Contract management is a key component of effective business management. It is important for companies to communicate their authority clearly, including who makes decisions and when. A company can choose to have a specific contract life cycle, such as a quarterly cycle, and designate a decision-maker for each contract. By communicating authority, it is easier for all parties to understand what their role is and how to handle it. Some companies even elect a representative from their board of directors to oversee contract management.
Stages of contract management
Contract management is an ongoing process, with various stages. The first stage, known as the contract request, is the stage when an organization expresses its expectations and gathers information related to the contract. The second stage, known as the post-contract stage, consists of contract documentation, such as final invoices. Many contract managers also perform post-mortems on their contacts, based on which they can learn valuable information to improve future contracts.
In this stage, careful attention is required to the contract’s terms and conditions, and frequent monitoring is necessary to ensure a successful outcome. Having a plan in place can help minimize risks and identify problems early. A good contract management plan should include key milestones and performance metrics. In addition, an implementation plan should identify the roles of all parties, as well as the milestones and goals.
After the contract is executed, it must be monitored and evaluated to ensure compliance with its terms and conditions. In some cases, poor contract management can result in serious problems for a company and sour relationships with other parties. This is why it’s so important to properly monitor contracts, and use a contract management system to help you plan.
Challenges of contract management
One of the biggest challenges of contract management is tracking costs. According to the International Association for Contract Management (IACCM), companies that generate $1 billion in annual revenues typically incur high costs that are unnecessary. Even smaller organizations may have inefficient processes. In some cases, companies fail to manage costs, and they may lose business as a result.
One of the biggest challenges is identifying inefficiencies in the contracting process, which ultimately results in lower revenue. This inefficiency can be minimized by identifying bottlenecks in the process, and by developing strategies for each step of the process. Another challenge is making sure that contracts are comprehensive, accurate, and generated quickly. These tasks can be very time-consuming and can be difficult to achieve in an efficient manner.
The proliferation of contract templates and clauses is another major challenge in contract management, especially for enterprises with ad hoc contract authoring processes. Having non-standardized contracts makes it difficult to track compliance. An enterprise-wide contract management solution can reduce the number of contract templates and clauses and let legal staff focus on strategic initiatives.
Tools available to improve contract management
There are a variety of tools available to help improve contract management. These tools will help contract managers organize and track their contracts in one place and can offer features such as version tracking, electronic signature, and export options. While contract management is an essential part of the enterprise procurement process, it can be difficult to keep track of high-volume contracts. This can put a company at risk of failure rates and jeopardize partner relationships. Furthermore, manual processes can make it difficult to maintain version control, adhere to milestones, or enforce contract retention and archiving policies.
A good contract management tool can eliminate manual processes and increase productivity. For example, you can use contract management software to track all contracts, manage compliance, and track due dates. Some even have a version control feature, which allows you to track changes and hold discussions with stakeholders.
Business case for contract management
Developing a business case for contract management is an important process. This is where you lay out the benefits of using contract management software to manage your contracts. The CFO will focus on the ROI and the time-savings, while the GC will look at the control over template development and improved interdepartmental collaboration. Similarly, the CEO will be concerned with the overall view of your business contracts.
To build a convincing business case, you should start by preparing an extensive list of your contracts. This can be time-consuming, but it will help you see the full scope of your contracts. Centralising your contracts will save you time and money while also giving you new insights on your processes and areas of risk.
Another benefit is that a contract management system will improve legal processes. This will cut down on litigation costs. Many attorneys spend a significant amount of time on standard contracts, and implementing a contract management system will help your legal department to make the most of their time.
