What is Contract Management? and Why is it Important?

So, exactly what is Contract Management? And, why is it important?

These two questions take on more relevance when we look at them through the lens of a changing business paradigm, significantly altered by COVID restrictions and a changing society. Put simply, the days of seeing colleagues and customers face-to-face on the daily are fading into memory, which has led us to seek out new systems to maintain smooth workflow.

And, although the above two questions might seem rather simple – to really get to the heart of their answers, the simplest thing to do is break Contract Management down to basics.

Contract Management Explained

You probably already know that a contract is a legally binding document, and that it contains the terms and conditions of an agreement and relationship between two or more parties. When it comes to organisations, there are going to be many relationships with other parties such as employees, customers, vendors etc – which means a multitude of contracts. Each of these contracts requires negotiations before agreeing on the goods or services to be purchased, the conditions under which they will be procured and how much will be paid for them.

Basically, contracts are one of the cornerstones of an organisation, which makes the management of them rather important. The art (or science) of Contract Management centres on the processes used to manage the contracts and has rapidly evolved since the technological boom and revolution of web 2.0. Not so long ago, however, the labour-intensive process of procuring and executing the contract would end with it being filed away in a cabinet in an archive somewhere. If an agreement was questioned or disputed, then that contract would need to be located again – with fingers crossed it was filed correctly in the first place!

Even though some organisations still follow that process, as society evolves in more dynamic ways, today’s businesses require a more efficient system. And this isn’t just because a paper contract can so easily go missing. It’s also because each contract has a lifecycle with crucial stages and vital processes attached – and mismanaging one of those stages is a risk that we can plan against.

Conversely, successful management of a contract lifecycle will reap big rewards! Think saved time and increased profits to name a few (but more about that later).

The Lifecycle of a contract

To be successful with Contract Management the right system for each stage needs to be put in place. Each lifecycle begins with a contract that must be created for its individual purpose. This contract will then be negotiated and approved, then signed, stored away and managed. The management of it might include such variables as renewing it, terminating it, adjusting its deliverables and the fulfilment of a variety of obligations attached. You probably get the idea by now that managing a number of contracts, each with their own complexities, can be quite a challenge.

Contract Management Software

These days, it makes sense to use technology and automation to navigate challenges wherever possible. This also applies to Contract Management. With Contract Management software, many of the processes attached to lifecycle management are simplified. Templates can be digitally stored and used to create new contracts with just a few clicks. Negotiations run smoother with document and deadline management features, while tasks are assigned and reports generated with ease. You can use automation to manage obligations, track compliance and apply permissions.

What’s more, Contract Management Software built on SaaS (Software as a Service) architecture is easily accessible on any device. This cloud-based software, runs on a subscription system – meaning that organisations who implement it don’t have to worry about setting it up on their devices or maintaining it. SaaS Contract Management is available on-demand to customers, who can access it from home or the office as they need. And, because its cloud based, customers receive updates and bug-fixes automatically. This also makes customisation possible, allowing users to customise data fields for their office needs and even integrate the Contract Management software with their other business applications. These advantages add up to a reduction in the expenses usually associated with hardware acquisition, maintenance and licensing – which is always welcome.

How is it important to my business?

“I wish I had more time” is a common lament. Obviously, in business, time management leg-ups are always welcome. More time means the capacity to take on new opportunities, which equates to sustainable growth. Contract Management done effectively, seeks to minimise lost time, maximise the output of resources, increase profits and reduce risk.

Save Time and Resources

Despite having systems in place to save time, many organisations are still losing it. If you think about your own Contract Management system, how much time is spent finding, creating or requesting a contract, then getting it signed? If you’re working from home because of COVID restrictions, is that time doubled or even tripled if you need to physically go out to get what you need?

There is often a significant portion of time and energy spent getting the contract through to execution. Then, after that stage, there is more time spent storing and then retrieving the contract if there is a dispute or question about it. Imagine how much time could be saved by storing contracts electronically rather than in a cabinet. With your contracts in a central repository, they can be easily accessed from anywhere, at any time, by anyone with permission. This means that employees can spend their work time on their set tasks (even if they’re working from home).

Increase Profits and Reduce Risk

Customisable features of Contract Management Software will also save time if implemented correctly, and saved time increases profits. Customising and storing numerous pre-approved contract templates will start your negotiations off on the right foot. If changes need to made during the negotiation process, pre-approved content will keep the process moving and avoid delays. Like a well-oiled machine, an effective contract lifecycle process can increase profits by allowing employees to focus on their work instead of wasting hours catching up on delays and reporting their progress to various departments. Furthermore, choosing a Contract Management system that notifies you of workflow tasks, ensures contracts cost less to wrap because the time taken to do so, is also less.

Implementing customisable features also reduces exposure to risk in your contracts. Making use of the automated custom reporting features, can pre-empt events such as the closing of contracts, work health and safety requirements and police checks. You can set up automation for insurance certificates, qualifications of individuals, certification of equipment, to log service failures or quality issues, performance reviews, meeting minutes and consumption monitoring.

The Answer to Contract Management

So, to sum up all of the above, let’s revisit our second question: “why is Contract Management important?”

Quite simply, the answer is that a good Contract Management system will organise complexities in a way that keeps everything, well – simple. And simple is something worth achieving. Simple is easy to teach to others and maintain, it keeps you ‘on top’ of your goals, your stress levels manageable and ensures your relationships with stakeholders remains strong. Simple, in an already complex world, is the ideal we are all working towards, and with the right technology – there’s no reason it can’t be achieved.