We seldom re-evaluate the evergreen contracts we enter into as a business. You should do a sanity check on your business expenses every year.
What are evergreen contracts?
These are the agreements you make with companies and suppliers for goods and services that auto-renew unless one or the other party gives notice, these often auto-renew with an annual escalation.
Your financial manager should reassess these contracts every year to see if there are better deals available in the market. Annual escalations can often outprice the service offered over a few years.
If you have evergreen contracts that do not have annual escalations, you may treasure them. Unless, of course, they leave you with old equipment that you could have paid off yourself many years ago.
What are some of the evergreen contracts in a business?
For most businesses, the critical evergreen contracts you can look out for are:
- Copier machine rentals
- Insurance policies
- Flower deliveries for reception
- Stationery suppliers
Many of these require a notice period for cancellations.
Can I cancel an evergreen contract?
It all depends on the fine print. Most often, the parties need to notify the other of the will to terminate. But you will need to look into the fine print to see what notice period you have agreed to in advance.
How to negotiate a better deal
If you have a good relationship with the company or supplier, call a meeting to let them know your intention to shop around. Many companies will come prepared with a counteroffer if they know you are looking to cancel. Instead, allow them to come back with a counteroffer. If you do not have a good relationship, you may want to get in a few companies to bid for your business. You may be surprised at what is out there.
Suppose you manage to re-evaluate your contracts each year. In that case, you can pay less and less each year for the services, as opposed to the annual escalation fees that automatically increase.
Bizcash is here to assist with your business cash flow, save on costs and to help you grow. For more information on our Invoice Discounting or Business Loan products, or arrange for a demo on the financial dashboard, get in touch here. Follow our social media pages here for tips for small businesses.