How to Drive Effective Collaborative Contract Management
In the children’s game Telephone, players line up and whisper a word or phrase into the ear of the next player in line, who whispers it to the next player, and so on. With each iteration, there’s a new opportunity for misinterpretation, so by the end of the line, the phrase heard by the last player is wildly (and often hilariously) different from the phrase the first player whispered.
This miscommunication makes for a great children’s game, but it makes for terrible business practice. Without the right software, collaborative contract management can become like a game of Telephone: every time the contract changes hands, there’s a renewed opportunity for miscommunication, human error, misinterpretation, etc. so that by the end of the process, the information you act on can be wildly different from the information in the original contract.
Contract Logix is a data-driven contract management software designed with collaboration at heart. When you use secure, intelligent, and optimized contract management software, collaboration is easy and intuitive, and you mitigate miscommunication and maximize operational efficiency.
Key Takeaways:
- The contract lifecycle is a continuous process of request, revision, and execution.
- Collaboration is vital for every stage of the contract lifecycle
- Contract Logix makes contract management easy and efficient.
What Is Contract Management?
Contract management involves tracking and distributing the contract in every stage of the contract lifecycle. The lifecycle of a contract encompasses stages from the original request for a contract through the final post-award amendments.
At each stage of the process, collaboration drives success. The contract lifecycle broadly includes three phases: pre-award, award, and post-award. These broad phases contain as many as eight distinct stages. Different organizations may label these stages in different ways, but the principles that define them stay the same:
- Contract Request: At this stage, the contract only exists as an idea. Coordination occurs between both parties as they communicate their needs and capacities.
- Authoring. This is the drafting of the contract itself. At this stage, the party making the offer must collaborate with lawyers, colleagues, and decision-makers to author or assemble a legally sound and operationally feasible contract.
- Negotiation. Once the seller has written the contract, both the buyer and the seller must collaborate to reach terms that are amenable to both parties. Communication is essential, and both parties must document and formalize this communication.
- Review/Approval. The buyer either approves or rejects the contract. This requires clear lines of communication and appropriate documentation as this is a legally binding decision.
- Execution. Both parties fulfill the obligations of the contract. Organizations collaborate to achieve mutual goals, meet expectations, and communicate needs.
- Repository. Contract repository is the storage of the contract. This stage doesn’t require collaboration between organizations but requires the ability to access the contract document securely and consistently.
- Expiration/Renewal. Once the term of the contract expires, organizations can either let it lapse or renew the contract per the terms in the document. This requires collaboration between both parties to communicate the path forward.
- Amendment. The final stage of the contract lifecycle is amendment. This stage is similar to the negotiation stage because it requires collaboration between both parties. The organizations may make changes to an existing contract.
At every stage, collaboration and coordination are vital to both parties. Contract management is essential for the entire lifecycle of a contract.
What to Look for in Contract Management Software
With contract management being such a vital component of the entire lifecycle of a contract, your contract management software must meet your needs. There are several things you should look for in a contract management platform.
1. Secure
Contracts are not only legally binding, but they frequently involve sensitive information. Contract management software should be secure to prevent unauthorized users from accessing your documents. Throughout the life of your contract, you should use different levels of access. Since collaboration happens internally and externally, controlling who has what access to the contract is a dynamic task.
2. Collaborative
Collaboration should happen inside your contract management software, not outside. In the traditional paper contract management lifecycle, businesses made changes on paper, which means that different parties had different copies of the contract that reflected different changes. In the digital age, this same issue persists when organizations pass digital documents back and forth rather than using a contract manager to share them.
Especially in the negotiation and amendment stages of the contract lifecycle, it’s easy for the contract to become fragmented, but having a central repository for your contract ensures that a single view of truth is always accessible.
3. Convenient
Most businesses will manage many concurrent contracts with different buyers and sellers. This documentation can easily become entangled and unwieldy. The right contract management software makes document management convenient and accessible so that accurate documentation is always within arm’s reach.
Contract Logix makes contract management easy and convenient using our real-time Collaboration Room technology so that contract collaboration is intuitive and clear.
The Consequences of Poor Contract Management
Collaboration is vital for good contract management, but the consequences of poor contract management can range from inconvenient to expensive to illegal.
1. Scope Creep
Contracts use concrete, legally binding language to lay out the specific duties and obligations of both parties. Scope creep refers to the gradual expansion of projects as businesses add new layers to their process.
Contract management keeps scope creep in check by making clear expectations and limitations available to both parties. This helps the buyers manage the right expectations, and it helps the sellers deliver the right products or services.
Image Source: https://kissflow.com/project/avoid-scope-creep-in-project/
2. Missed Renewal Dates
Losing track of the renewal date of your contracts can hurt your business in two ways:
- Lapse in contract. Missing the renewal date can result in a contract expiring out from under you. This can result in not receiving the goods and services you expect.
- Unwanted renewal. Many contracts have an automatic renewal clause that re-ups the contract after it expires. This can lead to unplanned expenditures and unwanted obligations.
In either case, missing a renewal date can obstruct your planning and disrupt your business. Missing a renewal date is easy without a contract manager, and the more successful your organization is, the more complicated your contract management is.
3. Breach of Contract.
Breach of contract occurs when a party neglects to meet the terms of the contract. This could happen when a business doesn’t deliver goods and services on time, doesn’t make payments according to schedule, or fails to meet any other term of the contract. Managing contracts help track other organizations’ obligations to you and your obligations to other organizations.
Contract Logix Can Help
If managing contracts sounds like a tall order, it doesn’t have to be.
Contract Logix’s contract management software helps businesses keep track of their vital documents, fosters collaboration and communication between organizations, and securely tracks the status of contracts, all with actionable and data-driven insights.
Contract management with Contract Logix makes documentation easy and convenient.
If you’re ready to take charge of your collaborative contract management, request a demo today to learn how Contract Logix can help
Looking for more articles about Contract Management? Check out our previous article “8 Keys to an Effective CLM Workflow“.