Contracts are legally binding agreements that define and govern the exchange of goods or services. A contract’s journey – from creation to fulfillment and completion – is complex and leaves room for errors and oversights. As such, a process has been generally agreed upon for the handling of contracts. This process is referred to as contract management.
But what is contract management, and how can it be approached? Here’s what you need to know.
What Is Contract Management?
So, what is contract management? Contract management is the administration of contracts made with customers, partners, vendors, suppliers, and employees. Contract management involves the negotiation of contracts - which are then mutually approved, signed off on, and executed. Responsibilities are expected to be fulfilled thereafter.
Digging Deeper Into Contract Management
Now that you understand the general idea behind contract management, let’s take a closer look at the contract management process. Along the way, you can uncover tools to use for more effective contract management in the age of digital transformation. We will cover the contract lifecycle, bad contract processes management, a better way, and some bonus tips.
#1 - Conquering the Contract Lifecycle
Successful contract management starts with a foundation of procedural oversight of the contract lifecycle. Contract lifecycle management (CLM) is a model used to visualize the contract management journey. The process commences with a contract request and ends with the fulfillment of responsibilities – with the possibility of contract renewal.
The stages of the contract lifecycle are as follows.
- Contract Requests: The first stage allows parties to gather key details associated with a prospective contract, amendment, renewal, or other agreement.
- Contract Authoring: Sometimes called “contract writing,” this CLM stage involves counterparties putting terms and conditions into writing. Standard clauses, key dates, counterparty information, and other essential data are united.
- Contract Negotiations: Parties negotiate the contract terms drafted during authoring. Back-and-forth redlining and collaboration result in agreed-upon conditions that provide insight into the expectations of all parties.
- Contract Approval: Legal teams review and set parameters to meet compliance, obligations, milestones, and special terms. Both sides of a contract approve of these final terms and conditions.
- Contract Signatures: Parties have chief authorities with high clearances sign a contract. Signing ratifies a contract’s enactment.
- Contract Obligations: Parties perform their responsibilities, adhere to key dates, meet milestones, and observe payment windows.
- Contract Compliance: In addition to those specified in writing, general and field-specific contractual rules, guidelines, and standards are observed. Proper compliance management helps reduce late fees, litigation expenses, and CLM bottlenecks – setting the stage for future contracts.
- Contract Renewals: Contract parties are given a chance to renegotiate terms, revisit discounts, and promote further mutual opportunity realization.
Now that you know the stages in the life of a contract, hopefully, contract management seems less daunting. However, knowing the CLM stages alone is not enough for you to truly conquer your contract management process.
Before we make an action plan for healthy contract management, let’s take a look at what not to do.
#2 - Avoiding Outdated Contracting Processes: Know the Signs
Managing a high volume of highly complex contracts leaves evermore room for error as your organization grows and scales. As such, you should know some of the top-offending strategies when it comes to contract mismanagement.
- Manual Contract Storage: Relying on filing cabinets, shared drives, and disorganized digital contract storage can make day-to-day processes difficult. Tracking versions of a contract – as well as important contract data – can become almost impossible.
- Inefficient Workflow Processes: Contract managers need to suffer time-consuming supervision of each stage of contract management. Without clear chains of approval and actionable task insights, delays and discrepancies can ensue. These delays and oversights can lead to missed key dates and obligations.
- Lack of Preparation: Relying on manual contract authoring tactics can require contract managers to generate new contracts from scratch. Downloading templates, manually introducing contract data, and finding relevant information can be time-wasting and prone to error.
- Manual Contract Tracking: As contract complexity and volume grow, manual contract tracking methods become ineffectual. Unfortunately, your organization can be left drowning in missed financial goals, weakened security, and increased contract risk.
- Wet Signatures: Manual – or “wet” – signatures can waste office supplies, incur postage expenses, and expend time and energy while lacking security.
#3 - Contract Management Software – Light at the End of the Tunnel
For successful contract management, you can trade in the methods above for user-friendly contract management software!
You can confidently tackle the contract lifecycle with a contract management system that supports:
- automated contract requests with dynamic intake forms and a user-friendly request wizard.
- contract authoring with seamless merging of clauses and templates from your pre-approved library.
- centralized negotiations, collaboration, review, and approval. Leading tools include tracking, clause ownership, and user-friendly connectors for MS Word, MS Outlook, MS Office 365, and Google Workspace.
- insightful contract analytics from contract creation to renewal.
- automated key date notifications and alerts – including for obligation fulfillment, approvals, and renewal dates.
- comprehensive risk management and analysis.
- searching and reporting – including compliance reporting.
- electronic signature software integration for streamlined signing.
#4 - Bonus Contract Management Tips
In order to electrify your contract management process even more, CobbleStone recommends this list of bonus tips.
- Consider dashboard contract management for visually engaging and centralized contract analytics and reporting.
- Enjoy a custom report designer for visual reporting that meets your unique needs.
- Look for a solution built on contract artificial intelligence with machine learning that lets contract management solutions learn and grow.
- Take an advanced approach to risk with a configurable and insightful risk assessment matrix.
- Automate data identification and extraction with a system that intelligently maps contract data into tidy record field metadata.
- Choose a solution that lets you establish rules regarding the protection, classification, and redaction of sensitive data. This sensitive data can include PII (personally identifiable information), PCI (payment card information), addresses, phone numbers, and employee data.
- Enjoy paramount security as a contract administrator with a provider that boasts SOC 1, SOC 2, and Privacy Shield compliance.
- Seamlessly integrate eProcurement, eSourcing, and vendor/supplier management for a powerfully central system.
- Enjoy integrated purchase order management with catalogs, shopping carts, and punchouts.
- Select a solution that lets you choose between SaaS (web-based) or local deployment on your organization’s servers.
- Trust a solution that affords you flexible user permissions. Enjoy governance over individual users, employees, and groups with comprehensive access settings.
Now You Know Contract Management. Now You’re Ready for Advanced CLM.
Now that you know how to define contract management and tackle your process, the ball is in your court. All that’s left to do is select a contract management solution with all of the tools mentioned above and more. The leading solution for your needs is CobbleStone Contract Insight®.
CobbleStone® is an award-winning CLM software solution that has received widespread critical acclaim from users and third-party analysts alike. CobbleStone has been a visionary leader in contract software for years – having developed one of the first solutions on the market. CobbleStone’s user-friendly and robust product scales with your needs as contract complexity and volume increase.
CobbleStone boasts a litany of CLM success stories in a variety of industries. It’s no wonder CobbleStone is named the CLM Leader in the SPARK Matrix™ Report.
*Legal Disclaimer: This article is not legal advice. The content of this article is for educational purposes only. The information on this website may not present the most up-to-date legal information. Readers should contact their attorney for legal advice regarding any particular legal matter.