Why Your Company Needs a Long-Term Supply Agreement

Success in business often depends on effective planning and the management of assets. The more your company can accurately predict in terms of costs, the better it can allocate resources. Whether your business focuses more on the construction industry, information technology, or even retail, you should always consider long-term supply agreements for raw materials. These business contracts can extend over years, and provide your company with a ready, calculable source of products for your regular customers. Our business contract lawyers in Chester County explain the benefits.

Easy Budget Creation for Business

business supply agreement FAQ

Anticipating costs is a massive component in the success of any business. A long-term contract can allow your company to lock in the price of particular materials from a supplier, making it much easier for the business to plan its costs ahead of time. That allows you to portion out the rest of your company’s available funds over its remaining costs. The contract, in effect, becomes a constant by which you can pay the rest of the company’s expenses. Keeping the price for particular goods at a predetermined level eliminates surprises that could eat into your company’s budget and damage the bottom line.

Security for the Supplier and Buyer

A company that can’t meet demand for goods or services may not be in business for long. The security a long-term supply agreement gives your business a ready resource for obtaining the materials it needs to continue closing sales and bringing in money. In turn, your supplier also has the added security of knowing that your company plans to do business with them for a guaranteed period. Your business can also obtain a lower-than-average price for what materials you’re buying because of the long-term contract. The supplier has no need to maximize profit on one sale because you’ve already agreed to an extended commitment.

Streamlining the Paperwork

streamlining business logistics

Keeping purchase orders and invoices in order sucks. Misplaced paperwork can lead to unpaid bills and angry distributors, even a damaged credit rating or dip in available stock. A long-term supply agreement can eliminate the need for new purchase orders with every delivery or transaction, which lowers the paperwork your company has to keep track of, and makes the logistics process simpler. Fewer administrative duties also free up your employees to do what you’re paying them to do – run your company.

Quality of Goods or Services

Negotiating the quality of goods or services your company is paying for ahead of time eliminates headaches at the point of sale. Contractual language can state clearly what quality of materials your company is paying for, and what quality the company won’t accept. The supplier understands the agreement ahead of time, so there shouldn’t be any confusion. Any disagreements about the supplier’s goods or materials can be settled through the contract.

Getting it right the first time with any business contract requires the services of experienced attorneys to draft the agreement and review its finer points. If your business is considering a long-term agreement of any kind, call our firm today for a thorough review by our legal professionals.