starting small.  Try taking 1% of your revenue as it comes in and starting that profit account.  1 percent?  You’ll never miss it!  But as you watch it accumulate, as you realize that you can still pay your bills and sign your staff paychecks, you’ll begin to understand how it works.

We must learn to prioritize profit if we are to succeed as entrepreneurs.  And to be clear, I’m not saying that money is everything in life.  But if you want your business to thrive … if you want to be able to provide for your family, you owe it to yourself, your employees, and your community to run your business profitably.

The solution to the profit crisis is to shake off the old mentality — that profit is what’s left over — and to adopt a new mindset — profit comes first.

Profit Photo via Shutterstock

This article, “Is There a Profit Crisis in Your Small Business? If So, Here’s How to Face It” was first published on Small Business Trends

10 Important Business Tips You Shouldn’t Overlook


When running a small business, it can be easy to overlook some things. Little things like social media profiles, customer insights and even your own happiness can make a big difference, even though they might not always be your main focus. Gain some valuable tips and insights by following the advice below from members of our small business community.

Avoid These Overused Buzzwords on Your Social Media Profiles

When creating your social media profiles, it’s important that you accurately describe yourself and your business. But there are some overused buzzwords that can make your profile fade into the background, like the ones listed in this Prepare 1 post by Blair Evan Ball.

Boost Conversions With the Right Customer Insights

Having insights about your customers can be incredibly helpful when it comes to increasing your sales and conversions. But you need the right insights in order to make those positive changes. This Kissmetrics post by Shayla Price includes some insights about finding the right customer data.

Access the Ultimate Productivity Hack — Happiness

You can’t hope to get much done in your business if you’re constantly stressed and unhappy. That’s why this Fundera Ledger post by Eric Goldschein suggests that the ultimate productivity hack may just be happiness. BizSugar members also discuss the post here.

Repurpose Your Content Like a Champion

Once you create content, you don’t have to let it just disappear into the archives after a week or so. You can actually repurpose it later to get even more of a benefit. This Search Engine Journal post by Danny Goodwin outlines how you can repurpose your old content.

Create Effective Calls to Action

Creating great content and marketing materials is a great start for gaining customers. But if you don’t have effective calls to action, your marketing isn’t likely to be as effective as possible. In this MyBlogU post, Ann Smarty discusses some methods you can use for creating effective calls to action.

Show Yourself Some Love as a Business Owner

You can’t hope to grow a successful business if you don’t take care of yourself. To show yourself some love and help your business in the process, check out the tips in this CorpNet post by Nellie Akalp.

Write Blog Posts Your Audience Will Love

When blogging for your business, it’s important to always keep your audience in mind. If your audience doesn’t love your posts, then blogging isn’t likely to do your business much good. So this Blogging Wizard post by Elna Cain includes tips for writing posts your audience will love. And you can also see commentary about the post over on BizSugar.

Use These Smart Investment Strategies for Entrepreneurs

If you’re going to invest in your business, you need to make sure that you have a smart strategy for doing so. This GetEntrepreneurial.com post by Ethan Theo outlines some smart investment strategies that entrepreneurs can use to better their businesses.

Create an Invoice That Will Get Paid

The last thing you want as an entrepreneur is to provide a service or fill an order and then just not get paid. For that reason, you need to make sure your invoices are optimized to ensure payment. In this Noobpreneur post, Tara Miller shares some tips for creating invoices that will actually get paid.

Don’t Deter Customers With Incomplete Content

Great content can give your business a boost. But bad or incomplete content can actually have the opposite effect. This Target Marketing post by Heather Fletcher details how incomplete content can turn shoppers away, and what your business can do about it.

If you’d like to suggest your favorite small business content to be considered for an upcoming community roundup, please send your news tips to: sbtips@gmail.com.

Overook image via Shutterstock

This article, “10 Important Business Tips You Shouldn’t Overlook” was first published on Small Business Trends

How to Start a Mastermind Group

How to Start a Mastermind Group

If you’re interested in sharing your knowledge or networking with other entrepreneurs or professionals in your industry, you might consider starting a mastermind group.

Gail Gardner of Growmap.com is the co-creator of the Blogger Mastermind Group on Skype. Over the years, she’s seen the positive impact that mastermind groups like this can have for businesses and entrepreneurs. And she shared some tips for others looking to start their own groups.

How to Start a Mastermind Group

Find Potential Members

The most important part of any group is the members. And that’s the case with mastermind groups as well.

For Gardner, the group started as a forum site that added members over time. When the site got hacked, she decided to switch over to Skype. And then she invited all the members who were still interested in being a part of this type of group.

She told Small Business Trends, “I invited all the original forum members and we’ve been adding people as we come across them ever since. Most of the members are full-time freelancers or serious bloggers. Some are web developers and most own their own sites.”

Welcome New Members

It’s also important that you actually engage with those new members when you find them. There are different methods of doing this. But you should at least send a quick welcome message and tell them a bit about the group.

Gardner says, “When onboarding new members, it is important to make them feel welcome and give them some idea what is acceptable and what isn’t. We have a Blogger Mastermind blog post that explains how the group operates and how to access our collective resources on Skype. When adding a new member, I invite them to share what they do and their website and most used social accounts.”

Be Clear About Expectations

Since most groups are going to have a specific purpose, that also means that there are certain activities that won’t fit into that purpose. That means you need to have some kind of rules or a code of conduct to ensure that the group remains valuable for all members.

Gardner says, “Be clear on the purpose of the group and what is expected. In our case, we make it very clear that there are no requirements and it is not necessary to try to keep up with all the messages. I tell members to think about it like a water cooler. Chat when you can, but don’t worry about reading every message.”

Stick to the Rules

From there, you need to actually come up with a way to deal with any difficult situations when they do arise.

Gardner says, “If someone does things that other members find annoying, Eren [Mckay of Mckay Social] or I will talk to them privately. Most understand that they should not spam or advertise, while sharing a special post or recommending something they find truly useful is encouraged. We have only removed people a couple of times in all the years our group has existed because they persisted in doing something they had been repeatedly asked to stop doing.”

Keep Information Organized

To make the group as valuable as possible, it’s also a good idea to have a system for organizing the information you’ve discussed. This can make it easier for people to provide quick answers or information when people bring up topics that have been discussed at some point in the past.

Gardner says, “We pool our knowledge and resources and save that information onto Trello boards for easy access anytime. As discussions happen, I capture the highlights and organize them by topic. This makes it easy to share any conclusions and tips that come out of our discussions whenever the question comes up again.”

Mastermind Photo via Shutterstock

This article, “How to Start a Mastermind Group” was first published on Small Business Trends

7 Keys to Success: Avoid Being an “Old Steel Guy”

How Not to Be a Know It All in Business

Through our years of coaching and helping small business owners chart their paths for more profitability, we often run into business owners who feel that they know everything.

My business partner, Jack Mencini and I, have a name for these folks … we call them “Old Steel Guys.”

You probably know some Old Steel Guys. Maybe you’re even one of them!

We named this type of individual over the years because they think they are experts on everything. The phrase comes from our Cleveland roots. Back in the day, Cleveland was a big steel town and there were lots of Old Steel Guys who were stuck in the past, knew it all, and quite frankly were a pain in the butt to deal with or be around.

It really doesn’t matter if you are old or young, man or woman. If you have the mindset that you know everything, we are going to refer to you as an Old Steel Guy. Deal with it!

As a small business owner, you need to stay current and you need to keep learning. If you keep learning it keeps you young, vibrant, and relevant.

One key thread we have found within every successful business owner is that they are always trying to learn, correct and get better.

Jack and I have never met a successful Old Steel Guy, because they are of the mindset that “If it ain’t broke, don’t fix it,” and why should I even try to learn or engage in anything new when my way is the best way?

Engaging and trying new things are key ingredients to keep you and your business growing and moving forward. But it just seems that the only thing moving forward with Old Steel Guys is that they get grumpier and meaner.

Who wants to be around someone like that? The fact is that, as a business owner, you can’t know everything!

Not all Old Steel Guys start out that way. It usually takes years to develop, so beware, just because you aren’t an Old Steel Guy today doesn’t mean it’s not in your future.

Your attitude as the owner is the number one key for improving and increasing your small business’s profitability. Attitude is infectious and Old Steel Guys tend to beget more Old Steel Guys.

How Not to Be a Know It All

As a small business owner you need to embrace learning and looking for ways to improve yourself and your team within your small business. If you aren’t coachable, why would you expect your team to be coachable?

One of the challenges we give each of our business owner clients is to master the seven keys to success.

These seven keys were developed over many years and modeled on successful companies both big and small who were able to achieve growing and sustainable profits. While the premise of these seven keys seems almost simplistic, the work and learnings behind each key can open doors to new insights for how the business is functioning.

The seven keys to success are:

  • Vision
  • Profit Planning
  • Marketing Planning
  • Organizational Planning
  • Leadership
  • Cash Flow Forecasting
  • Presenting

The simplicity and clarity that comes from focusing on the seven keys can be very empowering and exciting for both you as the business owner and for your team.

One thing is certain. You can’t focus on all seven at once, but you can dig more deeply into a couple at a time. If you’re not sure where to start, begin with a 10-year vision for where you want the company to be and what it will look like in 10 years.

Old Steel Guys can’t think this way as they are too focused on today or the past. Don’t aspire to become an Old Steel Guy. Be open to learning and growing and your business will grow too!

Steel Worker Photo via Shutterstock

This article, “7 Keys to Success: Avoid Being an “Old Steel Guy”” was first published on Small Business Trends

6 Important Contract Terms that Should Raise a Red Flag

These 6 Important Contract Terms Should Raise a Red Flag

Too many small business owners gloss over important terms in contracts they sign. This can cause a problem later in the relationship if they are not properly negotiated. While a lawyer may not need to be involved in every transaction, here are the areas that all companies should look for to protect themselves before signing any agreement:

Important Contract Terms

1. Dollars and Timing of Payments

Always review this part first in the contract. Do this by searching on the symbol “$” throughout the document. Ensure that the financial terms were what the parties verbally agreed to before this draft. If this section is wrong, it does not make sense to focus on the other parts of the agreement until this is fixed. Carefully note if the exact timing of the payments is tied to specific dates, elapsed time (90 days from now) or to milestones being achieved (and who determines if the milestones are complete).

2. Non-competes

Many contracts state that once a company is doing business with one company, they can’t do it with a competitor, in similar industries, or for a period of time. While this can make sense in some situations, try to take these clauses out of the contract or at least make them as narrowly defined as possible. Fighting this limitation may be important to growing a company since expertise in an industry can be valuable to future customers.

3. Ownership of Work

Understand who owns the work that is produced as a result of the contract. This may be critical if the company wants to use what is produced or learned for other customers or markets. If the company is being paid to make something, typically the payor will own it, but try to negotiate joint rights or continued access to this information. For example, when Microsoft was paid by IBM to develop the DOS operating system, they retained the right to sell it to other companies which drove the growth of their business.

4. Actual Contracted Parties

Read the agreement to make sure that the contract is between the correct parties or corporate entities. This is especially important to determine where the money is coming from and who it will be paid to. This becomes even more critical if things go wrong and lawyers get involved.

5. Penalties If Things Go Wrong

If something goes bad in the execution of the contract, note what the penalties to either party will be. It is also important to see if there is a “cure period” when a deadline is missed or one party is dissatisfied. This is typically the time that one party gets to “make it right” before penalties or legal action can begin. It provides a very important time buffer or cooling off period before things can get ugly

6. Liability and Indemnity

Contracts are a set expectation of what is to be done. Therefore, they become critical as a written record of what happens if things go wrong. Review who is liable if either of the parties get sued by an outsider and who will pay the legal costs. These sections typically have very ominous legal language like “Party A agrees to indemnify, defend and hold harmless Party B and their employees, officers, directors or agents from and against any loss, liability, damage, penalty or expense (including reasonable attorneys’ fees and cost of defense) they may suffer or incur arising out of any claim…” Try to get the other party to be responsible for all claims or at least have each party take care of their own legal expenses.

What do you look for in every contract?

Red Flags Photo via Shutterstock

This article, “6 Important Contract Terms that Should Raise a Red Flag” was first published on Small Business Trends