Contracts are a core component of virtually every business transaction, yet they can be complex documents with numerous details that must be adhered to. More so, contracts between various vendors, tenants, and other services differ greatly from each other, complicating the process of maintaining them. This is where contract management comes into play.
What Is Contract Management?
Contract management is the method of properly managing all commercial contracts. It can be used for any type of commercial contract typically related to customer, partner, vendor, and employee contracts and every stage of the relationship with them. A contract manager will handle the entire process through what is called contract lifecycle management. This enables the proper oversight of contracts to occur on a consistent basis.
The complexity of contract management is that each business type will need a varied contract, and the contract terms of each are likely to differ as well. It becomes the business’s responsibility to ensure that all contracts align with each other as well, meaning that various suppliers and vendors are cohesive and that all employees meet contract obligations.
Typically, contracts also require action. This includes issuing the contract but also throughout its lifetime. The key is to ensure the contract can remain actionable for those involved.
What makes this process even more overwhelming is that most companies, even small businesses, are likely to have dozens – and sometimes even hundreds – of contracts to manage each week. That makes it very easy for documents to fall through the cracks.
What Are The Benefits Of Proper Contract Management?
When done well, proper contract management can help companies in numerous ways:
- Estimates are more accurate and more detailed, minimizing the risk of costly mistakes in any type of transaction.
- Deadlines and renewals of contracts are more in sight, allowing companies to have a better idea of where they stand at any given time.
- Compliance requirements that fall on the shoulders of many companies can be maintained, minimizing costly regulatory fines.
- Contracting workflow becomes more standardized, which ultimately leads to less frustration throughout the process.
- In many situations, cash flow gains are possible because there is enhanced visibility overall.
- Contracts can be better analyzed and determined if they are a success and advantage for a company or not.
- Agreements are easier to put in place, communicate, and implement within businesses.
Utilizing Support for Contract Lifecycle Management
As a business owner, putting in place proper contract management reduces risk and improves visibility. To achieve that, organizations must understand the contract lifecycle, which can differ somewhat between agencies. Having a contract management team to oversee this process can be critical:
- The request for the contract goes in.
- The creation and review of the contract takes place.
- Pre-approval is put into place.
- Negotiations occur, and redlining happens as needed.
- The contract is signed.
- The contract is then executed and managed, and maintenance of it is completed.
- Storage and compliance occur.
- Performance of the contract is considered, and ultimately, renegotiations are considered based on that performance.
- Analysis and optimization of the contract are completed if there are to be additional contracts created.
At every stage, there are steps necessary to ensure proper, legally binding, and advantageous contracts are utilized. With the support of contract management services, it can be more efficient and effective to manage this entire process.
Get The Guidance You Need With PayrAdvisors
Contract management is a precise process with numerous challenges in most situations. With the help of our team at Pay Advisors, you can navigate the process, minimizing loss, improving revenue, and better managing your business’s bottom line. Contact our team now for a consultation.