How Contract Structure Should Reflect Business

general contract unique contractThe President and founder of the International Association for Contract & Commercial Management (IACCM), Tim Cummins points out that contract structure is an important topic. “Not only to ensure the structure actually reflects the nature of the deal or relationship, but also to improve the ease of reviewing and understanding the contract”, Cummins says. “Having the wrong contract structure is actually one of the issues that frequently leads to claims or disputes”, he adds.

For example, in the oil and gas business the contract structure is pretty much standard. While each customer has it own structure for numbering, the contract is structured into section or exhibits. At the other end of complexity are the contracts from the construction industry, even more those that are funded by local, state or federal government monies. Under the latter scenario, costs and associated data needs to flow seamlessly and correctly for project,contract, billing, and financial management.

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How to Create Quality Contracts

quality contractFounded in 1999 with support from British Telecom, Hewlett-Packard, IBM, Lucent Technologies, Marconi Communications, and Siemens, the International Association for Contract and Commercial Management (IACCM) stands as one the global forums for innovation in trading relationships and practices. The IACCM is a useful resource for contract managers around the world and its blog has some articles that have even reached almost 30,000 unique readers. As of 2012, the third most popular article is on what is the purpose of a contract and what are the quality indicators for a contract. The article surveys members of the IACCM and tries to define what ‘quality’ means in terms of a contract.

Here are some of the findings on how to create quality contracts.

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The Importance of Integrity in Contract Management

integrity in contract managementIntegrity in business is a more complex topic than it might at first appear. Integrity could be summed as a list of “Don’ts”—don’t lie, don’t mislead, don’t conceal, don’t steal, don’t break professional ethics codes, and so on. Seen in this way, integrity in business is simply about doing the right thing—as individuals and enterprises.

But there’s another perspective—integrity is also integrally tied to business success. There are of course exceptions—many of which get highly publicized—but generally speaking, the way to get ahead in business, as an individual and an organization, is through integrity.

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Outlook of Contract Management in Asia

contract management in asiaContract law in Asia has traditionally been inconsistent, and it remains so, even in the larger markets. This lack of contract clarity and unpredictable contract enforcement has, not surprisingly, discouraged business investment in Asia.

In part, the situation in Asia is due to a cultural tendency in Asian business to focus on personal relationships rather than on contracts. But as Asia becomes more integrated in the global economy, Asian countries are quickly becoming more sophisticated in their use of contracts and more transparent and predictable in their enforcement—a development borne out by World Trade Organization surveys.

Nonetheless, throughout Asia there are significant differences in regulation, levels of trust, and attitudes toward business, so a uniform contracting environment is far from a reality. Asia still remains in the infancy of complex contract management, including contract creation.

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What to Consider When Negotiating SaaS Contracts

how to negotiate saas contractThe market for software-as-a-service (SaaS) continues to grow rapidly, with global spending expected to rise 17.9 percent in 2012, to $14.5 billion, and to reach $22.1 billion by 2015, according to the market research firm, Gartner.

Increased awareness of how SaaS works, growth in related technology (e.g. platform-as-a-service), and the low upfront licensing and capital costs are driving this increase, said Gartner’s research director, Susan Mertz.

But as many enterprises transition to SaaS, they’re often unsure of how to find and negotiate service contract terms that best suit their business needs. Many enterprises don’t adequately review the contract terms of the SaaS vendors they are considering, and even more never try to change the terms in their favor.

In a July 2012 article on CIO.com, Thomas Trappler, director of software licensing at UCLA and SaaS contracting instructor at the school, urges enterprises to be more aggressive in seeking terms that will provide the most benefit.

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Take Charge of Your Contract Management Process

take charge of your contract management processImplementing an enterprise contract management system results in numerous benefits—pre-approved templates and legal language that speed time to close, alerts for milestone dates, tracking of contract compliance, and analysis of contract performance, to name a few.

At the core of this increased functionality is a central repository for all contracts.

The Old Way: Miscommunication, Holdups, and Mistakes

In companies that don’t utilize an enterprise contract management system, it’s not always easy to find a contract within the organization. Many companies without contract management software have multiple contract repositories spread among various departments or business units. This lack of centralization leads to costly delays and errors, as well as making effective analysis impossible.

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Evaluating SaaS for Your Contract Management Processes

contract management saasEnterprises considering whether to implement contract management software should always ask the central question: Will this technology ultimately help the organization achieve its key strategic objectives?

In a recent blog post at CIO.com, Martin Davis, a vice president of IT for J.D. Irving Ltd., points out the perils of adopting new technologies without proper alignment with business goals. Often an organization wants to try a new technology such as contract management software without any definitive plan for how that technology will actually help increase revenue, improve productivity, lower costs, or realize any other specific, measurable objectives.

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Effective Data Reporting for Contract Management

contract management reportingOne of the essential elements of any productive contract management software system is its reporting capability. Even if critical contract data is collected and stored in spreadsheets or databases, a company won’t fully maximize the benefit of this information without a user-friendly and reliable reporting function that produces meaningful, concise reports that highlight the most important data.

Effective data reporting capability allows companies to identify and analyze opportunities, as well as problems, in the way they create, negotiate, execute, and monitor contracts. Merely gathering information about the contracting process and contract performance isn’t enough.

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How a Centralized Contract Management System Brings Your Business Together

centralized contract management systemContract management has traditionally been a haphazard process that resists efforts at internal coordination. Paper documents containing important contract information are often stored in multiple locations, despite the best intentions for centralization. Even electronic contract-related information (e.g., Excel spreadsheets, Word docs) is often dispersed throughout an organization, saved in places where it’s not accessible to all key people.

On the flip side of this accessibility issue, contract data and documents that aren’t properly maintained in a centralized location can often be accessed and edited by unauthorized personnel.

Having a secure, centralized contract management system eliminates these problems by bringing all contract management data together in one location, where it can be readily accessed by the right people and protected from the wrong people. (Using a third-party hosted software provider—which often makes the most financial and strategic sense—will completely remove the sensitive contract information from vulnerable in-house servers.)

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3 Top Tasks to Keep in Mind in Contract Management

3 Top Tasks to Keep in Mind in Contract Management

The keys to contract management are to make sure that you will have important records when most needed and that you will maintain the integrity of your data at all times. A great way to achieve this is through a digital contract management system. Here are the top 3 tasks to keep in mind in contract management and how a contract management software helps you achieve them.

Creating a Digital Record

One of the main reasons that most people do not let go of a paper-based contract management system is that they fear that they must prepare for the worst by always having a paper backup. However, this anxiety is misguided: a statement printed at home has the same legal value as one received over the mail. Having a digital record to track invoices and documents saves you from last-minute scrambles for key records, particularly during tax season and end-of-year statements. Features such as Full-Text and Criteria-based Searching make contract management software a powerful tool to quickly find and locate contract documents and specific data. To encourage adoption of a new system by your staff, it is a good idea to look for an option that has integrated Microsoft Word features. Such user-friendly features enable a smoother user adoption process.

Setting Up a Review System

Whenyou have keeping only a paper-based contract management system, it is very easy to keep track of term changes, due dates and pre-established thresholds with a dozen or so contracts. As your business grows and thrives, it becomes much harder to keep tabs on a couple dozen contractsit becomes harder to maintain the same diligence with the same process. . Stay organized and informed aboutvigilant of your contracts with a contract management software .by signing up for Scheduling email alerts when a deadline is approaching or when there is significant deviation from approved contractual language can save you time and money. . Having a digital review system that is accessible at all times empowers you to act faster and establish priorities more efficiently.

Protecting Your Data

When considering going from a paper-based to a digital contract management system, you’re taking a great step in protecting your contracts and the privacy of your clients from dumpster-diving ID thieves. However, improper digitization of your documents on your hard drive can open you up to other privacy risks. Using professional contract management software, allows you to choose from several options that will proactively guarantee the integrity of your data. Given the rise of cloud computing, it is a good idea for businesses to consider Software-as-a-Service (SaaS) options because these systems not only offer a high security level but also free the organization from making expensive financial commitment in IT infrastructure hardware and software and management costs.

If an organization is not ready to fully commit to cloud computing, there are several options that are a mix between on-premise, third-party hosted and self-hosted systems. No matter what mix of a contract management system you choose, make sure that the system is Statement on Auditing Standards No. 70 (SAS 70) compliant. In simpler terms, SAS 70 is a widely used compliance audit for assessing the internal control framework on service organizations that provide critical outsourcing activities for other entities. There are 2 levels of SAS 70 audits, Type I Audit and Type II audit, being the Type II Audit the highest level of compliance.

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