What is Contract Management? 

In contract management, contracts are managed between companies, vendors, or employees. Contract managers document and negotiate terms and conditions as well as any amendments that reveal themselves during the execution or implementation of a contract. It is its responsibility to ensure that all parties to a contract are accountable for their responsibilities, which helps prevent financial losses and legal disputes. The management process aims to boost financial performance and minimize risk by systematically managing contract creation, execution, and analysis. 

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Why is Contract Management Important?

Today's complex world puts an increasing pressure on organizations to reduce costs and improve performance. A contract management system is essential to a successful business, as manually managing contracts can be very time-consuming. Without effective management, businesses and organizations are unable to keep track of thousands of their written contracts. This leads to decreased efficiency and productivity. Lack of management can lead to a multitude of heavy costs, such as the absence of control and organization, increased administrative cost due to terrible coordination, and missed economic opportunities. In order for a business or organization to flourish, it is paramount to invest in contract management. 

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Benefits of Contract Management

Systemic contract management allows users to schedule notifications and track critical milestones. Getting rid of manual processes and centralizing your contract database makes it easier to control workflows. Furthermore, a centralized database prevents misunderstandings and disagreements by ensuring that all parties understand their responsibilities underlined in the contract. In other words, a contract management system ensures that contracts are followed. As a result, organizations may be protected from legal action and possible financial losses. Businesses and organizations can save time and money by streamlining the contract management process, ultimately reducing legal fees and avoiding unplanned renewals of services. Another high-value benefit is spend visibility. It has been reported that best-in-class procurement teams save 37% more than their peers each year. By purchasing from approved suppliers at the right time, in the right quantity, and at an agreed price, one can reduce "off-contract" spending. A sourcing cycle's savings can be maximized by delivery terms, tracking rebates, and volume discounts. 

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Contract Management Best Practices

• Standardizing Contract Creation: By doing so, you can ensure that you have legally binding contracts that meet the needs of your organization. Furthermore, standardizing contract creation allows for more efficiency regarding time and money due to increased efficiency. Having a standardized process allows for an increased spend leverage, ultimately resulting in a decreased buying and supply risk. 
• Regularly Conducting Contract Reviews: By constantly reviewing and revising current contracts, you can identify any changes that need to be made and ensure that your contracts are up-to-date.
• Setting Alerts and Reminders: By being timely and organized, you have time to revise and renegotiate, pinpoint unsuitable auto renewals, and leave no contract unturned. 

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Types of Contract Management 

• Contract Lifecycle Management: Proprietary artificial intelligence trained by millions of contracts that can instantly identify key clauses and metadata from any contract to provide accurate real-time analysis.
• Renewal Contract Management: Negotiation and preparation for contract renewal. As a result, both parties may need to assess performance, revise terms, and make any necessary changes in order to renegotiate existing terms. 
• Relationship Contract Management: Involves maintaining good communication between respective parties. A contract can be jeopardized if there are any misunderstandings or conflicts.
• Procurement Contract management: Streamlines the procurement process while supporting compliance and risk reduction throughout the entire company. Third Party agreements, such as those with customers, vendors, and partners, are simply part of the overall management. 
• Contract Data Management: Tracks, records, and analyzes the essential data for all of your organization's contracts. 

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What Are The 5 Stages Of The Contract Management Process? 

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1. Creation

Initial Request: Identifying contracts and documents to support a contract's purpose

Authoring Contracts: Producing contracts either by hand or through use of a contract management system‍

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2. Collaboration 

Negotiations: By comparing versions of the contract after they are prepared, employees can identify discrepancies and reduce negotiation time.

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3. Signing 

Contract Approval: By creating tailored approval workflows, including parallel and serial approvals, users can preemptively prevent struggles around obtaining management approval.  

Contract Execution: Use of electronic signatures and fax support as part of executing the contract gives users control over and reduces the time spent on signatures.

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4. Tracking 

Obligation Management: It is imperative that project management is applied to ensure deliverables are met by key stakeholders and that the contract's value doesn't deteriorate.

Revisions and Amendments: Identifying all the necessary documents for the contract's initial drafting can be a challenging task. The original contract needs to be amended if overlooked items are discovered.

Reporting and Auditing: Can help determine whether both parties are complying with the terms of the contract as well as if there are any possible issues.

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5. Renewal

Renewing: Instead of simply extending an existing relationship, it is the act of creating or replacing one, as opposed to treating the contract as an extension of a previous contract or relationship.