Every business needs contract management and administration. Contract management solutions are being used by more companies as they realize how important it is to automate processes. Contracts are necessary for the legal protection of one or more entities, which is why an organization needs to make them. A contract spells out who does what for a business and its vendors, customers, employees, and other business partners. Contract Management and Administration give your business a single source of truth for all of these business relationships.
Careful Contract Management and Administration means making, reviewing, signing, and storing contracts. Contract Management and Administration get harder as a company grows from a small start-up to a larger business.
What is the purpose of Contract Management and Administration?
During each step of Contract Management and Administration, the management processes move the contract through each stage of the contract lifecycle. Contracts need to be looked over, signed, kept, and made available to everyone involved. But contract Management and Administration are not very simple.
A set of contracts must be written in precise, legally-binding language. Since lawyers are hard to find and cost a lot of money, not every organization can understand a 40-page contract on its own. Some of the information in a contract is very important, like an exclusion clause that can keep a business from being liable. Most businesses use manual review and data entry to read contracts. They look for the most important parts of an agreement and sum up as much as they can.
Contract reviews can happen at any point in the management of a contract. During the process of negotiating, a review helps you choose the best terms for the type of agreement that will help your business the most. During the contract execution stage, several departments, such as legal, project management, financial reporting, or procurement, may need information from the contract.
What happens if a mistake happens during the Contract Management and Administration process?
There may be no first name, last name, email address, phone number, signature, or date. Your business can be hurt by liability, risk, and missed opportunities to make money. Contract management and administration can go wrong in a lot of different ways.
What are Contract Management and Administration’s six steps?
There are six main steps in the Contract Management and Administration process.
During the contract initiation stage, a business decides to start doing business with a partner, client, vendor, or employee.
The business and those who are interested talk about contract agreements and how they are good for both sides. This is the step that takes place before a contract is made.
Making Contractual Obligations
A contract is set depending mainly on what both parties agree to. To make a contract, you might fill out a simple template or make a whole new contract.
Both sides look over the contract and sign it to show that they agree to be legally bound by its written terms. Contract lifecycle management (CLM) speeds up the approval process and makes it easier to make contracts by using templates, fast distribution, and automatic reminders.
During this stage, the contract is put into action. Both sides are now bound by their contracts. And they must meet their obligations. If there are problems on either side, the contract could end, there could be damage clauses, or something else could happen.
Renewing and ending
The contract is up for review after a certain amount of time. If the contract says that it will last forever, it could be renewed, renegotiated, or changed.
For each of these steps of good contract management, your business teams need to work together.
Contract management makes a plan for how two parties can work together to help each other. The contract has language that explains how each party’s expected role and actions will help the other’s business.
What are the Contract Management challenges?
Almost every business has problems with how they manage contracts. Almost any company can work to deal with contract problems by getting good at managing contracts, using modern contract software, and managing contracts in common sense and practical way.
Making contracts easy to understand
Contract management often depends on contracts that are easy to understand. Without legal training, you need to have certain skills to write complete, clear, concise, and easy-to-understand contracts.
Using different parts to manage contracts
Contracts must be handled in a way that takes into account many important factors, such as:
- Type of deal
- Total value
- How important it is to the business
- Performance requirements
During long-term contracts, these different factors often change, with less management needed as trust between the parties grows.
Checking the terms and conditions of a contract
It’s easy to sign contracts without reading the terms and conditions, especially the “fine print.” If you don’t read the terms and conditions, you might find out something later that you didn’t expect.
Three strikes for contract management violations
If contract management refers to a supplier in terms of the contract, then if the supplier makes a mistake or doesn’t meet the requirements, the relationship with the supplier could get worse quickly. The “three-strikes” rule can help give warnings outside of the contract for the first two times a breach happens. It can be hard to figure out how to use the remedies for not following the rules.
Advantages of contract management software
When a company is growing fast enough, and contracts are going up, it is time to invest in contract management. Risk is also rising quickly, so it is important to use CLM software to keep an eye on the contract management process.
Here are a few of the most important reasons why you should use Contract management software:
It takes less time to use a template to make a contract than to write one from scratch.
Let’s say your new boss sends you a revised contract. You want to accept it, but there is a mistake in the start date. Your team needs time to make changes to the contract, export it as a PDF, print it, and send it through the mail. Using contract management software, one or more parties can make changes to a live document right away without having to send it through the mail.
With contract management software, you can now search for your contract, which is another benefit. Using a digital system to store and manage contracts saves a lot of time over doing things by hand. It’s better to use the Internet to find concrete results in seconds than to dig through filing cabinets.
Contract management software uses encryption and other advanced security measures to keep contracts safe behind many layers of security protocols.
This post will educate you on each and every principle of contract management and administration.