The Stages of Contract Management

Managing contracts has become a way bigger responsibility than it used to be back in the day. As the amount and importance of contracts in day to day operations grows, it is important that businesses come up with ways to save time and effort in managing these contracts. Contracts should save time, rather than consuming more of it while handling management and storage.

Following a concrete contract management process can help businesses streamline operations and ensure that all contracts are formulated and managed in a professional manner. In this article, we mention all stages in the contract management process and look at the importance they carry in adding efficiency to key business operations.

Stage 1: Preparing for the Contract

Contracts are legally binding documents that shouldn’t be taken lightly. Contract preparation is the first part of the process and includes a detailed overview of all details related to the contract. You should be organized and prepared at this stage, so that no rash decision is taken. You should properly identify the needs of your organization and the reasons and objectives you have in mind behind the contract. Having a contract by your side makes it easier for you to comply with legal guidelines and to make future decisions without any burden.

Contracts should not only seek to define risk in a relationship, but should also mitigate it through the verbiage and specific points. Do look over any possible complications you might face in the future and make sure you mention them in your contract. For instance, the terms of the agreement within your contract should clearly define what happens if a client files for bankruptcy, sells their business, or has other emergencies.

Also, identify and discuss the reasons for creating a contract. It is in the best interest of both parties to discuss and establish these reasons, so that they can proceed with drafting the contents of the contract.

Stage 2: Authoring the Contract

The next stage in the contract management process is to author the terms of the contract. When authoring the terms and regulations of the contract, you should pay specific attention to the wording and clauses mentioned. Ambiguity should be avoided, as it leaves the contract open to interpretation. Use punctuation clearly and have a copywriter work with you if need be. You should also take state and country laws into perspective while creating a new contract. You wouldn’t want to be on the wrong side of the law, especially if both entities are entering a contract from different states or nations.

Stage 3: Running Negotiations

Regardless of how much planning, research, and preparation goes into the first draft, you should almost always follow it up with negotiation. Negotiation should always be built on trust and transparency for the best results.

Anticipating the needs of the other party before the actual negotiation process begins can be beneficial for you. It is easier to have an updated version of the contract available during negotiation; so that both parties can redline changes they want and collaborate in real-time. Emailing changes, in the end, can cause long term mistakes.

Stage 4: Getting Approval Before Finalization

After the negotiation process is complete and both parties agree to the contract, the next stage is to get approval. In large companies, mid-level workers have to get approval from multiple managers or have to follow audit procedures. All these approvals have to be finalized before a contract can be approved. For instance, if an organization follows a specific procurement policy, then the new contract should adhere to that policy before gaining approval. This is easier to do in an automated system where you get timely approval.

Stage 5: Executing the Contract Properly

Once you have approval from all relevant managers and stakeholders, you should head toward executing or signing the contract. The signing is by far the simplest part of a contract. Both parties read over the contract, agree with the exact wording and take the next step forward to make it official.

However, since many organizations enter into global and international contracts through the internet, it isn’t easy to get the desired signatures. Hence, a contract management system can offer a prominent solution here. Online signatures or e-signatures that can be traced back to the signee are considered legally binding today.

Stage 6: Keeping an Eye on Amendments and Revisions

Contracts rarely remain stagnant. There is the added need for continuous amendments and revisions to ensure that the contract remains valid and up to date with changes. Tracking changes and their effects back to the user can be difficult, which is why it is necessary that you have a contract lifecycle management platform. Such a solution makes it easy to record edits and add changes. Both parties should be fully aware of all changes beforehand, so that there aren’t any last-minute confusions.

Stage 7: Managing, Storing, and Accessing Contracts

If you think about it, the most integral stage of contract management actually starts once the ink dries. Storing contracts in a secure place, where they are easily accessible is necessary for organizations today. You should have alerts set for deadlines and renewals so that the contract can be accessed and changes made in time for renewals. Missed renewals usually mean lost business, which is why you should keep an eye on them. No company wants lost revenue and customers, which is why it is imperative to take care of the relationship and contact the other party well before the renewal date or deadline.

All of the stages we mentioned above can be made easier through a contract management system. If you don’t believe us, you can start your contract management software free trial today to see the benefits on offer here. Once your free trial is over, you will know the actual benefits of this solution.