7+ Strategies for Effective Contract Management
Contracts are important written or oral agreements that your company has with third parties such as customers, employees, partners, or suppliers.
In this article, we will examine eleven examples of best practices for managing contracts effectively. The primary purpose of contract management is to streamline the work with agreements and decrease the number of possible risks such as lost documents or missed deadlines. Thus, having these practices in place may help to improve the management of your contracts and contractual obligations.
1. Choose the best contract manager
A solid contract manager will have certification and/or experience in this area, and knowledge of specific aspects of contract laws. They should possess outstanding communication and writing skills. A manager who has excellent communication skills is beneficial, as they frequently interact with your partners.
2. Include the legal department in contract discussions
If your company is willing to invest some costs into this matter, it is recommended to involve the legal department in the hiring of a lawyer. It is beneficial to hire a lawyer when establishing contracts with different parties, especially with business partners or vendors.
Lawyers or the legal department are more knowledgeable in this area, so the contract implementation will be more effective and secure. The breach of an agreement or any other breach of trust that involves your businesses could lead to legal action, and it’s best to be protected.
3. Keep track of important dates
Keep an eye out for important dates such as negotiations, meetings, contract expiration dates, and so on. Missing deadlines may lead to damaged partnerships due to poor management and lack of alertness.
Missing renewal dates can result in losing valuable partners. A certain time frame before the expiration date is often when contractors provide discounts or lower rates. Even though missing this opportunity may not have a huge impact on your business, adhering to deadlines is still important. Mishandling of contracts has led to some extreme cases of contract breach in the past.
4. Implement a systematic approach to contracting
Even though different systems may be suitable for streamlining your contracts, it’s very important to standardize management across the board by setting contract management stages.
For your employees responsible for managing contracts, it’s a good idea to provide them with clear instructions. The guidelines may contain several mandatory terms, conditions, and language guidelines applicable to a wide range of contract establishments. These guidelines may not only assist with contract creation but also prevent your managers from straying from your company standards.
Also, in case you need to confirm the information, you can always check the current version of the US Code on Lawrina, organized by subject matter.
5. Schedule compliance reviews
Performing a compliance review on a regular basis is very important after you set up a contract with a party. Compliance reviews benefit your business by providing a deeper level of visibility, ensuring that your company is always receiving the benefits listed in the contract.
6. Manageable deadlines
One of the most important aspects to consider is the deadline. Both parties have occasions when deadlines cannot be met. In this situation, it may be better to move up the deadlines by agreement. You may want to move the deadline to ensure high-quality products instead of putting your employees under pressure and getting an unsatisfactory result.
When setting deadlines, be realistic. You should formally object to ambitious or unrealistic deadlines if they are requested by the other party. Compromising is certainly key to a long-term partnership, but you shouldn’t lower your standards too much just for the sake of following unreasonable requests. Stand up for your business with honesty and assertiveness.
7. Software use
Due to their familiarity with paper trails and tradition, companies prefer traditional contract management methods. That said, digital management is worthwhile.
Utilizing software eases information retrieval by automating data. Besides reducing the workload on human resources, the software helps organize most information automatically and needs less attention compared to traditional solutions. Information is also more accessible. Countless hours can be saved. Work that takes hours can be done in minutes or even seconds. Having your contracts digitized makes them easily accessed on the fly from anywhere you need to be.
To protect your data and avoid any security issues, you should always have a vendor contract in your hands. It will help you to stay on a safe side and prevent all the potential risks in the future.
8. Clearly define goals and standards
Contracts negotiated with your business company may be misused by some parties. This mindset may have a negative impact on your business, especially if partnering with other parties is crucial to your growth.
Every time your company wants to begin a contract with a partner, it is imperative to establish the goals and standards that will be followed by both parties. Why are you partnering? How will both parties benefit from it? How will you measure success?
This information must be communicated clearly so that both parties understand their respective responsibilities and benefits. The contract can be terminated if the terms are not followed.
9. Securing Information while maintaining visibility
Your company’s contracts with other parties may include some confidential documents, while others may be made accessible with little difficulty. Determine which documents are sensitive. Only certain personnel should have access to confidential documents. Documents that require constant review by both parties, however, should be kept in accessible storage to make retrieval easier.
You may want to consider being sure your contract documents are properly secured by utilizing a secure storage system accompanied by strong accessor verification. Nowadays, companies prefer cloud storage which can be accessed anywhere, anytime. Contract managers can also upgrade the system to determine each document’s importance and confidentiality, and every level is given a different level of access.
10. Monitor the financial health of your business
Contracting with another party can help you save money. Consider your company’s budget when negotiating a contract. Could partnering with the vendor increase your profits? Ensure that both parties agree on fees. You might want to investigate the other party with similar purposes if the expenses exceed your budget. Take all these factors into account as you narrow down your list of potential partners.
Negotiations and signed contracts aside, it is equally important to monitor your financial status constantly. When reviewing contract compliance, your business should also use financial metrics or standards.
11. Monitor performances
Following the establishment of a contract, both parties are expected to benefit from each other’s growth. If your partner is adhering to the terms agreed upon, how do you know if they are doing their part?
It may be helpful to provide a precise KPI when supervising performances, so the other party is aware of possible penalties for their actions. The performance of the partners needs to be monitored continuously to make sure they are contributing to the goals.
Whether your partner meets your company’s expectations will depend on how you supervise their performance. Based on this, you will decide whether you want to extend your collaboration and renew your contract. A contract may be terminated due to poor performance from the other party.
Contract Management Improves Business Relationships
The eleven practices listed above may be implemented to improve contract management stages. Good contract management techniques can lead to many benefits. Revenue and expenses are the main factors in determining your business’s profitability. A business partnership based on efficient management may last for a long time.
Managers of contracts are responsible for managing the contracts between their company and potential partners and customers, or even their own employees. The purpose of contract management while maintaining good practices is not just to sustain a long-term partnership, but also to ensure business growth. If your company intends to improve its contract management, these eleven practices may be useful.
Why Do You Need a Contract Management Strategy?
Systems and strategies for how to manage contracts effectively offer many benefits. As the world becomes increasingly digitized, it becomes increasingly important to maintain tight control over all contracts. Cyberattacks and data breaches must be prevented.
Contract management requirements include document security. Hacking and ransomware attacks are less likely with multi-level password access. It is crucial to protect your contract data.
Contract management strategies must include a centralized repository of all contracts and related documents that can be easily accessed by authorized individuals. This reduces liability by eliminating outdated information.
Automation of mundane tasks frees up your expertise for tasks that require your skills. Reminders help you stay on top of tasks and track the contract.
Time and money are saved in any company with organization and efficiency. To ensure efficiency, you need contract management software that improves collaboration and streamlines contract workflow.
How to Improve Your Contract Management Strategy
Contract management requires a good strategy and workflow. Keep everyone informed throughout the contract lifecycle by using contract management software.
Following these simple guidelines will help your company manage its contracts better.
1) Organize contract management workflows in a centralized location
Multiple parties are required to participate in contract management stages. Using a centralized workflow management system streamlines the process of tracking each step of a contract’s lifecycle.
Your contract data can be created, edited, and stored using the software. Give your team access to relevant contract data from one centralized place with the help of a collaborative contract management platform.
2) Plan your contract management strategy with your staff in mind
A contract management strategy that considers the needs of your team and everyone else involved in the contract lifecycle process will be most beneficial. Effective contract management requires collaboration across all levels.
As you plan and implement your contract management strategy, your team needs to feel they are on the same page and motivated to take action.
3) Maintain the plan once it has been implemented
Maintain your contract management strategy after it has been implemented successfully. Make sure your contract management system is automated so that you can stay on track and create top-quality contracts.
Keeping your contract management strategy flexible and transparent helps everyone stick to the plan while making adjustments when circumstances change.
4) Analyze your data
With data analysis on your side, you’ll know what’s working and what isn’t, but searching through all the information related to a contract is time-consuming. This process can be automated to save you time and improve accuracy. Software that manages contracts decreases errors because it knows how to find errors quickly and accurately.
5) Do your research on contract management software
You want your contract management software to work for you, and be easy for your team to pick up and use to its full potential.
Many contract management tools cost a lot, don’t meet all your requirements, and have a complex setup process. Using them can lead to frustration and delay your contract lifecycle process. It is common for many to make promises they can’t keep.
You can improve your business processes and contract workflow by following these best practices for contract management. It can be time-consuming to manage service, support, maintenance, and license agreements. Legal templates can help your company realize its potential.
Contract renewals provide companies with returns of 50 percent or more, making them extremely high-margin businesses that can also be highly profitable. Investing in a professional renewal management system pays for itself in a very short time, leaving you with more time to focus on your business.