8 Ways to Improve Contract Management
Contract functions vary depending on the business units and individuals use different systems and processes when contracting. Contracting that is not done through a uniform, systemised process can lead to inefficiencies at each stage of a business transaction. Here are eight tips for achieving a cohesive program for contract management:
Use simple contract language and well-known templates
It’s important that you use templates with standard language, which are consistent and easy to understand. Furthermore, business-side users should also be trained on the meaning of specific terms in the contract and their application.
Assess clauses regularly
The act of developing standardised language and stopping at that is not enough by itself. More needs to be done to keep the company ahead in contract management. Templates lose their value when the language used in them is renegotiated several times. As such, companies that are looking to continue growing need to regularly evaluate contracts and revise clauses to suit each stage of their business development.
Give contract work to the right personnel
Low-risk contracts don’t require a lot of time for negotiation and they can be assigned to professionals who don’t have legal skills. On the other hand, high-risk contracts should be assigned to professional attorneys who can evaluate them in depth.
A financial review should be built into the lifecycle of the contract before it is executed
In cases where there are errors in revenue recognition, a company risks facing lawsuits. Therefore, the finance department should be adequately involved in the course of contract negotiations by reviewing the business’ financial reports and identifying areas facing the most risk.
Assess the performance of individuals using contract data
Before you can decide whether you want to renew a contract, you need to consider the financial and business benefit of that particular contract. Innovative companies use management reports to evaluate all the aspects of such contracts.
Create a central contract repository
The presence of multiple repositories in an enterprise makes it easy for people to duplicate contracts. The most effective way of curbing this is by creating a central contract repository.
Automate the contract process
The approval process should be made easier by using electronic approvals. Such approvals can be delivered using a system that manages contracts via email with all the necessary information. Additionally, any approvals, denials or comments can also be sent through the system. Instead of using multiple department contract systems, the most effective approach that an organization could take is the implementation of enterprise-wide contract management tools since they help in the achievement of business objectives.
Evaluate past and current contracts
The evaluation of executed contracts makes it possible to analyze how risks have been navigated and the cost structures that have been used. It also helps in determining any gaps in operational efficiency and provides useful information to help in improving the processes, language/terms and the resources allocated to contract management.
What do I do now?
Contact us if you would like to have more information on enterprise-wide contract management. Our lawyers at You Legal will be happy to assist you in whatever way we can.
* This blog is for general guidance only. Legal advice should be sought before taking action in relation to any specific issues.