Contract management implies the managing and handling of contracts related to employees, customers, and suppliers.
Essentially, a contract is about solving the needs of the business, and there are often many different parts of the organization involved in its development. Unfortunately, this fractioned approach rarely offers a clear definition of roles and responsibilities, leading to a lack of overview and the risk of internal and external tensions, disagreements, and conflicts.
Having the right processes, structures, and activities can help you get the most out of your contracts and minimize the risk of valuable losses or disputes when working with a customer or supplier. Here, we'll dive into contract management as a process in your organization and highlight the importance of procedures and structures.
The contract management process
Simply put, contract management is about managing contracts from start to finish. It's a discipline that requires knowledge, skills and commitment. This places demands on management to take the lead in establishing accountability for the organization's overall contract management.
With the overall responsibility in place, the responsibility for the individual contracts must be embedded among the manager(s) responsible for the agreement. This is where the real work begins. Clear procedures and guidelines must be established to ensure that all contracts are handled equally across the organization, the respective departments and individual managers.
We have gathered a selection of key points to consider when developing the guidelines:
- The different phases of the contract - from needs assessment and bidding, to development, negotiation, implementation, operation, and closure.
- Fixed procedures for “dead information” - e.g. key dates, notice periods, price adjustments, etc.
- Managing changes and possible conflicts.
- Internal and external communication.
- Roles and responsibilities.
Well-defined processes minimize the risk of errors, and an efficient system supports and streamlines administrative tasks. It also ensures a consistent and structured approach to contract management so that both management and the individual responsible employee can quickly and easily get an overview of the contract portfolio.
Benefits of contract management
Implementation of contract management can help you realize both financial and qualitative gains. With a dedicated effort, you will quickly achieve the necessary overview that makes it possible to store and manage the large number of contracts across the organization.
There are many benefits associated with an active approach to contract management - including:
- Structured contract management increases the chances of achieving goals, closing deals, and improving business performance.
- A complete overview provides a better basis for decision-making and helps save both time and money.
- Supplier management becomes easier when there is easy access to uniform and structured contracts.
- Forgotten price adjustments, unused discounts, or late terminations of agreements become an unknown phenomenon.
Both private and public organizations have numerous and complex contracts. With the right management tools, you can gain a strategic overview that makes it possible to create reports, gain insight into cost-effectiveness, and, not least, search across departments and areas of expertise.
