About 'nature and scope of management accounting'|Evaluate the strengths and weaknesses of the following strategic management tools and techniques. Show how to minimize the weaknesses of each.
When you have a small business there will be times when you need to sign a service contract for work that you need to have done in your business. Or you may need to write a contract for the services you provide. Having a contract clarifies and documents the understanding, protects both parties, and generally provides for more transparency and certainty in your business relationship. While it is always a good idea to consult with an attorney before entering into a contract, this may not always be practical or financially feasible. You may be able to prepare your own contract for the services you provide, or evaluate a contract for services you are requesting. There are standard templates available on websites that offer legal documents, sometimes for free and other times for a fee. You may also be able to find standard formats in an office supply store. Some are fill-in-the blanks type forms that could be adequate if your needs are very general. Or the templates could serve as a basis that you could tailor to your specific needs. General contents of a service agreement The contents of a service contract will depend on the parties and the nature of the work. But there are some general categories that should usually be included in a service agreement. Identification of the parties The contract should clearly identify the parties, with their commercial and legal names, addresses, taxpayer ID numbers, telephone and fax numbers, and e-mails. Any person who is acting as legal representative or agent for either of the parties for purposes of the agreement should be specified in the contract. Purpose and scope The purpose of the contract should be clearly spelled out. The purpose is a detailed description of the work to be performed. The relationship between the parties should also be indicated. For example, the work is being performed as an independent contractor and not as an employee. The scope should be sufficiently detailed so that both parties know exactly what is expected. It should identify all tasks, work elements and objectives of the contract, and the timetables by which major parts of the work are to be completed. You should include in the contract what the end result will be, in terms of completed work, standards for acceptability, and any reports or other information that must be provided. Depending on the complexity of the work, you may need to refer to attachments that detail the work, including hours, materials, subcontracts and any other applicable breakdown. These attachments should form part of the contract and that should be explicitly stated in the contract. If there is a proposal that led to the signing of a contract, and the terms of the proposal have been agreed upon, the contract should make reference to that proposal. If the service contract is not for a specific job or project but rather for services to be performed for a certain period of time, that period should be clearly stated in the contract. The end date and the possibility of renewing the contract should be indicated. Compensation The total compensation to be paid under the contract should be specified, either as a lump sum for the whole job or project, hourly rates, unit prices, or cost per deliverable. If there are variables involved, a clause can be included stating that the total compensation shall not exceed $XX. There may be separate schedules that break down the compensation. Specific reference should be made to expenses in terms of what expenses are reimbursable and the expenses that are the responsibility of each of the parties. Any premiums or bonuses to be paid, such as for completing the work early or under budget, or on the contrary, penalties for not meeting deadlines or for coming in over budget, should be specified. It is important to clearly define the conditions for the payment of any premiums or the charging of any penalties. Billing procedures and payment This section of the contract should specify how and when the contractor will be paid. The terms could be, for example, payment within 30 days of acceptance of services provided and receipt of properly completed invoices, upon satisfactory acceptance of each deliverable, upon completion of each major part of the contract, or payment at the conclusion of the contract. The contract should describe how the invoices are to be presented, the information that has to be on the invoice, and any supporting documentation required. If expenses are to be reimbursed, there should be a requirement to provide receipts. Any specific accounting requirements should be indicated, such as a reference on the invoice to the contract number, and how the charges on the invoice should be broken down. The contract should specify whether any retention can be claimed on payments, such as withholding a certain percentage from progress payments, pending final acceptance of the completed work. If there are retentions, the contract should indicate how and when they will be reimbursed. Contract management The contract should indicate the person responsible for administering the contract for each of the parties. This includes how communications regarding the contract should be handled, whether by e-mail, letter, or other. This section should include all the contact information for the contract administrators or representatives. Insurance The type and amount of insurance coverage to be maintained by each of the parties, and who is responsible for the cost of the coverage should be indicated. This may include commercial general liability insurance, automobile insurance, or any other as applicable to the work being performed. If a certificate of insurance is required before the work begins, this should be specified. This section could include a reference to protection against any claims, suits, actions, costs, damages or expenses arising from the negligence or intentional acts or omissions of the other party. Intellectual property and confidentiality If any intellectual property or proprietary information is involved in the contracted work, there should be a clause in the contract that protects the confidentiality of sensitive information and the parties' rights and obligations regarding any intellectual property to which they gain knowledge. If any intellectual property is created as part of the services, the contract should specify which party will retain ownership of that property once the contract is concluded. Resolution of disputes If the parties agree to a process or procedure for resolving any disputes that could arise, such as submitting the dispute to independent arbitration, the contract should describe how this process will take place and under what conditions. Assurance The contract should specify that the parties agree that all activity pursuant to the contract will be carried out in accordance with all applicable laws, rules and regulations. There could be a clause indicating that the contract will be interpreted and governed in accordance with the jurisdiction in which the contracted activity will be performed. Order of precedence The contract can include a clause indicating the order of precedence that will apply in case of any inconsistencies between the contract and any other agreements made between the parties. Entire agreement This is generally a clause that indicates that the contract and all referenced attachments constitute all the terms and conditions agreed upon by the parties. This prevents both parties from bringing in other statements, written or oral, inferring that they form part of the agreement. Approval Finally, the contract must be signed and dated by the authorized officials or representatives of both parties. If you have any concerns about either signing a service contract for work that your business is requesting, or in preparing a contract for the services you are providing, you should seek assistance from a qualified attorney. Sources: How to Write Effective Business Contracts - AllBusiness Independent Contractor Agreement Form - 'Lectric Law Library Use Written Service Agreements for Your Clients - Nolo |
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