Contract management is the act of preparing, negotiating, analyzing, implementing, and maintaining contracts. Even though a contract has been signed, it doesn’t mean all the hard work is done. After the contract has been signed there is still a considerable amount of maintenance and effort required to manage changed circumstances or contract amendments. It’s critical to have a plan to navigate this new flow of information.
While a signed agreement between certain parties contains a lot of general information, sometimes it does not dictate what should happen on a day-to-day basis. A contract management plan (CMP) provides a practical roadmap for how to ensure parties meet all terms in a contract. A CMP often provides key indicators, milestones, and delivery dates to keep both parties on track.
A CMP can assist in answering three key management questions:
- Who is responsible for performing which actions the contract requires?
- How will the parties satisfy their contractual obligations?
- When will the terms be delivered and when will the entire contract be completed?
Contract management plans do a great job of ensuring both parties are aligned regarding expectations and timelines.
While each negotiation is unique, it typically follows a back and forth exchange. One party proposes terms, the other counters with new or modified terms, and this process repeats until all parties sign a final document. After a contract is signed, the parties may later wish to revise certain provisions during the contract term. Contract lifecycle management focuses on streamlining every step in the contract process to create and maintain agreements between parties more effectively.
The importance of contract management can be overlooked, especially by people removed from the daily benefits management provides. Without proper contract management, a company can be at considerable risk.
Contract management is necessary for the survival of businesses, no matter the industry, size, or region. To achieve success, you need proper legal compliance, due diligence, and active monitoring of the contract process. Further, proper contract management mitigates the risk of costly audits and lengthy litigation. Companies that fail to properly identify contract errors or miss the opportunity to renegotiate terms can end up with significant losses. And with a great deal of back and forth, multiple contracts can be buried within your inbox. Imagine making key strategic moves with vendors to realize you’re viewing the wrong version of a contract.
Aside from risk reduction, you can use contract management to increase profitability. Contract management software can analyze existing contracts to determine the best way to allocate budgets, negotiate more favorable terms, and find new opportunities for revenue growth.
Effective contract management no longer requires an entire staff of legal experts and compliance managers. Tasks that used to take days or weeks to complete can be achieved in minutes.
Before the implementation of artificial intelligence, companies had to rely on employees to draft contracts from scratch or modify potentially outdated templates. Now everything from creation to approval and renewal can be managed seamlessly using software that can learn and understand your business.
Contract management software will help you create a sound contract strategy. For example, with contract management software, you can find specific terms that allow for the compilation of all renewing contracts. With that information, you can calculate the timing and structure to determine the most effective way to negotiate future terms, which gives you the upper hand.
No matter the industry, almost every part of day-to-day operations exist on a foundation of contracts. All contracts have due diligence requirements, even those that are modified or amended regularly. Whether to ensure the company stays within legal compliance or to protect the businesses’ best financial interests, contract management is key to long-term success. Contract management software helps companies maximize the value of each contract while saving time. It can also allow for quick identification of potential short-term and long-term risks as well as more favorable contract terms.
If you want to know how to improve contract management, start by using all the tools at your disposal. Contract management software allows businesses unparalleled visibility and control.
For example, using Kira, you can search for the presence or absence of a clause or provision with a simple click, without having to review each page. Additionally, you can compare contracts to form documents to see deviations instantly.
While every business hopes to deal with other companies in good faith, sometimes modifications or additions are made with the hope they will go unnoticed. Contract management software can instantly detect these changes so you don’t risk being bound by terms you didn’t agree to.
The benefits of using intelligent contract management software are vast. The only real way to understand its full potential is to give it a try.