More than a piece of paper

By Emma Peterson. 

John Kenney explains the importance of specificity in contracts and other official paperwork. 

One of the most complex parts of running a business is navigating the legal landscape. From employee classification to payroll management, it can be a lot. But it is crucial that contractors don’t shy away from the legal paperwork just because it can be overwhelming. Yet, these things must be delt with, as contracts are more than just a piece of paper – they are protection for you, your people and your business. To learn more about avoiding costly paperwork mistakes, we invited John Kenney of Cotney Consulting Group to join us for an episode of From the Ground Up™. 

One of the biggest things that John highlighted was the importance of specificity in your contracts. He explained:  

A misunderstanding of scope is a silent killer. If your scope says something like, ‘complete installation per plans or complete installation per our owners,’ then you basically accepted everything. Even if it wasn't in your estimate, you own it. So, that's why you have to be very careful about what you're signing up for and make sure that your language is very specific. 

The result of this lack of scope is not only frustrating for your timeline, but it can also be a business-killer. John explained, “Issues with misunderstood scope causes profit to quietly disappear. Take this as an example, maybe you’re working on a pool or irrigation system and there’s underground work. You have to make sure scope and responsibility is clear, because if it’s not you might become the contractor in charge of all the utility coordination on the project and suddenly you have permits and inspections and all these unexpected costs.” 

How do you avoid this problem? The answer is two-fold. One, make sure your contracts are written clearly. John elaborated on this, sharing, “Every contractor should have clear language in the contract.  If there's something that is ambiguous and it doesn't sound right, then more than likely it's going to get you into trouble later on down the job and defending yourself from that is going to take two to three times more time and a lot more money than getting your contract in order with an attorney before a project starts.” 

Two, make sure all your teams are on the same page. John explained: 

I’ve seen it often; a field team proceeds with extra work without the proper written approval. And then you send the invoice, and the customer is looking at their original contract, saying, ‘Wait a minute, we didn't authorize that. We shouldn’t pay.’ And if you don't have an approved change order to point to, that customer is actually right. So, you have to make sure all your teams know to wait for a written change order that shows the change in your contractual obligations before anything happens. 

At the end of the day, the legal paperwork might seem frustrating and tedious, but it is always better to make sure it’s all clear and aligned before a project than to deal with the fallout of ambiguity down the line. As John put it, “Remember, it’s not just a piece of paper. They're going to bind you to a lot of things you're not going to want to be bound to unless you understand them. So, if it's not clear and it's not included or clearly excluded, then you're exposed and it's definitely going to be a financial problem for you.” 

Listen to the podcast or Watch the recording to learn more about managing the legal paperwork that keeps your operations protected and profitable.