Contracts govern your organization’s relationships with vendors, customers, partners, and employees. Effective contract management ensures these relationships are efficient and profitable — that your business benefits from every agreement and you get optimal financial returns. It also ensures that the implementation or delivery of every contract, whether a legally binding written or oral agreement, is satisfactory to all parties.
Efficient contract management includes agreeing to, documenting, and reporting on any changes from both buyers and sellers, so you face no disputes or surprises.
WHAT IS CONTRACT LIFE CYCLE MANAGEMENT?
Contract life cycle management (CLM) covers every step of a contract, from drafting to approval, implementation, utilization, and expiration. CLM is vital to every business. The life cycle has three stages that encompass these actions: pre-award, award, and post-award. Each step creates, contributes to, or uses contract data.
The best contract management processes use the data throughout the life cycle to improve a company’s exposure or ability to manage financial or legal risk. CLM streamlines the process of managing all contracts that affect your business, from internal agreements with employees to external commitments with partners and vendors.
OUR CONTRACT MANAGEMENT PROCESS
Our contract management touches every business and operations area of an organization. A consistent and efficient contract management process guides and streamlines the management of each contract through all its phases, from creation, negotiation on terms and conditions, and approval, through execution, performance, and compliance on deliverables and deadlines.
Our contract management handles any modifications to the contract, as well as its termination. All phases ensure customer satisfaction.
OUR CONTRACT MANAGEMENT FRAMEWORK(CMF)
OUR CMF HAS FOUR MAIN COMPONENTS THAT COVER A RANGE OF ACTIVITIES.
ESTABLISHING GOVERNANCE AND THE CONTRACT MANAGEMENT TEAM:
Identify the structure, roles, and responsibilities of the team, as well as the resources needed for contract management and any training.
PLANNING, ESTABLISHING, AND EXECUTING CONTRACT ADMINISTRATION:
Establish and monitor the key components of contract administration in your organization, including checklists, payment standards, and strategies for identifying and mitigating risk.
Drive engagement by using communication tools and processes, as well as developing conflict-resolution protocols that build relationships with team members, stakeholders, and partners.
Assess whether the contract’s deliverables meet the standards spelled out in the contract, and use performance improvement methods to address substandard work.
Our scope of contract management covers strategy, sales, performance optimization, and your relationships with customers and suppliers. The National Contract Management Association (NCMA) defines contract management as “the process of managing contracts, deliverables, deadlines, and contract terms and conditions while ensuring customer satisfaction.” It involves many areas of the organization to ensure that you not only meet your operational, functional, and business objectives, but that you profit from every interaction and deliver cost-effective approaches.
IMPORTANCE OF CONTRACT MANAGEMENT
Contract management affects your organization’s revenue, budget, and operations. It also influences the way your customers view you, as well as your public image. The way you manage your contracts can touch upon almost every aspect of your company. Contracts are crucial to the success of any business arrangement.
Here are some ways that good contract management can affect your business and your bottom line:
- Improves the process for generating, negotiating, signing, and renewing contracts
- Increases revenue (and reduces expenses) because you can streamline contract creation and implementation processes
- Creates strong relationships with your partners and vendors because you monitor contract performance and quickly identify problem areas
- Promotes long-term profitability because you can renew more contracts with the partners who provide the best business opportunities
- Ensures your suppliers are cooperative and respond to your organization’s needs
- Supports strategic decision making because you can easily see the areas for growth, the partners and vendors that provide the best opportunities, and your organization’s ability to commit to additional work
- Converts your strategy, partnerships, practices, policies, and capabilities into specific terms and conditions for any contract, providing deep insight into your business
- Through a contract manager, advises C-suite stakeholders and executives on the effectiveness of the contract in implementing the organization’s goals
- Supports commercial management because it ensures that you meet all your legal commitments once you’ve entered into a contract
- Helps you assess, monitor, and mitigate financial, legal, and procurement risks
- Creates standard processes for routine contracts and business, freeing time to address new business prospects and unique or infrequent processes or implementations
CONTRACT MANAGEMENT POWERS THE SALES CYCLE
Optimized contract management — the ability to tap the data in your contracts — benefits your sales cycle and is a growth area for all businesses. You can shorten this cycle from sales lead to contract to revenue, as well as reduce your customer acquisition costs, when you have up-to-date data and templates. Here are some ways contract management improves your sales cycle:
- Contract data helps you create quotes based on previous contracts.
- Contract data cuts down on the negotiation process when initial quotes reflect the customer’s needs and previous business dealings.
- Templates provide quality contracts that require less review from legal.
- Effective contract implementation increases the likelihood of return business because customers are satisfied.
CHALLENGES IN CONTRACT MANAGEMENT
Contract management is a complex function that is central to the success of every organization. Because it includes so many aspects of your business, contract management faces an array of challenges:
LACK OF COORDINATION AND COMMUNICATION:
Misunderstanding and conflicts can arise when you don’t have clear lines of responsibility and authority. Strong contract managers ensure consistent communication with internal and external stakeholders, as well as a defined process for feedback and approval at each stage of the contract life cycle.
LEGAL IS THE “DEPARTMENT OF NO”:
In-house counsel assists with most contract preparations and can even create, manage, and maintain contracts in the organization. Without a smooth process for viewing and vetting contracts, the work can progress slowly, resulting in other departments — especially sales — seeing legal as the obstacle to moving forward with contracts, sales, and strategic initiatives. Develop a checklist of the actions you need to smoothly generate, vet, approve, modify, and document any contract.
It takes time to generate, review, approve, implement, and renew contracts. Look for ways you can standardize and streamline the process, including maintaining a library of contract templates and boilerplate, communication tools that gather feedback and approvals in a timely fashion, reporting tools that automatically gather information about deliverables and track timelines, and searchable document archives that allow you to see the outcome of any contract at a glance. These methods help you avoid the bottlenecks that can form when creating and approving contracts.
IMPACT ON THE BOTTOM LINE:
Contracts are all about your business and its profitability. It’s essential, therefore, that you clearly spell out all the details. When a contract is phrased poorly, you may miss a technicality that could cost your organization thousands of dollars.