Contract management involves correctly administering every step within the contracting process. Contracts need to be tracked, access for various stakeholders needs to be controlled and rules need to be set, as well as checked to ensure compliance. A strong contract management plan is an important factor in making sure the procurement cycle kicks off smoothly and operates properly into the future. Many members of staff within a larger organisation will need to continually make sure that not only they are meeting all requirements, but that their suppliers are too. Regardless of whether this is in a commercial or contractual capacity. Contract management software hosts a number of advantages, as it allows each stage in the process to be closely monitored, contract access to be properly controlled and archiving to take place when changes are made.
Typically, it includes the following steps:
- Gathering. Contract lifecycle management typically begins by bringing together all paper contracts into one area that can be accessed easily for everyone involved. This is necessary to work out potential risk.
- Capturing. A range of data will need to be captured from various existing contracts. If the information is being captured from printed documents, software such as OCR (optical character recognition) may be used to convert text into an electronic format by scanning it into a computer.
- Track. Once data has been captured, it will then need to be tracked to make sure no key milestones are being missed. This applies to both old contracts, and ones that are yet to be signed.
- Authoring. Once tracking is complete, new methods can be created to allow new contracts to be created as efficiently as possible. A range of templates and clause libraries should be created so other non legal users can quickly put together new contracts which remain regulated.
- Creating. Upon passing of templates by legal teams, a number of business users put together contracts using templates and information. This takes pressure from the legal department when having to spend extra time putting together complex deals or amending drafts written by other users.
- Approving. Sometimes, contracts are deemed particularly risky so need to be passed to certain people within a business such as the legal or credit departments, or even management. However, contracts deemed ‘safe’ do not require this.
- Negotiating. Negotiators then check contracts for things like problems with certain deals, commenting them on the draft and making sure all relevant information is captured.
- Signing. Upon the contract being approved by all, it should be signed by everyone involved and then be stored in a centrally accessible location. Another individual will then need to check that no further changes have been made to the final contract after it has been sent out to be finalised.
- Analysing. Companies dealing with more than 100 contracts at any one time will need to analyse contracts for risk, rights and obligations. Specific individuals within an organisation will manage risk and create ad-hoc reports when unexpected situations crop up. Making sure contracts are stored appropriately is essential to making sure everyone has easy access in case new risks or situations occur.
What is the Future of Contract Management?
In previous eras, contract lifecycle management could be a complex, confusing and error prone process. Old systems and processes such as combinations of outdated digital systems and paper based meant that scope for problems was often high such as poor regulation or information becoming out of date quickly, not to mention the evidently huge security burden too. Now you can get a contract management software and deal with data in a way you never have before. They can take the relevant information from each digitized contract and condense it into a format the layman can read. You can create a more efficient business by learning more about your business partners, especially your suppliers, and make decisions based on data and not guesswork. The technology behind it can only be more specific in the future. Thankfully, we are now in the age of Contract Management Software, making contract lifecycle management more efficient whilst also offering better checking of compliance with policies that make up procurement processes.
However the benefits don’t just end here. There are many more:
- Each and every part of the contract management lifecycle becomes streamlined
- Documents, client information and legal agreements can be accessed and changed in one location
- Determining who can access documents and make edits can be tightly controlled
- Working out how well contract is being adhered to through service level agreements
- Developing better relationships with vendors by minimising disputes with contracts
- Processes such as admin tasks and approval processes can be highly streamlined
- Tasks, including document creation and approval can be more closely monitored
- Additional useful features such as electronic signatures and commitments management
- More accurate understanding of obligations, opportunities and risk
- Information can be accessed through any internet browser