This template comes from our free ebook, How to give your business a strong forward outlook.
Contracts and agreements are one of the five key factors we consider when assessing the strength of a business’s forward outlook. The others are:
- Work in progress
- Pipeline of prospects
- Client portfolio
- External market trends
Contracts and agreements
The next contributor to forward outlook is contracts, which can fall under both WIP and pipeline.
Some businesses have the benefit of written legal contracts with clients which are based on a fixed or hourly price, and which can provide the business with a level of certainty about the amount and timing of revenue for a set period.
Here’s an example:
A building services firm has a contract to provide maintenance services to three universities over the next 12 months.
The contract includes a minimum scope of works that adds up to $500,000 for 12 months, in terms of sales.
The contract also includes an agreement to provide additional services by way of variation, depending on what the three universities require as part of their public works programs.
So the minimum $500,000 would form part of the firm’s WIP, while there could be another $500,000 that has some risk attached and it effectively forms part of the firm’s pipeline, because it may or may not happen.
If you are a business with contracts, it’s important to have them fully documented and be clear about what they add to your forward sales and earnings.
Use our template to record your active contracts.
