The Contract Management Process Is Business Critical: Here's Everything You Need to Know
Get your business set up for contract management success and learn the fundamentals of the process.
Contract management is an essential business process that allows organisations to effectively manage and monitor contracts with suppliers, customers, employees, or any other party. It involves the planning and execution of contractual obligations and ensures that all parties are in compliance with the terms of the agreement. By effectively managing contracts, organisations can save money, ensure compliance with laws and regulations, increase competitiveness, and avoid potential legal disputes.
Why a Contract Management Process Really Matters
Contract management is a critical part of any business. It defines the terms and conditions of commercial relationships, creates an audit trail for accountability, captures important metadata for forecasting, and assists organisations in staying compliant with applicable laws and regulations. The process, beginning with the development of a contractual agreement, is managed through the document's lifespan—allowing businesses to gain ultimate visibility into their agreements.
At its most basic contract management software streamlines the contract management process, simplifying the work of drafting and managing legally binding contracts. This enables businesses to reduce the risk associated with manual paperwork processes since everything is automated in a single system, meaning documents are easier to track and are always retrievable. Additionally, contract management systems offer advanced features such as customisable workflow settings allowing users to review contracts quickly and accurately before signing off on them.
A major benefit of using a contract management system is increased visibility into all stages of the contracting process. Contract managers have access to analytics that can help track how long negotiations take or identify instances where compliance issues arise; this information can be used to make more informed decisions about future contracts as well as ensuring any upcoming agreements are made according to best practices. As well as this, contract management platforms enable near real-time updates during negotiations making it easier for stakeholders to stay informed and connected at all times without having to wait for emails.
Gooe contract management systems are equipped with built-in reporting tools allowing users to review their current portfolio of contracts at any point in time as well as generate reports detailing any changes throughout the entire lifecycle of an agreement – from initial creation up until expiration or termination. With better oversight comes greater transparency which in turn helps build trust between business partners while reducing organisational risks associated with noncompliance or errors due to manual paperwork processing methods.
Overall, contract management software has become an invaluable asset for organisations looking for greater control over their contracting processes. In addition to helping teams manage every step of the immediate process—from drafting documents to obtaining signatures electronically—contract management solutions offer data-driven insights that help organisations optimise future agreements and increase profitability over time
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5 Stages of The Contract Management Process
The contract management process involves five essential steps to ensure that all necessary contractual elements are properly handled and tracked. These steps include Contract Initiation, Contract Creation and Negotiation, Contract Execution, Contract Performance Monitoring and Renewal/Termination.
1. Contract Initiation
The first step in the contract management process is contract initiation. During this step, the parties involved will delineate the terms of their agreement, agree on the scope of work to be completed, and determine which party is responsible for each task or activity. During this stage, it is important to make sure that all stakeholders are aware of the parties’ roles and responsibilities in order to avoid conflicts down the line. Additionally, the initiation stage can be used as an opportunity to identify potential risks associated with a contract before moving forward with negotiations.
2. Contract Creation and Negotiation
Once both parties have agreed on the terms of a contract during the initiation stage, they must now enter into negotiations concerning specifics such as pricing structures and payment arrangements. During this second stage of the contract management process, it is important to negotiate in good faith so as not to create unnecessary tension between parties during later stages of performance monitoring. As a rule, contracts should be drafted clearly and concisely so that there is no ambiguity when it comes time for enforcement by either party if need be.
3. Contract Execution
Once both parties have agreed upon all aspects of a contract and have signed off on documents be they employment contracts, non-disclosure agreements (NDAs) or other, then it's time to officially execute the agreement. This third step in the contract process includes any activities related to filing paperwork with relevant governmental bodies or other third-parties associated with a particular arrangement. It is important at this point for contracting parties to make sure that all additional documentation required for an effective agreement is promptly received prior to commencing performance under said agreement.
4. Contract Performance Monitoring
Following the execution phase comes performance monitoring–an integral part of any successful contract management process. During this phase contracting organisations can track progress made against predetermined contractual objectives as well as offer feedback on potential improvements or changes that may need to take place given changing circumstances throughout project duration or business environment conditions outside of control of either party. Additionally, performance monitoring allows contracting entities to document events such as delays or discrepancies between stated intentions versus actual results in order to avoid any disputes over payments when due at end date or termination date if applicable.
The final step in a typical contractual management process focuses on renewal or termination depending upon whether parties wish to extend the current arrangement under same terms or whether one or more parties want to make a change or seek more more favourable conditions. Either way, it is important for all involved in a renewal/termination phase to understand the complexities surrounding “break clauses” wherein one side may choose to terminate an agreement before its scheduled expiration even if other party does not wish for it so – thus requiring more enforcement mechanisms up front than those typically found within standard contracts alone (e.g., liquidated damages etc.).
Who uses a contract management process?
Contract management processes are used by individuals and organisations of all sizes, from start-ups to large enterprise. Contract managers are often tasked with overseeing the creation and enforcement of contracts between their organisation and outside parties. This role can involve working closely with other departments, such as legal or finance, HR or sales, in order to ensure that the contract is legally binding and meets a company's expectations.
In larger organisations, contract managers may be part of a larger team or may report directly to the executive team or a senior manager. They are typically responsible for establishing processes for drafting contracts and ensuring that those processes are followed. This includes conducting any required due diligence on the proposed terms and conditions of the agreement, analysing risks associated with it, negotiating changes if necessary, approving final versions of contracts for execution, tracking performance milestones and ensuring compliance with applicable laws and regulations.
While the contract management process can be complex —involving many moving parts, it is foundational to your business success. Prioritising and systemising your contract management process can protect and accelerate your business in exponential ways, for years to come.
Docue Legal Team