- On April 27, 2014
- contract, partner, supplier, trust
We are all in business sellers and suppliers and we always want the best from our supply chain. But do we know how to choose our suppliers or we just apply the “test-error” principle?
There are many cases when we select by intuition and hope that suppliers will not mislead us. Actually, there is a way to protect ourselves from incorrect suppliers and sub-contractors while building sound business partnership. Here is how:
1. Confidentiality agreement
Before starting any business relationship, if we want it sound and long living, we’d better sustain it with a confidentiality agreement. So the parties would be able to share information, necessary for the joint development of these companies.
2. Check the supplier
This is like a job interview but much, much harder. The check or the so called Due Diligence should be done before signing any contract and it includes analysis of finance documents, procedures, equipment, innovations, personnel, etc.
3. Payment terms
The payment term speak itself about supplier’s potential for a new business partnership. If the supplier insists on a 100% advance payment, how would he guarantee the shipment? Of course it’s the same interpretation about credit terms payment. The safest way of payment, especially in the beginning of the partnership, is the letter of credit.
The gentlemen’s word still has value in some regions, but the contract is valid worldwide. The more detailed the contract is, the safer the parties are. And when we sign the contract, we should strictly stick to it, otherwise we may need to apply the penalty clauses.
If we follow these steps, the chance to have a safe partnership is rather high.