Ever since the first businesses emerged in the world, there have been some or other forms of contracts that have been maintained. Earlier, they would have been done on animal skin to ensure that businesses held up their end of the bargain.
With societies developed, orderly, and organized, contracts assumed the backing of legal forces. Most contracts are not considered legally binding entities that can be taken to court if one or the other parties to the contract violates the same.
You might think that contracts do not have such an important role to play in business organizations. However, given the complex nature of our commercial reality, contract management plays a leading role in improving business performance.
In this article, we are going to look at the basics of effective contract management solutions. We discuss how contract management works out and what are the major processes that are involved.
Contract Management: Meaning and Definition
In very simple words, Contract Management involves the creation, safe storage, and monitoring of business contracts as and when they evolve. It is strongly connected with Contract Lifestyle Management (CLM) and acts as the foundation for businesses that enter into working and financial agreements with various stakeholders like suppliers, vendors, clients, and so on.
Effective contract management can help a business reduce risks and exposure. For example, if a supplier has promised you ten tons of raw materials a month and the payments have been mentioned accordingly, you as a business can hold him up if he fails to release the number of raw materials that had been promised. When you do not honor the payments, you can always refer to the contract and state that it was because of the action of the other party.
Contract management helps in improving the performance of businesses as teams know what they have to work with, the proper deliverables, and the time frames for the same. In all, contract management reduces risks, betters organizational efficiency improves employee performance, and allows for better monitoring of data.
The Various Processes of Contract Management Solutions: What do Contract Managers do?
In this section, we are going to look at some of the various processes of contract management solutions. You can think of this as the work that is routinely done by contract managers.
- The first step of contract management starts with the creation of a business proposal. In many ways, this forms the foundation for any contract made.
- The second step involves the negotiating of fees, prices, and conditions of work with the client/supplier or vendor, as the case may be.
- The third step proceeds to document the above two steps into a legally binding contract. This is digitized, signatures are added and the contract becomes legal in nature.
- The fourth step entails highlighting and monitoring all the important points, deadlines, deliverables, team members’ involvement in the contract.
- The fifth step is vigorously monitoring that all the points in the contract are followed meticulously. If there are any violations, they should be brought forward immediately.
- The last step is the contract completion and adding this to the set of records. Storing it safely can ensure it can become the basis of future agreements and contracts.
The above-mentioned are some of the major steps or processes that are involved in the contract management process. As you can see, a lot of work is required in ensuring that all the processes and meticulously curated and managed.
The Bottom Line
Contract management can help in streamlining the performance of businesses. It can also help in preventing the business from suffering from too much risk and exposure. Having a detailed contract can also show a direct path of action as to how teams should work in a coordinated and synchronized fashion. If you have any more questions on contract management or need any clarifications, let us know in the comments section below. We will be more than happy to clear all your doubts and queries.