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What Is Contract Management? Everything You Need to Know



featured image: What Is Contract Management? Everything You Need to Know

Contract management is a vital part of any business. It can be difficult to keep track of all the contracts you have with your suppliers, customers, and partners. That’s where contract management software comes in.

In this article, we will discuss what contract management is and what benefits it can bring to your business. We’ll also provide a few tips on how to get started with contract management.

What is contract management?

Contract management is the process of tracking, reviewing, and approving contracts. This is done manually or through software.

Contract managers ensure that all parties involved in a contract are held accountable for their obligations. This helps to avoid legal disputes and prevent financial losses.

To be effective, contract management must be ongoing and well-organized. Reviewing and approving contracts should be done on a regular basis, and all parties should be reminded of their obligations when necessary.

All contracts should be stored in a central location where they can be easily accessed. By following these guidelines, contract management ensures that all contractual obligations are met.

Benefits of contract management

Managing contracts is beneficial to organizations in many ways.

It can help to ensure that contracts are complied with. This can protect the organization from legal action and possible financial damages.

Contract management improves communication between the parties involved in a contract. By ensuring that all parties are aware of their responsibilities, contract management avoids misunderstandings and disagreements.

Contract management can also help to improve the efficiency of an organization’s operations.

By streamlining the process of creating, reviewing, and approving contracts, contract management can save the organization time and money. Successful contract management can be a valuable tool for any organization.

What is the contract management process?

The contract management process typically consists of five distinct stages: creation, collaboration, signing, tracking, and renewal.

The first stage, creation, involves drafting the initial contract documents and getting feedback from all parties.

The collaboration stage begins once the draft contract is complete. It involves negotiating terms and conditions with the other parties involved.

Once both sides are satisfied with the agreement, the document is signed and entered into the agreement.

The tracking stage involves monitoring compliance with the contract terms and ensuring that all parties fulfill their obligations.

Finally, the renewal stage occurs at the end of the contract period and allows both parties to determine whether they wish to extend the agreement.

contract lifecycle workflow
Source: Avokaado

Types of contract management

Service delivery contract management focuses on ensuring that the contracted services are delivered as agreed. This includes overseeing the service provider, monitoring performance, and addressing any issues that arise.

Relationship contract management is about maintaining good communication and relationship between the parties. This is important to avoid misunderstandings or conflicts that could jeopardize the contract.

Contract management proper are the financial aspects of the contract. They include negotiating pricing and terms, payments, invoicing, and so on.

Renewal contract management includes preparation and negotiation for contract renewal when it expires. This may involve renegotiating terms, assessing performance, and making any necessary changes to ensure that the renewed contract is in the best interests of both parties.

Operational and financial performance contract management focuses on ensuring that the contracted services are delivered as promised and that the contractor is paid accordingly.

Contract lifecycle management oversees the entire lifespan of a contract, from negotiations to renewal or termination.

Procurement contract management covers the process of sourcing and selecting contractors, whereas contract data management deals with storing and organizing contract-related information.

While each type of contract management has its own distinct focus, all four play an important role in keeping contractual relationships running smoothly.

The contract management processes require knowledge of both legal and financial matters. To be successful, contract managers must be able to effectively communicate with all parties involved in the contract. They must also be detail-oriented and able to stay organized throughout the lifecycle of the contract.

How to become a contract manager

If you’re interested in becoming a contract manager, there are a few things you’ll need to do. First, you’ll need to test for certification through the NCMA (National Contract Management Association). This will allow you to show that you have the necessary skills and knowledge to be a successful contract manager.

You should also have solid communication and writing skills, as well as good organizational skills. Time management is another important skill for contract managers, as they often have to juggle multiple deadlines and complex contracts. A good contract manager also understands the WIIFM principle. This principle forces you to put yourself in the other party’s shoes and understand what motivates them in a contractual agreement.

Finally, although it’s not required, having a law degree can be helpful when it comes to understanding and negotiating contracts. If you have all of these qualifications, then you’re on your way to becoming a dedicated contract manager.

Related: Boost your management skills with important leadership skills

Contract management best practices

To optimize your contract management, you need to have best practices within your organization.

One best practice is to standardize the creation of contracts, including the terms and conditions. This will help to ensure that all contracts are legally binding and meet the needs of your organization.

Another best practice is to set KPIs and goals for each contract. This will help you to track the performance of the contract and identify areas for improvement.

Finally, it is important to conduct regular reviews of your contracts. This will allow you to identify any changes that need to be made and ensure that your contracts are up-to-date.

With good contract management, you can improve the efficiency and effectiveness of your contract management.

What is contract management software?

Contract management software dashboard
Contract management software dashboard

Contract management software is a tool used to manage contracts and contract-related documents. The software typically includes features like:

  • contract creation
  • contract administration
  • contract management system
  • storing
  • tracking contracts
  • managing contract renewals and amendments

Some contract management software solutions also offer features for automating the contract renewal process, ensuring that all contracts are up-to-date and compliant with regulations.

Some contract management software solutions integrate with third-party applications, such as customer relationship management (CRM) software, to provide a more complete view of the customer relationship.

Contract Management: Wrap up

So, what is contract management? Simply put, it is the process of organizing and managing contracts throughout their life cycle. This can include creating contracts, negotiating terms, tracking performance against those terms, renewing or terminating contracts as needed, and more.

Contract management has a ton of benefits for businesses of all sizes – from reducing costs and improving efficiency to mitigating risk and protecting your brand. If you’re not currently using a contract management system in your business, we highly recommend you start today. It’s never too late to reap the rewards.

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