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It's also important for both parties to sign off on an SOW before any work begins as this makes it legally binding on both sides. Failure to do so could mean that one party has no legal recourse should things go wrong further down the line.

The Statement of Work (SOW) is an important tool used internally or externally to govern project activities performed by vendors or by departments within the organization. It is also legally binding and must be approved by the project's client before work can commence.

Both parties need to agree to and sign a statement of work (SOW). But what exactly is this document, and how does it fit into the broader landscape of business agreements? Read on to learn more about SOWs, what they are used for, and how to create your own.

You always begin the statement of work with an introduction. This section introduces each key stakeholder in the project, i.e., the client, the agency, and third-party stakeholders, if any. The introduction is also where you briefly define the project and the work that needs to be completed.

While a statement of work can be sent to the client for approval and is flexible to change and negotiable, a contract is the final step in the negotiation process that binds both parties together. Both terms are often used interchangeably, but depending on the context, there's yet a slight difference between the two.

It tells the supplier exactly how to do the work and what processes to follow. Additionally, it defines all requirements and any specific industry-related regulations that must be followed by the contractors. Typically, the organisation using design SOWs assumes most of the risk for the project.

A statement of work is legally binding, but it is not the final, formal contract signed at the end of the contracting process. It can be thought of as the formal foundation of a final contract.