Contract management is the process of overseeing the initiation of agreements and their execution. It is for the sole aim of maximizing the performance of business processes concerning its operational and financial aspects.
Contract management is of paramount importance as it helps keep the parties involved in check. It also clearly defines the scope of work, what is expected of the organizations, and track financing. These processes go a long way in ensuring the sustainability of the business project.
Contract managers are tasked with creating such contractual agreements. It is, therefore, vital that they implement clever strategies to ensure they come up with a viable contract.
In this article, we are going to look at the various strategies contract managers should implement for successful contract management.
6 Effective Strategies To Ensure Successful Contract Management
1. Invest in contract management software
As digital technologies continue to take over every aspect of our daily living, organizations are moving away from the manual ways of conducting business. Contract management software plays an integral role in helping companies draft and manage contracts. They are particularly important as they have repository functions that manage all contracts implemented throughout the project’s lifecycle.
Additionally, contract management software has clause libraries where the legal team can easily pick pre-approved terms to use. Workflow automation is another feature to look out for. It also provides valuable insight into all business processes in the life cycle.
There are such programs available in the market for purchase. However, a contract manager can try out contract management software free trial. By doing so, they improve the chances of getting their hands on a contract management program best suited for their project.
Before entering into any contractual agreement, doing a background check on the other parties is of the utmost importance.
Business is very sensitive. One slight mistake and clients will run out the door. As such, it is only for the good of your company that you conduct a legal background check. Seek to know whether the other parties have existing agreements.
In case there are legally binding agreements, through your legal team, find out how they affect your business dealings. Carefully review the terms of their other contracts to see whether there is any conflict of interest.
Also, if the other parties do not have existing contracts, establish whether they had other contracts in the past. How did they handle the project? Was the project finalized or was there a breach of contract?
As such as there should be trust among companies entering into a contract, it is only wise to be on the safe side.
3. Establish the managerial team
For successful completion of a business lifecycle, having an effective managerial team is imperative. At the first meeting, the agenda should be appointing individuals that will head the team.
Depending on the scope of work, a need for multiple managers may arise. Establishing clear points of contact for each of the team members is paramount for the smooth running of processes. During the meeting, executives should establish which individuals have the authority to make final decisions. Having such a clear chain of command is essential in minimizing conflicts in the workplace and stalled projects.
4. Come up with a performance review process
Conducting regular performance evaluations is a sure-fire way to ensure all parties are upholding their end of the deal. Reviews can be a dreaded time for especially those parties that are lax in their duties. As such, they help in re-evaluating performance goals and priorities.
When coming up with a timeline for your performance review process, consider milestones. Holding review meetings when milestones are met is great as it allows both parties to evaluate the processes that led up to that moment, pinpointing the challenges, solutions, and growth opportunities.
During the performance review meeting, all parties need to be transparent. It is crucial to be specific on things that were rather unappealing and those that were appreciated. By doing so, contractual partners will know what is expected, minimizing the risk of a breach of contract, among other unpleasant things.
5. Set business boundaries
Before the actualization of the contract, all parties involved must set business boundaries.
You see, establishing clear communication is the backbone of success in contract management, and setting boundaries is the best place to start. Involved parties should communicate their expectations and define what they find unacceptable. Of course, there are aspects in a contract that is open to negotiations, while other elements, such as working hours and client expectations, are non-negotiable.
Establishing these boundaries is an effective strategy for a successful contract management process. It allows all parties to work on their assigned roles without meddling in the affairs of their partners.
6. Outline the consequences of delays
Achieving milestones and meeting deadlines during the lifecycle are some of the most crucial aspects of contract management. Slips in schedules are detrimental to any business dealings. For this reason, all parties must establish the consequences of delay to ensure a successful contractual agreement.
When companies enter into legally binding contracts, they invest their time, money, and resources. In case the contract is unsuccessful, involved parties can suffer unimaginable financial losses. Also, what may seem like a slight delay on one party may cause other parties to incur more costs in terms of additional manpower and supplies.
For effective contract management, the repercussions for delays need to be discussed and put into writing. Clearly state the penalties to be issued to the at-fault party. However, since some delays result from unprecedented and unavoidable circumstances, it is essential to have a process for change of requests.
Successful contract management is the dream of all parties involved in contractual agreements. It is beneficial to a business as it ensures financial optimization, risk reduction, and efficiency. It allows partners to work in harmony and increase productivity in aspects that work towards a triumphant contractual project. By following the strategies mentioned above, companies can foster better relations with their partners and work together harmoniously.