As businesses look to increase their productivity, the role of contract management takes on greater importance. And where contracts grow in number, ensuring they save time, rather than drain it, is essential.
This is where knowing the ins and outs of the contract management process comes in. In understanding the process, businesses can minimise the time they spend ticking off administrative tasks and, instead, use the knowledge to mitigate risk within agreements and improve their strategic relationships.
We'll take a look at the process of contract management in more detail here, along with some strategies that can benefit businesses dealing with agreements and contracts.
Although there are many different components of contract management, it can generally be broken down into the below stages:
Identifying needs: From the outset, you should identify the needs, reasons and end goals you require from a contract. Doing so makes any decisions easier down the line, so consider any potential scenarios that may arise and account for them in the contract.
Initial requests: The contract management process begins by identifying contracts and important documents which support the contract's purpose.
Authoring contracts: Whether you create a new contract, use a preset template drafted by your legal team, or devise it through an automated contract management system, pay attention to specific wording. You want to be as clear and unambiguous as possible. You may also need to take laws into consideration if the other party is based in a different country.
Looking over the contract: After the contract has been drafted, let employees read through it. A fresh set of eyes can point out any discrepancies, ambiguities or errors which helps to minimise issues later down the line.
Approving the contract: If you need manager approval or your business has audit procedures, then the contract needs to meet these requirements before approval.
Contract management platforms make this easy; it's simply a case of setting up an approval workflow so the relevant person receives a notification and can view, edit and comment on the contact in real time.
Negotiation of the contract: Even after all the research, planning and preparation, it's rare that a first draft will seal the deal. Whatever arises in the negotiation discussions, it's easier to use a contract management platform so that both parties can view and make changes to the document.
Following an email chain might be confusing and create costly mistakes. A single platform where things can be discussed and amended, however, can result in quicker negotiations and a contract with trust, transparency and visibility for all sides.
Signing of the contract: Now it's time to put pen to paper. But if you're making agreements with business across the country, or in another part of the world, getting signatures might not be so simple.
Legally binding online signatures can deal with any issues that may arise from international contract signings, especially when deadlines are on the horizon.
Revisions and amendments: A common part of the contract lifecycle, contracts will have to be updated and amended. But tracking their changes can be confusing for all involved. The user-friendly interface of a contract management platform once again comes in useful here, allowing for easy edits and amendments and ensuring both parties are up to date on new revisions.
Auditing, reporting and renewal: Contract management doesn't end once the ink has dried. Regular audits determine whether obligations are being met and iron out any issues.
Deadlines for renewals should also be set. Skipping out on these renewals could mean losing out on future opportunities to strengthen the relationship and, of course, create further revenue. Making contact with the other party before the renewal time shows awareness of the relationship, building on the trust and loyalty created when the contract was first signed.
Traditionally, managing contracts involves sifting through folders and files, a process that tends to lead to inefficiencies and errors.
Contract management software, on the other hand, can reduce these manual mistakes, organising all your contract paperwork electronically in one easily accessible place. As we've mentioned, signing and renewing can be flagged up on an electronic calendar, while resources that relate to the entire process are easily tracked and allocated.
Such software reduces time-intensive administrative tasks, automating many of the processes involved with managing a contract. The man-hours freed up as a result create more value for a company, allowing employees to use their time on other duties.
And by centralising important documentation into one area, everything is easily accessed, viewed and amended from a single location. This tidier approach keeps track of everything in a much more streamlined manner, improving contract visibility, ensuring contract compliance and optimising both parties' commitment to seeing the contract through to completion.
Strategies for improving contract management
Before you agree to anything or sign on the dotted line, looking into the other party's legal background is crucial. For one, you need to determine that they're legally able to enter into a contractual relationship.
And if there are existing commitments, reviewing these obligations can determine how a new agreement might impact them.
Both parties should be clear on the respective persons that have the authority to make final decisions. Although these people don't have to be present in every meeting, knowing who can act on their behalf is key to speeding up the process and avoiding misunderstanding.
Tailoring your contract lifecycle to the needs of the contractual relationship can help make the process a lot smoother. For the outset, you should identify the necessary processes, deliverables and review periods, along with the key documents and information you need from the other party. This helps to create a more accurate, complete contract, and keeps negotiation time to a minimum.
At the earliest possible stage, both parties should mutually agree (in writing) on the length of review periods, so you can adequately draft, review, discuss, revise and complete deliverables.
Be prepared for delays
Not every contract is going to go as planned. If there are issues or delays, you'll face the brunt of additional costs and time. Not only does this jeopardise projections and budgets, but it also affects other business opportunities.
Let the other party know how delays will affect you ahead of time, so they know what to expect should issues arise.
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Don't be tempted to skip out on the evaluation stage of a contract. Meeting with team members after the contract's execution can help identify pain points and uncover their root causes. Carrying out an evaluation now can save time in future situations, so make sure you're devoting the right amount of time to proper analysis.
Gazprom Energy is a leading supplier of energy for small businesses, offering competitive gas and electricity contracts that are simple to set up and manage. For more information, visit the homepage or call our team today on 0161 837 3395.
The views, opinions and positions expressed within this article are those of our third-party content providers alone and do not represent those of Gazprom Energy. The accuracy, completeness and validity of any statements made within this article are not guaranteed. Gazprom Energy accepts no liability for any errors, omissions or representations.
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