Contract management can be described as the management of the creation, conclusion, and maintenance of contracts. Its objective is to optimize business performance while reducing financial risks. Contract management treats the entire life cycle of a contractual relationship as a business process. As it is also a business process, it can be measured, analyzed, and, most importantly, improved. Effective contract management not only protects the organization from legal risks but also makes the contracting process more efficient and increases the profitability of the company’s operations. But the question arises of how to improve the contract management process, let’s figure it out together.
Best Practices in Contract Management
To make your lifecycle management system more useful, there are a number of best practices you can adopt to get the most out of your contracts.
Centralized storage of all contracts
Organizations should ensure that all contracts are stored in a central repository that everyone can access. This will allow them to track contract terms and conditions, renewals, and other contact information.
Use contract templates
One of the most common problems with contract management is that companies create entirely new contracts for each supplier or customer. This is not only inefficient, but it can lead to inconsistencies and increase the risk of potential liability.
- Contract templates should use standardized, unambiguous language.
- Different templates should create for different purposes, such as recruiting employees or attracting new customers.
- But a set of “generic” contracts can create for each need.
- Instead of creating a new contract from scratch, simply change the name, date, and appropriate details of the new contract.
Ensure teamwork during the life of the contract.
In many cases, the legal department is responsible for overseeing the contract management process. Make sure there is a process or communication channel to represent the parties involved in the contract. Collaboration and communication between legal and other business units ensure that the contract achieves the desired outcome with minimal risk. It also prevents other business units from relying solely on the legal department.
Ensure compliance throughout the life of the contract.
Effective compliance management throughout the life cycle of a contract is critical. It can ensure compliance with legal and corporate requirements. Companies that comply with their contracts can avoid financial and operational losses, in addition to various risks.
Standardize contract management procedures without strict requirements.
Standardizing the various stages of CM can reduce cycle times and associated inefficiencies. Because most contracts contain common agreement types, organizations can have standardized templates. Pre-designed templates, which update regularly, can facilitate compliance and meet regulatory requirements. All organizations should have a contract management process in place to enable business units to manage contracts in a standardized approach.
Automate where possible.
The larger the organization, the more difficult it becomes to manage legal documentation. Whether it’s service contracts, confidentiality agreements, contractor disclosures, or vendor contracts, the amount of documentation a mid-sized company has to manage can quickly become overwhelming.
- Automation is critical in the management of this and other contracts, as it is in many other areas of business.
- Automation systems do Much of the contract management work that individuals did.
- The current version of the contract can supply digitally instead of needing to meet to evaluate and sign contracts.
- The contract is instantly emailed back to your team for final review and approval after signing.
- These tools can help you avoid administrative mistakes (such as duplicate signatures) and perform all parts of contract administration faster.
- Many of these automated contract management platforms also include capabilities like cloud storage and real-time communication.
Continually review plans for the future
Contract management requirements evolve as technology and regulatory requirements change. Existing contracts may need to be fundamentally altered as a result of regulatory changes.
- It is essential that you examine your contract and management practices on a quarterly or annual basis to minimize any responsibility and maintain your system in the future.
- It might also be a good idea to hire a professional consultant to assess the contract management process on a regular basis.
- Consultants can spot problems that your own staff might overlook.
Key Features of Contract Management
As mentioned above, there are a number of steps and processes that can take to improve effectively managed contracts. Some of the key features of the contract management process include:
- Service delivery: ensuring that deliver products as expected.
- Relationship management: improving the relationship between the retailer and the buyer by being the point of contact between the two parties.
- Contract Management: Manage and monitor the day-to-day contracting process to ensure that you have met contractual agreements.
- Continued contract improvement: ensure that contracts are regularly developed in line with the changing business environment and that the business model is appropriate and up-to-date between the parties involved.
- When companies fail to streamline their procurement process, they waste time and resources that can use more efficiently.
- Ongoing evaluation. Compliance with relevant legislation contributes to improved service quality, so a review of legislation is essential for any business model.
Value of improving contract management processes
Many companies are lagging behind their competitors and are not aware of the importance and positive impact of well-designed document management. When companies fail to streamline their procurement processes, they waste time and resources that could use more effectively elsewhere.
- In short, consistent and organized contract management provides an opportunity for growth and is valuable to any business.
- By following these tips for improving your contract management cycle, you can optimize the way your company handles legal documents, save time and money, and help grow your business.
- In short, if you want to grow your business, you need to know how to effectively manage contracts.
Author Bio
Sally Hickman Green is a 30-year-old who enjoys blogging for the best online signature App, internet marketing, and social media marketing. She is inspiring and generous in blogging. She has a post-graduate degree in Computer science.