Procurement and contract management can either be dealt with as separate parts of your business or as different phases during an entire contract lifecycle if you have an end-to-end management system in place. How it works for your business is often dependent on the size of your enterprise or the type of industry you are in.
Different departments are often tasked with procurement and contract management, so you may have a dedicated procurement team and contract manager, or your entire procurement and contract management may be overseen by your legal and financial departments. However, both procurement and contract management can be considered parts of a whole due to the often-interconnected responsibilities and operations required in the lifecycle of a product or services contract.
What is procurement?
Procurement is the acquisition of goods, works or services, usually for business purposes. The procurement process and choices of partner must reflect both business strategy and objectives whilst creating value for your organisation against the stated criteria and matching the company ethos.
What is contract management?
Contract management is the term used to describe the continuous managing a contract, usually from the point of signing, through to the end of a contract lifecycle and off-boarding or expiry. Contract management starts once the contract takes effect. It is the process to ensure deliverables and obligations are met, as outlined in the contract or agreement, that the business and operations adhere to any regulatory compliance, any risk is mitigated, and the contract is providing value during the lifecycle of the contract or agreement.
How procurement works
There are many complex elements to procurement. Establishing the requirements of the organisation and then converting those needs into finding the right supplier of goods or service, whilst managing the expectations of stakeholders and negotiating the best contract for your business or organization, can sometimes be a lengthy process.
As part of the procurement process, the person or team responsible needs to ascertain and understand fully the business criteria that needs to be met. This involves purchase planning, which considers factors such as customer or end-user needs, business needs and budget. This will often require the help or overview from other departments, such as finance.
To identify possible suppliers or third parties, there must be adequate resources given to supplier research and selection, as a robust selection process can often be key to finding the correct supplier relationships that create the most value for your business or organization. It is important to note that any potential supplier has a clear understanding of what is required from both sides before any negotiation can begin.
Another key factor in the procurement process is the mitigation of risk. Due to digital advancements, many businesses rely on external databases to help with security profiling and the creation of supplier risk profiles. There are many software systems that offer links to directories and datasets to help with the due diligence involved, especially when considering high risk or high value partners. This is a particular feature often offered by contract management solutions such as the contract lifecycle management software provided by Symfact. Having access to this advanced security profiling of both businesses and individuals and comprehensive background checks can help procurement teams analyze and evaluate the risks and suitability of each supplier and concentrate their resources on only those proposals and bids that are most likely to succeed.
Your procurement team needs to work closely with other departments to help with supplier analysis. This can identify supplier base, help your team understand and manage the whole supply chain – including inventory if applicable, spend per supplier and ensure budget restraints are adhered to during the costing and negotiation phase of the procurement process.
Procurement will often require one of two things at this stage, either entering negotiations with a potential supplier, or entering a competitive bidding process. As either can be a complex process, this may be carried out by your legal team or a combination of both procurement and legal departments.
The entire procurement process needs to be managed correctly to enforce standards and controls, ensure the procurement team has the resources and tools to efficiently carry out an effective procurement strategy and any risks are identified and managed.
How contract management works
Depending on the size of the business or organization and the number of contracts it holds and must manage on a regular basis, contract management can either be carried out by a contract manager, or by a contract management team. Due to the nature of certain industries, contract management teams may often be a mix of professionals from various departments, such as legal or financial. No matter how your contract management is carried out, there needs to be a continuous monitoring of all your contracts to secure a positive outcome for your business.
Effective contract Management must oversee the entire contract lifecycle. Many businesses concentrate on the procurement and contract negotiation, without having a framework in place for the suitable monitoring or reviewing of contract performance once the contract has been awarded. Contract management is an end-to-end process, including offboarding at the termination of a contract if it is not being renewed. There are many stages that need to be included within that process such as tracking and reporting of KPIs, ensuring the parties involved are staying compliant with current regulations and company policy, mitigating any risk and being proactive towards issues such as bottlenecks. Essentially, contract management is used to successfully manage all the practical requirements of a contract, such as what is required, when it is required and who is responsible.
When a contract is coming to end, businesses need to decide whether to renew or terminate the contract. If a business wishes to renew a contract, they may want to renegotiate certain terms and this point in a contract must not be missed as there are often set deadlines and regulations. To avoid financial penalties, your contract management team needs to be addressing the correct course of action well before a contract is due to end.
If a business decides to end the contract, there needs to be a period of off-boarding and a defined exit strategy. Reviews of the contract and the contract management system employed during the lifecycle need to be undertaken to ensure a business can optimize their performance and get the most value out of contracts moving forward. The contract can then be archived.
How procurement and contract management work together
If the teams or departments dealing with contract management are not the same department that procured and negotiated the contracts, as is often the case, then there needs to be steps taken to ensure a thorough handover from the procurement team to the person(s) responsible for the continued management of the contract. This should occur immediately after approval and signing. This includes access to all associated documents and information from during the procurement stage. This ensures that the contract management team has all the critical data needed to make informed decisions about the contracts under their supervision.
Not only is this good practice regarding communication, but your procurement team will often have valuable insights about the supplier or vendor that can help your contract management team during the contract management process and allows for fact-based decision making. It is particularly important to communicate any set KPIs and timelines, so the contract management team can immediately set up notifications for specific events and milestones. This proactive approach to handovers ensures everyone is kept up to speed with events and creates a smooth transition within departments, improving interdepartmental relationships in the process.
How Contract Management software can improve your procurement and contract management
Contract management platforms, such as the contract lifecycle management (CLM) software from Symfact, can play a large part in making the procurement phase easier, as well as streamlining the entire contract lifecycle management processes by using automating technology. Reducing the number of resources used and increasing productivity and efficiency.
To prepare for any supplier contract, CLM software can offer tools such as designing, building, and publishing intelligent questionnaires, identity management to identify, authenticate, and investigate individuals and companies, and most software has links leading to external databases, giving your procurement team access to advanced security profiling of both businesses and individuals and comprehensive background checks to help identify organisational risk. These validation features can prove extremely beneficial to businesses wanting to mitigate risk in a more efficient way than their current system.
Contract management software also enables the procurement team to determine all their suppliers and their locations. This is useful to work out whether a company is over-relying on a particular supply chain based in one specific place. Contract management software also allows companies to pinpoint weaknesses in a supply chain which can then be rectified, as well as being a useful tool for cost control and analysis due to the granular data recorded by an automated system.
All the information and data collected during the procurement stage, including contracts once they have been negotiated and signed, can be stored in a centralized repository. By keeping all the information about bids, contracts, goods, and services in the central repository offered by contract management software, organizations across all industries can maintain and manage the complex data and control their security and access with minimum complications.
Where CLM software can really help your business though, is during the procurement, negotiation, and contract creation phase of a contract lifecycle. During this stage, your business is not making money. By streamlining this stage using contract templates, a standardized contract language and clause library and eSignatures, you can reduce the time spent by your procurement or sales teams on each contract.
Quickening this stage of the procurement process can mean your teams move onto other sales, which can be useful during periods of quick growth. Improving the rate of sales improves your bottom line and the ROI of contract management software.
Using CLM software also means your contracts can be configurable to specific clauses and can be regularly reviewed and updated, which improves productivity and timing during contract creation and helps ensure compliance with any legal or regulatory rules. Having a library of standardized terms and clauses set up in the software can help identify any contracts that may include particular provisions, which helps with monitoring later in the contract management process.
Contract management with Symfact
Implementing software designed to make your management processes easier can make an enormous difference to the success of both procurement and contract management. That is why the contract management capabilities of the software available from Symfact can provide a competitive advantage to your business, even during the procurement phase.
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 your clients whilst minimizing the risk in doing so. Improving your communication and transparency is a vital during the procurement stage as everything needs to be clearly evaluated and audited. That is why we offer an auditing suite of tools – including the configurable access control, to allow for any changes or revisions to be tracked back to date and source in event of legal matters regarding non-compliance with the contract obligations, whilst still being open and communicative with any of your suppliers.
The custom reports feature of Symfact’s reporting software means you can analyze operational data and workflows, and the automated reporting tracks essential information and milestones relating to your contracts. You can set up trigger-based alerts for these milestones, deadlines, and events, so nothing gets missed.
Configuration is particularly important if your business is a larger enterprise. Being able to seamlessly integrate with other systems is one of the key foundations of Symfact software. Our intelligent and bespoke software capabilities, offers more control to your business, enabling you to respond more quickly to unexpected challenges and situations.
Our software can tailor specific fields and datasets and even screens to make sure the software works for you during the duration of the project. Due to our cross-platform open API architecture, our software can integrate with a range of different systems and software. Any existing tools or processes, or even project systems that are already being successfully utilized within your business can be retained and implemented into our platform.
- Our software can be implemented without having to rebuild IT infrastructure
- A drag and drop Interface allows for easy collaboration between systems
- Our Software integrates into existing ERP systems
- Easy to set up
Having your contract management unified into one single system can improve productivity and efficiency and in turn improve your management of resources. Our automated software can streamline your administrative tasks and approval processes whilst simultaneously lowering your overheads. We can optimise your business processes for ROI and maximise your business revenue. Our contract creation and configurable contract templates and e-signature capability accelerates the procurement, authoring and negotiation phase of the contract lifecycle and avoids costly delays in your supply chain.
Using any web browser, you can keep on top of all your contract management projects and processes in our contract management system, allowing for scalability and a global competitiveness.
Improving your procurement and contract management with supplier research and profiling, contract creation, managing commitments and cost, 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 procurement or contract management, then please don’t hesitate to contact us here at Symfact. We want you to work smarter, not harder.