Contract management is a continuous process, starting from the creation of contracts to signing them and closing the deal. In most cases after the deal has been closed the contract documents are put away to storage and forgotten about it until some issue occur or contract period expires. But what most managers forget is that the secret behind a successful contract management system is the proper tracking and monitoring of the contracts, even after the deal has been signed.
We have discussed in our previous blogs the effect a poor contract management have on an organization, it stimulates inefficiency, hinders communication and collaboration, and causes risk and other compliance issues. An effective contract management could fast track your business and business procedures, resulting in more productivity and increased revenue.
In this blog we will discuss why an efficient contract monitoring and tracking is important to enterprise organizations. We will discuss through points like why a central document repository is important. The key data in contract management and how you can use that to track and monitor contracts. And how to prioritize and strategize for an efficient contract management system.
An updated contract management database
The organizational contract management database needs to be up to date and organised. The database plays an important role starting from the initial phases of contract management. When drafting a contract document, you should be able to find the appropriate contract templates. Using a template that is unique for your company will speed up the contract drafting process. The database should also be the central document repository for all the contracts in the organization. It is important that managers know where to find the contracts when they need them, if the document repository is in a clutter and not organized, it will result in a waste of time and heightened chances of risks.
Not many companies use an automated contract management system, some are still using a conventional way of file storing for their contract management. Whatever system you have at your organization, be it file cabinets or cloud storage, make sure that they are properly organized. It helps in keeping track of the contracts, managers should always be able to access any contract files in the repository at any time.
Contract managers should also be sure on what metrices you need to be tracking for a contract. It is important that you document every bit of data that needs to be tracked for a contract. These bits of data or metrics could include deliverables and obligations, due dates, renewal or re negotiation dates, requisites for termination, compliance requirements, contract performance or any other crucial or high-risk clauses in the contract etc.
When companies employ the services of an automated contract management system, it is possible to handle the challenges in managing the database, especially for companies that have to deal with multiple contracts in their business. This type of contract management system will streamline the contract management and contract document storage and retrieval as well.
Efficient tracking and monitoring of key data.
The success of the contract management process rests mostly on how well the contract managers handle their tasks. It is imperative that contract managers give much importance to the details in a contract, like start date, end date, renewal, obligations, payment dates etc. It will be a good practice to keep a summary of these details handy so that it does not go unsupervised at any time during the contract lifecycle.
Successful contract managers are proactive. They tend to stay ahead of the contract dates and deadlines, always prepared for any risks that could occur in the contract lifecycle management. Staying proactive like that corresponds to the regular review of the contracts. When the contracts are regularly reviewed, contract managers can anticipate any risks in the contracts and act accordingly, or they can be prepared for a renewal or the contract termination. Experts suggest that it is a good practice to work a month in advance towards an expiring contract, it gives you enough time to discuss and decide n the future course, whether to continue doing business or terminate the contract.
Keep the stakeholders in the communication loop.
There are always multiple parties involved in a contractual agreement. And these stakeholders have financial investment in the contract. And ass contract managers you are obligated to keep them informed about the contract. There are some of the most important matters like deadlines, deliverables, renewals etc. Like we said before you will be able to discuss and decide on the contract deadlines if you start working ahead of the deadline, collaborating with the stakeholders.
Contract performance is also an important factor that the stakeholders need to be in the know. Inform them about the contract performance, whether it is performing as expected, if not then you can review them and make any changes if necessary. It would also be a good idea to keep a log of the timeline of the contract, any changes made, discussions held etc. to avoid any future misunderstandings.
Prioritize contract management system.
Contract management should be the first priority of your team. Teams need to understand the risks involved in contract management and work on it responsibly. Any slip-ups could inevitably lead to litigation or other troubles and it is not good for the organization. Also, you need to empower your team with the best tools to manage contracts. Without the right resources, teams could never achieve their full potential. You can start by ditching that old filing system and replacing it with an efficient document repository that has all the right features to manage contract documents. Effective contract management tools that are available in market right comes equipped with all the right features to manage contracts effectively. A contract management system that is built on SharePoint doubles as an effective document management tool also.
Plan strategies for continued review
As we discussed in the beginning, contract management process does not end at signing and closing the deal. Managers have to work on it throughout its lifecycle. Identify any past non-compliance issues so that you can add necessary clauses in the new contract to avoid that from happening. Continues review will also make sure that you never miss any deadlines, expiry, or renewal.
With automated contract management system that comes with automatic notifications and alerts, the continued reviewal of contracts become easier and more streamlined.
Contract management needs detailed supervision throughout its lifecycle. Efficient tracking and monitoring of contracts will result in a successful contract management and effectively reduce the chances f any risks or error in the process that could result in a serries of problems for the organizations. The risks in contract management could affect the brand image of the organization, which would result in a decrease in a business. Investing in a contract management system could only benefit the company in many ways.
Written by Adarsh Dorai
Adarsh is a SharePoint expert with hands-on experience developing various SharePoint and Office 365 solutions.