When businesses sign contracts with other companies or individuals, they must know how to manage these contracts. These contracts can be very complicated and can have many different elements. When an agreement is being executed properly, but when a contract is not being appropriately managed, it can cause severe problems for the business and can result in lost money and other difficulties.
Nevertheless, contract management is a growing cost for many companies. For this reason, many companies are turning to figure out effective ways to manage their contracts better. One of the critical ways that have been shown to help organizations reduce costs and avoid legal problems is by having an effective contract management system that allows them to ensure their contracts are being run effectively.
What Are The Steps In Managing Contracts?
The main steps involved in correctly managing a contract include:
Understanding the needs, ensuring that the main goals of the contract are covered, managing expectations, and defining risk. Good preparation can save many headaches further down the road.
Depending on the size of the business involved, it could be wise to include an attorney or even hire a law firm to draft a standard form contract based on your needs.
A draft is a draft for a reason. It will likely go through many revisions over the course of the negotiation period.
Once all parties agree, they can both sign, therefore sealing the contract in its current form.
At each stage of a contract, there are revisions, new people involved, and different terms. Moreover, other modifications may be made during the contract’s lifetime that keep up with current situations. This is where specific tools are becoming more popular that help to handle agreements over their lifespan.
How Can Contract Management Software Help?
Using an online platform is usually the most common way to manage a contract. These permit multiple parties to be privy to each step if required without being in the same room. A contract management system (CMS) is a system designed to organize, manage and automate your company’s contracting activities. Contract management can be as simple as organizing document folders or archives or more sophisticated involving complicated workflow capabilities.
Many corporations use some form of CMS for their contracting to automate the lifecycle and control the proliferation of contracts throughout the organization, adding value by automating processing timeframes from negotiation through execution, payment, renewal, compliance, and archiving.
Main Benefits of a CMS
The contract management specialists over at contracthound.com/contract-management-software/ suggest that the main benefits include:
- Save time.
- Lower cost.
- Security and transparency.
Reduce Approval Times
Several clever features enable these systems to reduce time considerably. These can include highlighting changes made so that everyone can see what has been changed rather than having to contact and update via email. Once a change is made, they can automatically send an email to the participants involved, updating them about that a change has been made and what changes have been made. This automation saves countless hours of time-consuming but necessary work and keeps all stakeholders informed.
Contracts can be extremely costly to create and even more so when an attorney is needed to advise on all changes, large and small.
Even those without legal backgrounds can create drafts with relative ease by incorporating a wide range of legal terms that are standard regardless of the type of contract being made. Small but important things like these make the initial investment in a CMS worthwhile.
Letting all stakeholders see any amendments is essential in forming a relationship based on trust. Transparency is one of the most critical reasons for using a CMS. The fact that everyone can see revisions via a revision manager and is informed when a change is made ensures that everyone is up to date. Moreover, terms can change over the lifespan of a deal, and keeping a digital record allows for a far more streamlined operation.
A paper contract can be a liability if not stored correctly. There are too many factors at play when dealing with the physical world. For example, the building could burn down along with the contract, liquid damage could occur, or could get lost among the reams of other paperwork. Storing everything in the cloud keeps it safe.
A second factor is that only those who have been given permission can make changes. This ensures that everyone knows who is responsible, and blame can be assigned if anything goes wrong.
Managing a contract over its life can be a daunting prospect for most, especially when dealing with multiple contracts ranging from different deals. Often, a contract management system is the most effective way to ensure their administration.