Managing a Team: Contracts & Payments

When it comes to running a business, two things make entrepreneurs sweat more than any other: money and legal issues.

And it’s no wonder, because for the average person, reading the tax law or employment guidelines are not enjoyable activities. In fact, it might even be easier to keep your business small, resist hiring, and not worry about all these details.

Except you know that your business exists to serve lots of people and you don’t want to shy away from things just because they’re hard. So today we’re helping you tackle, head on, what you need to know for team contracts and payments.

First up, you’ve got to have contracts. This is a given if you’re running a business and even if you haven’t incorporated yet. You have a business. This means that you’ll be liable for anything your employees do in your name, even if they’re independent contractors. Legal contracts not only limit your liability, but also make it very clear what your responsibilities are to fulfill.

At the very very minimum, your contract should state who the parties are, the payment terms, and who owns the property that is created.

For example, if you hire a developer to build you a website, who owns the site? Unless the contract states so clearly, you may not own your own website, even if you bought the domain, paid for hosting, provided the graphic and copy, and paid the developer.

Another example, you hire a VA to help you turn your blog posts and an info product into an ebook to sell. Who owns the book? Does the VA have any claim to the sales of that book?

The trouble is both parties will make assumptions that favor themselves. Team contracts make sure that each party is clear on what they give and get in this arrangement and have the opportunity to back out before any work is done or money is paid.

This is one of those few areas when it really pays off to hire a professional to look after your interest, in this case a business lawyer who understands contracts and online business is essential!

Show me the money!

Of course once the contracts are signed, your team will want to get paid. While the contract should state how time is submitted and when invoices are paid, it’s also important to have a system in place for paying your team!

One of the reasons we recommend a service like oDesk or Staff.com is that the hours are submitted in real time, the billing summary sent, and the payments are made automatically. Which saves small business owners a ton of time not managing their teams.

If you’re working with a bookkeeper or money manager, then you’ll want to set aside time each month to review payroll and make any adjustments. We’ve heard horror stories of agencies submitting 5-figure invoices and the owner not knowing about it until it was too late (this was a failure in both the contract stating the maximum hours to be worked and the payment system which should have been aware before it reached such a number).

Monitoring your outgoing payments is critical, especially as your team shifts and moves into different roles. We recommend reviewing each contract and invoices from your team every 3 to 4 months for accuracy and necessary updates.

If you’re new to managing a team…

Begin by ensuring that every team member (including interns) have updated contracts on file with you. Signed contracts. Then standardize your invoicing – both the date invoices are submitted and the date they are paid.

Document these processes so that as your team grows you’ll be able to use the same policy and practice with each new employee. The easiest way to get in trouble around these two issues is to ignore them or have inconsistency in your practice. These systems, commonly called human resource systems, will protect your business so you can focus on output instead of managing team administration.