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Sales Strategy
Canadian Professional Sales Association

Ah, the all-important contract! While you should certainly have all your contracts and templates drawn up or reviewed by a legal expert, as a sales professional, it’s important to understand the necessary components of a sales contract.

A comprehensive contract saves your company, and your client, a lot of headaches down the road. Your reps often, understandably, put their main focus on just getting their customers to sign on the dotted line. But as a manager, it’s important that your focus is at a higher level. You need to ensure that your team is equipped with a well-thought-out contract so they are suitably armed for negotiation time and don’t miss important terms that could derail the relationship in the future.

Here are 5 things you need in your contracts to set your sales team up for negotiation and sales success.

1. Description of Goods/Services

Clearly, the description of goods/services is a highly important term in a sales contract. But don’t overlook this element: there can be a lot of room for error with the description and you and your reps should be sure that it identifies the specific goods/services that the customer is purchasing. For physical goods, this includes type, model, weight, colour, size. For services, a clear and comprehensive description of the work to be done is critical - make sure you specify the whats, hows, and whens.

Doing so will help avoid future conflicts since problems that may arise with other terms are easier to resolve when the buyer clearly knew in advance what they were getting.

2. Delivery Instructions

Whether you are dealing with goods or services, it’s important to be clear and upfront about the time, date and location of delivery. In terms of goods, a late delivery or one made to the wrong location is a terrible reflection on your customer service which is why it’s so important to have everything clearly outlined in the contract. You should also include a clause about which party is responsible in the event of loss of goods while in transit. Similarly, if you’re dealing in services, you need to be clear about projected project milestone dates as well as the final date of completion. Also be transparent about the specific details of project delivery. You don’t want your client to have unrealistic ideas on these matters; if your company can’t live up to customer expectations, this again will lead to conflict and poor customer experience.

3. Warranties

A warranty provides assurance that specific facts or conditions pertaining to your product or service are true or will happen. Refund, repair or replacement warranties vary across industries and from company to company, so be sure to state your offerings in clear language. Explain whether goods are being sold “as-is” and whether product warranties are only applicable when used for a particular purpose.

4. Pricing and Billing Structure

Be clear and concise on pricing and payment terms. Do rates vary by certain conditions? Are there benefits or discounts for paying by a certain date? Pricing and billing are the sections that your customers will pay most attention to and the areas most ripe for negotiation. Make sure that the contract covers the scope of all possible outcomes.

5. Late Payment

It’s important that your company’s contacts take into account the consequences of late payment. Determine the grace period within which a customer can submit their payment after the invoicing date. While standard practice in many industries is 30 days, this is another area that clients may attempt to negotiate. Be clear about late fees and/or interest rates for late payments as this will give incentive to your clients to pay their invoices sooner than later.

Learn more about effective contract negotiation by taking the CPSA’s Effective Negotiation Strategies training program. Find out more about the program and book online.

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