Vendor relationships can be the backbone of smooth operations, product delivery and customer satisfaction. These partnerships are often governed by legally binding business contracts that define expectations for both parties.
But too often, businesses sign contracts and then file them away, never revisiting the details until a problem arises. Regularly reviewing vendor contracts is essential for risk management, maximizing value and staying aligned with your evolving business goals.
1. Before renewal or expiration
One of the most critical times to review a vendor contract is before it comes up for renewal or expiration. Many contracts include automatic renewal clauses, which can lock you into another term with outdated pricing, terms or services that no longer meet your business needs. Reviewing the contract before this point gives you time to:
- Evaluate the vendor’s performance.
- Compare pricing with competitors.
- Renegotiate more favorable terms.
- Decide whether to continue or terminate the relationship.
Waiting until the last minute can result in missed opportunities for savings or upgrades.
2. When your business needs or structure change
Business growth, downsizing or pivoting to a new model are all signs that it’s time to review your vendor agreements. For example:
- You may need revised shipping arrangements if your company expands to a new region.
- A shift to remote work might alter your software or IT service needs.
- Mergers, acquisitions or leadership changes could mean re-evaluating your supplier strategy.
By reviewing contracts during transitional periods, you help ensure that vendor terms still align with your goals, budget and operational structure.
3. After regulatory or market changes
Reviewing contracts in light of such changes helps you:
- Stay compliant
- Manage liability
- Anticipate disruptions
It also offers a chance to build in flexibility and contingencies that protect your business during uncertain times.
Vendor contracts are living documents that should evolve alongside your business. With proper legal guidance, you can schedule regular reviews to help you manage risk, optimize value and maintain healthy vendor relationships.