The Full Scope of Contract Management

contract management process“Contract management” is often thought of as a function that primarily occurs after contracts are closed. But the enterprises which are the most successful at maximizing revenues and minimizing costs in their contract portfolios realize that contract management has a larger scope.

Certainly contract management involves the administration of existing contracts, but it’s much more than that—it’s also about strategy, sales, performance optimization, and customer/supplier relationships. It’s about maximizing value, productivity, and profit through every stage of a contract life cycle.

Creation

The contract management process begins with the authoring of contracts. If contracts are not structured properly or if outright errors are made, the resulting unanticipated cost can be substantial, even devastating.  Understanding the importance of compliance with corporate and regulatory policies, the enterprises that do the best job managing contract creation rely on enterprise contract management software, which provides the capability to develop libraries of pre-approved templates and clauses so that contracts are correctly formulated.

This feature has the additional benefit of speeding the contract creation process, an advantage that can be invaluable to salespeople in the field and can help close deals faster.

Negotiation

In this stage, business intelligence made possible by contract management software enables enterprises to better make their case during negotiations. Due to increased efficiency, excellent contract management through all contract stages can also help make an enterprise more competitive in the price they are willing to pay or accept.

This stage of the contract life cycle is an example of how contract management can benefit customer or supplier relationships. As the National Contract Management Association points out: “A mutually beneficial contract can often be challenging to craft. Buyers want the lowest price, whereas sellers want to maximize it. Both, however, should strive to meet one another’s quality, delivery, and performance expectations. “

With effective contract management, an enterprise will have sufficient data on historical contract performance to negotiate terms that achieve a “mutually beneficial” contract without getting burned—ultimately leading to long-term relationships that help both parties prosper.

Approval and Closing

Lengthy approvals can sap the efficiency of a contract management program. Delaying approval not only delays the benefits of the contract, it can lead to a contract falling apart.

Again, the solution lies with enterprise contract management software, which automatically routes contracts for the necessary approvals and prompts those who need to act. The software also facilitates faster approval and closing by enabling anywhere/anytime communication and by tracking any changes made to contracts, thereby minimizing miscommunication, confusion, and time spent “catching up.”

Monitoring

Once a contract closes, contract management software can simplify and increase the reliability of this stage of the contract in numerous ways—from making routine clerical tasks easier and more-efficient to providing alerts to milestone dates and flagging problems that are developing.

But contract management during this stage also should include the aggregation and analysis of contract performance data. By evaluating contract histories, enterprises are better able to create and negotiate profitable contracts—a benefit that keeps on adding value.

Conclusion

Ultimately, contract management is a loop. Contracts are created, negotiated, approved, closed, administered, and mined for performance data. Then that data is used to identify necessary adjustments to the contracting process, and the enterprise starts the process again, more-prepared than ever to benefit from astute contract management.

Paper-based contract management isn’t sufficient for managing this loop, and companies that are still relying on manual contract management are putting themselves at a competitive disadvantage. As a rapidly increasing number of companies are discovering, enterprise contract management software is necessary for significant, ongoing improvement of the contracting process.