7+ Strategies for Effective Contract Management
Introduction
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 contract management examples of best practices for managing contracts effectively. The primary purpose of strategic 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.
Effective Strategies for Contract Management
Contract management is a pivotal activity that impacts various aspects of an organization's functions and performance. By streamlining contract management, businesses can improve partner relationships, mitigate risks, and optimize operational efficiency. Here is the list of effective strategies for contract management:
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 with excellent communication skills is beneficial, as they frequently interact with your partners.
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.
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.
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.
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.
Manageable deadlines: One of the most important aspects to consider is the deadline. 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.
Software use: Due to their familiarity with paper trails and tradition, companies prefer traditional contract management methods. That said, digital management is worthwhile. 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 the safe side and prevent all the potential risks in the future.
Clearly define goals and standards: 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.
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 specific personnel should have access to personal records. Documents that require constant review by both parties, however, should be kept in inaccessible storage to make retrieval easier.
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. 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.
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.
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 contract management 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.
In the process of managing and improving business relationships, there may also come a time when a relationship no longer serves the interests of your business. In those instances, a contract termination letter becomes a critical legal document. This letter formally communicates the contract's end to the other party and usually includes reasons for the termination, the date of termination, and any other pertinent details.
Why Do You Need a Contract Management Strategy?
Contract strategies and systems 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. The 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. But how to improve contract management?
Following these simple guidelines will help your company manage its contracts better.
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.
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.
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.
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.
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.
Conclusion
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.