One way businesses can protect themselves from the negative effects of inflation is by using flexible service agreements. A flexible service agreement is a contract that outlines the terms and conditions of a service being provided but also allows for adjustments and changes as needed.
By including provisions for adjusting prices in response to inflation, your business can safeguard itself from the impact of increasing expenses. So, let’s dive into the details of how flexible service agreements can help companies handle inflation and the considerations to keep in mind when using them.
Types of Contracts: Fixed & Flexible
In business, there are two types of contracts: fixed and flexible.
A fixed contract outlines the terms and conditions of a service but doesn’t allow for any changes or adjustments. This means that once the contract is signed, both parties are expected to stick to the terms as outlined in the document. This is ideal for projects with a well-defined scope with there is little room for changes or adjustments. However, its inflexibility may not allow for changes or adjustments if the project scope changes or unforeseen circumstances arise.
On the other hand, a flexible contract includes provisions for changes and adjustments to be made as needed. This means that the terms and conditions of the contract can be amended or modified to accommodate unexpected changes to the project or circumstances of those involved. Flexible contracts are often used in situations where the scope of the project is not well defined or may change over time. They can be especially beneficial for business owners worried about inflation impacting their operating costs, giving them leeway to adapt the terms of the agreement.
How to Draft a Flexible Service Agreement
To draft a successful flexible service agreement, it’s essential to be extremely specific about the services being provided and the expectations for the project. This includes outlining the scope of work, the timeline for completion, and the payment terms.
In addition to these details, it’s important to include provisions for changes and adjustments to be made, as well as a process for handling any disputes or issues that may arise. These provisions ensure that the agreement can adapt and accommodate any changes and give both the provider and the client confidence that the agreement will be able to adapt as needed.
Who Should Use a Flexible Service Agreement?
The level of flexibility offered by flexible service agreements is not only beneficial for the business providing the service, but it can also be great for clients, as it shows that the provider is willing to adapt to changing needs.
Pros of Flexible Service Agreements
- Allows for changes and adjustments to be made as needed
- Helps to build trust between the provider and the client
- Can reduce the risk of misunderstandings or disputes
Cons of Flexible Service Agreements
- Can be more complex and time-consuming to create
- May not provide the same level of protection as a fixed contract
There are a number of industries where flexible service agreements can be particularly useful. For example, in the construction industry, a flexible service agreement may be necessary to accommodate changes to the design or scope of the project. In the consulting industry, the scope of a project may evolve as the consultant gains a better understanding of the client’s needs. In this case, a flexible service agreement allows for changes to be made to the terms of the agreement as the project progresses. This type of agreement can also be useful in technology and manufacturing, as it allows for changes to be made to the product requirements as the project moves forward.
There are benefits to using flexible service agreements for all parties involved, as they can be a valuable tool for ensuring that the terms of the agreement are able to adapt to changing needs and circumstances.
Safeguard Your SMB Against the Effects of Inflation
Overall, a flexible service agreement can be highly beneficial for both parties. It allows for changes and adjustments to be made and helps build trust between the provider and the client while giving business owners the flexibility to adapt terms in the face of rising costs to remain profitable.
Looking for more ways to protect your small or medium-sized business from inflation? Download our free guide on 7 Strategies to Protect Your SMB from Inflation and discover seven tried-and-true tips from ei Funding’s financing professionals.