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• Contracts are an indispensable part of any enterprise. Every dollar entering and leaving an organization must be predicated on a contract. That is why contract management processes are critical for any operation.
• Procurement processes are complex, sequential, repetitive activities requiring constant tracking and monitoring. Contract management helps ensure that contracts with vendors or suppliers are managed with a streamlined and centralized database.
That is what a contract management solution is all about. It creates, negotiates, reviews, renews, and gathers actionable contract data with vendors or collects important actionable data from business contracts. The benefits of a contract management process are to streamline and simplify the process of managing contracts.
Today, organizations of all sizes and sophistication are moving towards a contract management solution. This solution helps organizations manage and optimize the several overlapping stages of the contract lifecycle.
Contract Lifecycle Management
Contract lifecycle management refers to the process of managing the end-to-end stages of a contract. The stages of the contract lifecycle management include:
- Contract creation. The contract is created based on an initial request by a business to enter into a buying or purchasing arrangement with a vendor or supplier of specific products and services.
- Contract negotiation. Contract negotiations cover many legal and commercial terms and encompass different members of both parties of the transaction. One best way is to agree on a strategy on how best to manage the contracts.
- Contract award. After negotiations, the contract is awarded to the supplier or vendor, and both parties sign the final agreement, digitally or manually. Most organizations have rules about who must approve each contract depending on the value and risk.
- Contract administration. During the contract administration stage, each party must comply with the rights and obligations of the contract. Contract administration captures continuous performance monitoring and management of quality and disputes arising from the contract.
- Contract closure or renewal. When the contract expiry date has reached, three main actions can take place. The contract can be renewed with the initial conditions and terms. The contract can be renegotiated. When it’s renegotiated, contract terms are changed or adjusted. And finally, the contract can be terminated, and both parties notified about the termination and the conditions surrounding the termination. Expired contracts must be closed-out and users notified.
It’s critical to note that these different lifecycle stages present management and oversight problems to procurement teams, managers, and business leaders alike.
A contract management solution is needed to streamline the different lifecycle stages and provide better visibility, performance, and monitoring of a contract lifecycle.
The Benefits of a Contract Management Solution
A contract management solution, also called a contract management system, has the following benefits:
1. Contract review and execution
Contract management systems accelerate the review process from inception to completion, leading to fewer review times. This automation can include a combination of parallel and conditional approvals that streamline collaborations among departments.
2. Reduce risk and improve compliance
A contract management solution reduces three primary risk categories. The first is through compliance management through a full audit trail. The second category of risk is contract compliance. The software can run analytics on the health and suitability of your business relationships.
The third category of risk is through contract templates. The software ensures that contract templates comply with industry and corporate standards, maintaining better control of how organizations do business.
3. Extending contract visibility
While contract management may mean a spreadsheet or a desk drawer, a contract management solution implies an enterprise-level solution available to everyone with access to an internet connection.
A contract management solution ensures that more team members can initiate requests and watch the progress of their requests. It acts as a single source of truth. This visibility capability ensures that different procurement team members can see pricing, suppliers, and contractual obligations from a single platform, thus increasing their negotiating power.
4. Renewals in less time
The contract management software automatically recognizes the contract renewal date and automatically notifies the contract owner or the legal team when the contract will expire. Knowing the timing of contract expiry dates is just the beginning.
The contract management solution will keep tabs on the terms and conditions of each contract, notifying you of any possible actions, obligations, and violations. A contract management solution can also support discussions related to building future KPIs and performance.
5. Document management
An information filing system helps you find the data and information you need when looking for it. A contract management solution lets you track and trace the right figures, information, data, and graphs at just a click of a button.
This solution converts into fully-searchable text, accessible from a laptop, desktop, and tablet device anytime and anywhere. A centralized database provides a central repository for procurement information and spending data, improving the visibility of business-critical operations and processes.
The Need for Contract Management Systems
Lack of online access and visibility are two leading problems with contract management. Most organizations struggle to maintain their contract repositories without the right technology. However, best practices in contract management include software tools and CLM solutions that provide visibility and efficiencies.
Some best practices in contract management that are facilitated by technology include:
- Use of a central repository for all your contracts
- Use of standardized templates for consistency
- Standardizing the negotiation process
- Building in compliance at different stages of the contract
- Measuring performance and tracking costs
The contract management software provides tools, technologies, and methodologies to manage different minute aspects of the contract. For instance, the existence of a repository system, standardized templates, compliance, and oversight capabilities are all critical benchmarks of a successful and streamlined contract management solution.
ProcurePort – Your Leading Provider of Contract Management Solutions
ProcurePort is a leading provider of contract management solutions. ProcurePort helps small and medium-sized enterprises bridge their contract management gaps with superior and integrated contract management solutions.
You can contact ProcurePort for robust contract management solutions.