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What is Contract Management? & Why it’s important?
The term Contract Management denotes a process related to business. This business process includes contract formation, contract evaluation, contract execution, and more. It is a process designed to enhance the operational and financial enactment of an organization while actively reducing risks, decreasing costs, and improving the overall performance of the industry.
The system of contract management is one of the crucial parts of any organization as it is directly connected to the profitability of an industry. It also has an impact on relationships with employees and business partners. A contract is also a complicated process that can only be managed and executed only by the experts like the legal department or the contract managers of an organization.
The system of contract management is one of the crucial parts of any organization as it is directly connected to the profitability of an industry. It also has an impact on relationships with employees and business partners. A contract is also a complicated process that can only be managed and executed only by the experts like the legal department or the contract managers of an organization.
Basic Elements of Contract Management
The Contract Management system consists of few fundamental stages to carry out in every organization.
Identification of business objectives, goals, and risks
Before drafting any contract it is necessary to identify its objectives and goals for which the contract is being drafted. Figuring out these important pieces of information will help in the formation of the contract by satisfying the concerns of both parties involved.
Drafting the Contract
After the objectives and goals have been figured out, it is time to draft the contract. Just collect all the supporting information and the necessary documents maintained by the organization. Finally, draft the contract. Just remember, drafting is an extremely crucial process, any error may end up in loss of businesses.
Negotiations
After drafting the contract the negotiation between the involved parties will begin. This process makes sure that all the parties are getting everything they bargained for. This process takes a bit of time and transparency from the involved parties is necessary to build trust.
Execution
After a strict negotiation comes to the execution. After all the changes are made with the permission of all the involved parties, the contract goes for approval. It is necessary for an organization that is overseeing an approval procedure to have a smooth workflow. Once the approval of the contract, the execution of the said contract will be according to the mentioned terms.
Obligation and Audits
Unfortunately, Contract Management doesn’t end with execution. Several post-execution procedures are essential regarding the performance, time, and cost.
Termination and Renewals
When the contract cycle goes forward and gets closer to its closing, keeping track of all the termination and renewals is a necessary part. Neglecting the renewals will result in losses and this will also mean that the organization will have to work with a new procedure but for the same contract.
Profits of Effective Contract Management
- After effectively managing the contracts, they will grow the operational and overall financial profits of the organization to the higher level
- This will also strengthen the organization’s relationship with other companies, employees, and freelancers
- An efficient way of contract management eliminates unwanted conflicts or disturbances during the alteration or addition of terms and conditions in agreement papers.
- The contract renewal factor can never go out of hand when the whole process is automated by software or managed by an effective contract manager
- An automated system reduces the burden of the organization by awarding them substantial revenue growth and also saves the company’s valuable time
Building Blocks of Contract Management Process
Each brick of contract management is tedious and time-consuming for every organization. It is an effort to build an effective system of managing agreements. The process starts with creating contracts and ends with agreement renewals. So, let’s find out the building blocks of every contract management process.
Initial Discussion
Initially, the process starts by identifying and discussing the terms and conditions of the agreement ensuring the purpose of a deal is fulfilled.
Generating Paperworks
Once the approval from both parties is received, all the paperwork is done satisfying all the objectives of the agreement. Since the paperwork process is a time-consuming one, most companies moved to an automatic way of contract management systems in recent days.
Negotiations
As soon as the paperwork is completed, multiple draft copies of the deals are created and the final fair copy is selected after getting approval from employees, freelancers, and business partners.
Execution Phase
In the execution phase, the signing of documents takes place. Here both parties sign the papers using a digital signature to reduce the time and speed up the overall process. In order to reduce the manual work and to improve security, digital signatures are always preferred by most organizations.
Managing Obligations
Now, the legal department or contract manager must ensure that the core values of the agreement are being honored during the operational activities of employees, freelancers, and partner businesses.
Alterations of Agreement
When things go out of hand or when a new situation emerges due to external factors, it is mandatory to alter the agreement papers with the permission of both groups. This can be done to hold the intrinsic core purposes of an agreement without disturbing the relationship strength of both parties.
Reporting and Auditing
The construction of the Contract Management is not yet over without auditing and preparing the agreement reports frequently. See managing contracts is not something like formulating terms and conditions for an agreement and launching it in action. Every organization must analyze or audit contract performance in real-time to avoid forthcoming disputes.
Managing Renewals
Finally. We have arrived at the last brick where the process of renewing the deal document happens. It is highly difficult to set an agreement renewal alarm manually when a company manages multiple deals at a time. To bypass this hard task, organizations moved to automatic renewal of agreement through contract management software.
What is Contract Management Software?
Contract Management Software is an automation tool that is capable of organizing, storing, and maintaining business agreements. There is no need to be worried about renewal deadlines when all the papers are integrated with the software calendars. This amazing software helps to reduce the burden of the company by streamlining and centralizing the documents. By using this multitasking tool, any company can effectively manage its contracts even during conflicts.
Benefits of Using Contract Management Software
- According to ResearchandMarkets, the Contract management software market is projected to grow by 2.9 billion USD in 2024 while it was just 1.5 billion USD in 2019.
- This can very well save time, money, and work through automated agreement maintenance.
- An organization can concentrate more on operating profits and increases financial strength when the agreement creation and maintenance are streamlined through an electronic software system.
- It is necessary to leave the traditional or time-consuming ways of contract management as for sure it increases the burden and drags the process by melting quality time.
- It is easy to arrange and maintain multiple contracts in a single software tool and finish all assignments in a reduced time.
Contract management is a considerably difficult part of any business which is also of utmost importance. It is an aspect that directly impacts an organization’s business strategy and overall profit margin. Unfortunately, the traditional method of contract management is tedious, time-consuming and makes it difficult to manage multiple contracts at the same time. But all these can be made simpler using MSB’s contract management solution. The contract management software by MSB Dcos provides much-wanted insight into the contract data and simplifies the terms of the alliance between the involved parties while eliminating all the risks and saving costs at the same time.
Few FAQ on Contract Managemen
Why traditional contract management is a hard process?
The traditional way of managing agreement is a hard and complicated process. It requires a lot of manpower, time, and skill. In order to overcome this hard task and to concentrate on revenue growth, global companies moved to an automatic way of managing deals.
Is it legal to alter or amend my contracts in the future?
Yes, it is legal.
Altering a line or a phrase in the agreement paper without disturbing the core objectives of the treaty is fine. But to alter a line to seek need approval from business partners, employees, and freelancers is not fine.
How can I manage my legal contracts?
The legal contracts can be managed easily by using contract management software which will help to organize, store and maintain agreement paperwork automatically.