What you need to know about the Client Service Contract

Did you know written agreements govern 60% to 80% of all business transactions? Fortune 1000 companies usually maintain about 20,000 to 40,000 active contracts at any given time. These facts and figures imply how important it is for businesses to set client service contracts.

Simply put, a client service contract defines your relationships with your client as its service provider. It typically outlines the service descriptions, payment terms, and contract breaches. This written agreement should be a part of your client management for winning and keeping them for good.

This page tackles a client service contract in detail. Read on to learn why it’s vital for your business.

What Is a Client Service Contract?

A service contract is a legally binding agreement between a service provider and a client. This comprehensive document covers the scope of work, duties and responsibilities, payment terms, and the expectations of both parties.

Businesses across various industries create client service contracts when working with project managers, business leaders, or decision-makers. These contracts provide a clear roadmap for the business partnerships between the service providers and their clients. They also seek to guide and protect both parties legally and financially.

Writing a service contract is crucial for successful client engagement. First, let your client set its business goals, key metrics, and service requirements. However, you should both negotiate the terms and conditions. Only sign the client service contract after a legal expert reviews it and when you fully agree with everything written.

What To Include in a Service Contract

Below are details to include in a client service contract

• Client and Service Provider Information: Start with the names, contact details, and other relevant information of both parties involved in the contract.
• Description of the Services: Outline a clear and concise explanation of the services.
• Scope of Work: Aside from the inclusions, include the limitations and exclusions to avoid scope creep.
• Business Goals: Define the operational objectives relevant to the agreed services.
• Key Metrics: Set key performance indicators (KPIs) for service efficiency, quality, and customer satisfaction (CSAT) to track and measure performance.
• Payment Model: Determine the payment structure and set the payment amount and schedule.
• Processes and Policies: Include things, such as confidentiality and non-disclosure agreement, intellectual property rights, data privacy policies, and network security protocols, among others.
• Dispute Resolution Mechanisms: Indicate the procedures for resolving potential disputes arising during the contract, such as mediation or arbitration.
• Liability and Indemnification Clauses: Specify each party’s responsibilities in case of damages or losses.
• Breach of Contract: Outline each party’s financial and legal responsibilities should there be a contract breach.
• Applicable Laws and Jurisdictions: Include the relevant laws and regulations governing the service contract to ensure regulatory compliance.

Here’s a sample service contract.

Why a Client Service Contract Is Important

In the business realm, no one is an island. It’s easy to see companies collaborate with various stakeholders, from suppliers to customers. But when working with a client, you’ll face complicated and stressful project management—not when you set a contract!

A client service contract doesn’t only set the expectations of both parties; it can be instrumental to your overall success. A robust written agreement is extremely important for the following 8 reasons:

1. It Sets Proper Expectations

A client has certain expectations about what you’ll do and accomplish when it hires your services. Meanwhile, you expect them to offer the support you need and pay you correctly on time. It’s best to put all these expectations in writing so that both parties fully understand their obligations and responsibilities.

Jim Pendergast, Senior Vice President at altLINE Sobanco, works with various clients for their factoring services.

“It’s best to be detailed with your services and transparent with your pricing. We learned that contract agreements set proper expectations and remove any clouds of confusion.”

2. It Provides Legal Protection

As mentioned above, a service contract in written form is legally binding. Legally binding implies that the contract has the force of law behind it. It means that the parties involved should fully comply with the agreements. In other words, this service contract provides both parties with legal protection.

Andrew Pierce, Founder of Real Estate Holding Company, advises acting within the bounds of the law.

“Whether working with a digital marketing agency or investing in real estate, ensure you set a contract agreement with your client. Without a service contract, you and your client might be at risk of legal action or financial loss.”

3. It Guarantees Accountability

In line with legal protection, a service contract holds both parties legally accountable. As a service provider, you should deliver the services outlined in the contract. Meanwhile, your client is responsible for paying for these services. That’s the beauty of having a written agreement in place.

Suppose you agree to work with a client for its search engine optimization (SEO) campaign. Your client should pay you for your services monthly or per project. Unfortunately, you only had a verbal agreement with your client, and they paid you less than what you deserved. In that case, you cannot hold your client financially and legally accountable without a contract.

4. It Improves Communication

A service contract is a written form of all the verbal agreements previously done. That alone already improves your communication with your client. Also, the contract provides a framework for regular check-ins and meetings with them, ensuring that both parties are on the same page.

As you can see, effective communication is almost always the key to success. It helps you collaborate better with your client and avoid potential misunderstandings, conflicts, and work delays. But should there be disagreements, the contract serves as the mediator for conflict resolution.

5. It Builds Relationships

Building good relationships with your client is crucial when pursuing a business partnership. That serves as the foundation of a successful project engagement. With a service contract, both parties can establish a foundation of trust and mutual respect.

Ken Savage, Owner of Ken Savage, is a staunch supporter of establishing good working relationships.

“Nothing is more important than building good connections with colleagues, clients, and other stakeholders. Knowledge and skills can be developed and acquired, but good relationships can go a long way in achieving business success.”

6. It Measures Performance

As detailed above, a service contract usually covers critical metrics for measuring performance and tracking progress. These KPIs are often in service-level agreements.

For the most part, key metrics measure service efficiency, quality, and customer satisfaction. As a service provider, ensure that you accomplish your work on time. Also, have quality control in place for business compliance.

Lastly, ensure your client’s customers are always happy with the services.

7. It Minimizes Risks

While pursuing a business is risky, working with clients can be riskier. As a service provider, you ask yourself:

Can I deliver the work on time? Is it of good quality? Will customers be satisfied?

Shawn Plummer, CEO of The Annuity Expert, suggests capitalizing on a service contract for risk reduction.

“Review the service requirements your client has set and only agree to those you can truly meet. Otherwise, negotiate the terms and conditions. Ultimately, be as realistic as possible in your contract agreement.”

8. It Ensures a Successful Project

Finally, a service contract does several things, from setting expectations to minimizing risks. However, it all boils down to one goal: ensuring a successful project. Of course, your client sets objectives, metrics, expectations, deliverables, and other agreements because they want you to meet their business goals.

Tory Gray, CEO & Founder of Gray Dot Company, has been working with various clients for their digital marketing, tech, and data services.

“While setting a service contract is a common business practice, we ensure we align with our client’s objectives. We aim to meet and even exceed their goals and expectations.”

Key Takeaway

A client service contract is indeed important for a successful business partnership. This legally binding document sets the foundation of your relationships with your client. As explained above, this contract seeks to:

• Set expectations;
• Provide legal protection;
• Guarantee accountability;
• Improve communication;
• Build relationships;
• Measure performance;
• Minimize risks; and,
• Ensure a successful project.

You’re well on your way to excellent service delivery with a service contract. That will be instrumental to your client’s overall business success!

Are you looking to draft a service contract and have robust client management? Paymo has the digital tools and automated software you need to manage a project and collaborate with your client successfully. Also, here’s a list of the best client and project management software suited for agencies dealing with clients on a daily basis. Get in touch with us today to see how we can help.