What is Contract Management and Why Use It?
Contract management software is the range of computer programs, libraries and data used to support contract management, contract lifecycle management, and contractor management on projects. It may be used with project management software to provide much-needed insight into contract data, facilitate collaboration between parties and save time and cost with negligible risks as well as help to reduce supply chain risk and ensure compliance at all stages of the supply and supplier relationship. Contracts are legally binding documents that should not be approached lightly so naturally, as businesses work towards increasing productivity without increasing their employee numbers contract management has taken on a greater role in day-to-day tasks. Good business practice dictates that all business agreements should be finalized with a contract therefore, in order to mitigate any risk in those agreements and to create strong strategic relationships, most contracts should be managed through the following seven stages succinctly described in this article.
Stage 1: Prepare the Contract
Being organized and prepared with the right resources is most important so make sure to begin by properly identifying the needs, reasons, and ultimate goals that require a contract. Contracts should seek to define and mitigate risk in a relationship, looking ahead to predict any potential scenarios that could occur over the lifetime of the contract and accounting for them in the written agreement. The terms of agreement within a contract should always clearly address exactly what happens if the client files for bankruptcy, goes out of business, or sells the company, along with any other contingencies that might arise.
Stage 2: Draft the Contract
Once the reasons for creating a contract are fully established, it’s time to consult with an attorney to begin drafting the contract or use a preset template drafted by your legal team to ensure all the information is up-to-date and all required clauses and terms are automatically included.
Stage 3: Get Approval Before Finalizing Any Contract
All the requirements for approval will need to be met before finalizing the deal in companies that need manager approval or have audit procedures. In a contract management platform, this is as simple as setting up an approval workflow so that whoever needs to approve the contract receives a notification and can view, edit, and comment on the contract in real-time. Nowadays, forward-thinking companies are turning to contract management platforms for such services. You can find no-hassle contract management for small businesses and nonprofits at https://www.contracthound.com/contract-management-software/ which can help you manage all your legal documents. Having a good overview of all requirements can cut down on unnecessary issues.
Stage 4: Contract Negotiation
Contract negotiation should always begin with transparency and trust. Anticipating and researching the other party’s needs before the conversation simplifies the process and creates a strong foundation for a lasting relationship. As redlining begins, it’s easiest to use a reliable contract management platform so that all parties can view the working document to make any changes and collaborate in real-time since a single source of truth for conversations and contracts results in quicker negotiations and a contract that provides clear visibility for both sides.
Stage 5: Sign the Contract
As the number of contracts in business transactions grows, it’s imperative that contracts save time rather than consume it so consider using a legally binding online signature also known as an e-signature which allows you to move faster, accelerating signatures and revenue.
Stage 6: Update Amendments and Revisions
Revisions and amendments are a common part of the contract lifecycle so make sure to implement a contract lifecycle management platform to record edits and add amendments because it’s important to stay ahead of any changes while making sure both parties are fully aware and in agreement on any revisions.
Stage 7: Manage Contract After the Signature
Finally, a successful business realizes that contract management doesn’t stop after the contract is signed, regular audits must be performed to ensure obligations are met and value is realized. Alerts should also be set for deadlines and renewals because missed renewals mean lost opportunities to continue a relationship, as well as lost revenue. Being aware and making contact in advance of the renewal time indicates reliability and care for the relationship, which in turn will continue to build trust and loyalty.
Contract management can be a time-consuming task but it does not have to be if properly managed by a competent team. Understanding the seven stages of contract management helps relate how a contract lifecycle management platform can simplify the overall contract management processes and in the long run, be one of the most lucrative areas for building business relationships and generating revenue.