Business agreements cannot take place without a valid contract being in place. This is where contract management comes in. As businesses rely on fewer and fewer staff while trying to keep productivity the same, the role of contract management is becoming more and more critical. Contract management software automates the contract management process, which helps save time through an automated process. Ultimately by understanding the contract management process better, businesses can spend less time on completing admin, and instead focus on essential tasks such as overall business strategy.
What Seven Steps are Involved in the Contract Management Process?
Step 1: Preparation. This first step is all about identifying the needs of both parties, along with associated goals, expectations and risks. So both parties can achieve these objectives; the creation of a legally binding document needs to take place between both parties. Risk needs to be carefully considered by looking at potential future scenarios, for example, if the client wraps up their business or files for bankruptcy. Ultimately, the contract exists so that both parties receive deliverables based on the original agreements in the contract.
Step 2: Authoring. Before authoring takes place, it may be necessary to seek advice from your in-house legal team if you have any uncertainty. Moreover, it would help if you considered them to draft a contract template so that all terms and clauses are legally binding and correct. It is surprising how many problems occur surrounding contracts as a result of ambiguous wording, allowing either party to interpret it differently.
Step 3. Negotiation. No matter how much research, planning or preparation you invest into a contract first draft, there is almost certainly always going to be negotiation taking place. Be sure to fully understand the other party’s needs to minimise the number of changes requested. Nevertheless, when changes are required, its much easier to update through contract lifecycle software than doing manually, more so because changes can be made live and collaborations take place in real-time. Something which is much easier and more error-free than the back and forth communication taking place with numerous e-mails.
Step 4: Approval. Once negotiation has occurred, and both parties are happy, the contract can then be approved. It’s likely that if you are a large company, you’ll need manager level approval for this so that requirements can be accepted. Again, contract management software makes this easy. Once the workflow is established, the person who approves receives a notification, and they can then edit or comment on the contract as necessary.
Step 5: Execution. The easy part of contract management is often the signing of it except if the two parties happen to live in separate continents. Of course, there are options such as e-mail or overnight mail, but considering that timezones can be different, you can perhaps begin to see the complexities. Thankfully, with contract lifecycle software, this problem is eliminated through an electronic signature. This helps move the process along faster.
Step 6: Changes. Contracts rarely stagnate. Revisions and amendments are a frequent occurrence in the contract management lifecycle. Keeping up with tracking changes to an agreement between both parties can be confusing. However, contract management software eliminates this confusion. So both parties can keep on top of changes and agree to them as appropriate.
Step 7. Post Signature. The contract doesn’t merely end on being signed by both parties. It needs auditing regularly to make sure it is of the best value and meets all obligations initially set out. Importantly, the renewal date needs monitoring so that opportunities for renewal aren’t missed. Contacting the client before renewal indicates care for the relationship and also reliability. It also helps build trust and loyalty.
What Are the Main Things You Need to Know About the Contract Management Process?
One of the significant setbacks of manual contract management processes is that it is incredibly time-consuming. Nevertheless, if contract management is done correctly, it can not only save businesses money but also help build better relationships with their clients.
Doing contract management properly, in our opinion, involves the use of reputable contract management software. Not only does it make everything much simpler and more manageable, but a whole host of issues become avoidable surrounding risk and compliance. Therefore, businesses that want to lower costs and risks, yet boost profitability, cannot be without contract lifecycle software.