An effective Contract Management plan must oversee the entire contract lifecycle. Many businesses concentrate on the contract negotiation and beginning of the lifecycle, without putting in place a CMP for suitable monitoring or reviewing of performance once the contract has been awarded for example. There needs to be an end-to-end process, including offboarding at the termination of a contract. There are many elements that need to be included within that process and a CMP can be used to successfully manage all the practical requirements of a contract, such as what is required, when it is required and who is responsible for ensuring that implementation. This seems like common sense, but with the IACCM announcing the amount of revenue lost annually due to poor contract management is around 9.2%, contract management is clearly an issue for businesses that needs to be addressed.
Regardless of industry or sector, increasing revenue and cutting costs, optimizing your business both operationally and financially, changing of regulatory requirements and increasing compliance and minimizing exposure to risk are all established reasons why you should have an effective Contract Management plan in place, especially if you want to successfully manage a larger volume of contracts of increasing complexity. So, in order to get the most out of your contracts and target the benefits, what should your Contract Management Plan include?
Formality and Structure
Your contract management plan needs to be a formally written document. This assures everyone involved in the process – employees, stakeholders, vendors of their roles and responsibilities and what is required. Although formality helps with structure, it’s important not to overcomplicate the language, so the document is user friendly.
Determining the value of a contract and the risk it poses can provide the level and specificity of management required. Factors that need to be considered include the length and value of a contract, performance criteria, risk and compliance, public visibility, reputation and business dependency. Once you have your value/risk profile, you can ascertain the amount of management and regulation and input the contract lifecycle needs to have.
When you have a structured contract management plan in place, it can be broken down into stages which makes it easier to understand the responsibilities at key points in the process and means employees and vendors don’t have to spend ages reading through information they don’t need at the time.
There should be clearly outlined definitions including:
- Roles & responsibilities
- Contact information
- An agreed level of management according to value/risk profile
- Contract objectives
- Performance Management Framework, e.g., KPIs
- Obligations, e.g., Dates and Deadlines
- Contract Compliance
- Review meeting schedule
- Risks & issues
- Exit strategy
In the event of a crisis such as the current pandemic, the ability to amend contracts and clauses to reflect circumstances is vital, and that can only be achieved if you have good communication and a solid working relationship with your third-party contracts and stakeholders. By having a contract management plan that is easily accessible, you have all the information available to quickly communicate and clarify any amendments or changes with the agreements of all parties.
Implement Contract Management Software
If you are looking to improve your contract management, manually dealing with all the above key elements outlined in a contract management plan can seem like a daunting task. Especially if you don’t have the personnel resources, or your legal or compliance teams already have a lot of responsibility. With the increase in satisfying compliance regulations and as more companies enter the global market and try to manage a worldwide vendor and supply system, there has been a growing need to improve contract management framework and an increase in software available to fulfil those requirements. Using this software means that at every stage in a contract lifecycle, a business can automatically digitize, create, monitor and manage their contracts as stipulated in a contract management plan.
Implementing an automated Contract Management system would provide the ideal solution for businesses with a multitude of contracts, although the features and tools of the software can often be extremely useful to a business no matter their size or the number of contracts. As we said earlier in the article, centralizing your contracts and data is essential for businesses moving forward, and with contract management companies offering a centralised repository as a standard feature, it can make unifying this data an easy process.
Simplifying the creation of configurable contract templates and with standardized language and a pre-approved clause library can make the usually long and tedious job of writing out contracts quicker and easier, improving productivity.
Having an automated system also has huge benefits for risk management and mitigation. Auditing and compliance become less complex as every action made in a contract management system is fully tracked in the audit logs, along with a time stamp and the user’s information, fulfilling the obligations and responsibilities defined in your contract management plan.
If you use software from a company such as Symfact, who have a configurable access control interface, you have the advantage of improving communication and visibility with third-party vendors whilst minimizing the risk in doing so. Any amendments can then be tracked back to date and source in event of legal matters regarding non-compliance with the contract management plan.
Custom reports mean you can analyze operational data and workflows, and automated reporting tracks essential information and milestones relating to your contracts. You can set up trigger-based alerts for these milestones and events, so nothing falls under your radar.
Contract management software can be integrated into existing ERP systems and you can also configure the software so you can implement only the features your business most requires. This makes it a useful and cost-effective solution for successful contract management and ensures your contract management plan is adhered to at every stage.
Simplifying the contract process defined in your contract management plan with document creation, managing commitments, better resource planning and electronic signatures, really can make a difference to your organization, so if you feel this is the right step to help you successfully manage your contracts and resources, then contact us at Symfact and start your journey towards efficient contract management planning.