Strategies to Follow for Effective Contract Management
Effective Contract Management – Most organizations in today’s world do not performduediligence before entering and managing contracts. Even in organizations where strategies are concocted before signing contracts, the contract itself is consigned to a dusty shelf, in the back of an office filing room, forgotten for all intents and purposes. The contract will only be referred to when things go south and there is a need for managers to go back to the contents of that forgotten piece of paper.
A contract should be treated as a ‘living thing’ during its lifespan. From signing it off to the actual process, the contract should be used as a guide for reminding all parties involved of the deliverables, requirements, responsibilities and roles entered into their not so casual ‘marriage’, of sorts. And, as a living thing, life should be breathed into it every now and then, rather than it being left to rot on an office shelf for ages.
In this article we take a new perspective at contract management and mention certain strategies you should follow for effective and continuous contract management.
Table of Contents
Do a Background Check
We gave a contract the title of ‘marriage’ so that you’d be able to relate to the process in a more personal capacity. What are the few things you consider before marrying someone? Your compatibility with them! Their character, personality, legal history, behavior, job, status and a lot more!
Similarly, when it comes to contracts, you should perform a background check before entering one. Always check the legal status of the other partner, be it a supplier, customer, legal partner or some other business entity. Go through their previous and current contracts and determine whether they are legally capable of entering into a contract with your organization, as capacity to contract is an essential contract element.
Try to also understand the impact this new contract will have on their relationship with their other contracts. Often in competitive business environments, organizations do not want to work with the same supplier or business partner as their competitor’s.
Establish Points of Contact
It is highly unlikely for senior managers or board members from both organizations to be present at all meetings related to the contract. Hence, keeping these future obligations in mind, both parties should establish points of contact – in short, someone tasked with representing them and given the authority to make decisions.
Anyone with the authorization to act on behalf of the board of members or the senior management should clearly show proof of that authorization. The channel of review should be made extremely clear to avoid misunderstandings and possible conflicts in the future.
Establish Contract Lifecycle
Your contract management software should be customized in order to record the contract lifecycle of each contractual relationship. Not every contract has the same lifecycle, which is why you should customize contracts and determine a potential lifecycle based on the complications involved.
Starting from the lifecycle, you can proceed toward outlining the scope statement and organizing the necessary deliverables, processes and review periods.
It is also necessary that you determine the information your organization would need from the other party for this contract. An accurate and complete contract can only be drafted when both parties have all relevant details pertaining to each other.
Agree on a Review Process
Take preemptive measures if you feel that gathering answers to your questions can become a major bottleneck. Parties can press for accelerated schedules at times, so you should always budget adequate time for reviewing, drafting, discussing, revising and completing the deliverables.
The kickoff meetings should include the discussion of review periods and how much time should be allotted to them. Have all such agreements in written form for more clarity.
Outline Consequences of Delays
Time is money, and if a contract suffers from multiple delays, you are losing out on potential money. All such delays can not only jeopardize your projections, but also throw your budget out of whack. You should discuss the consequences that delays have on your organization with the other party. Help them realize that delays in the project wouldn’t sit well with you.
The scope statement should also include possible clauses on the provision of change requests. The statement should include specific details on what constitutes a change request and the applicable costs required for it. The impact of changes on existing timelines should also be considered here.
Get a Contract Management Software
Contract management software can help make companywide collaboration and communication easier for organizations. Most contract management software providers offer a secure centralized repository and a wide suite of tools applicable across the contract lifecycle.
The automation you get through contract management software can rid you of your headaches and can give you the documented proof you require for managing conflicts. There is also the added benefit of a secure and encrypted place for storing and managing your documents – only accessible to employees with permission from you.
Step Back and Document
It is common for most organizations to jump on to new projects as soon as they finalize documentation on the previous one. However, we believe that you should stop for a while and focus on the post-execution evaluation stages of the contract. Schedule an internal meeting with all your team members and determine the pain points in the contract. Analyze the causes that led to disturbances and find ways to minimize them. All such evaluations will help you out whenever you face similar situations in the future.
Contracts shouldn’t just be considered a means to permit the start of a project and to refer to when things go horribly wrong. Your contracts should be monitored, updated, taken care of and maintained regularly.
And although your project might still succeed without adhering to the contract management strategies we mention in this article, the odds will be higher if you do follow them and manage contracts thoroughly.
Industry leader: How to Drive Web Traffic in 2024
Driving web traffic and increasing conversions is the ultimate aim of SEO. So, if your traffic is lacking in 2023,…
Data Visualization in Python: Creating Stunning Visuals
The digital world is full of data needing interpretation and analysis to draw actionable insights. One has to understand data…