Contract Management Lifecycle: The 7 Stages of Managing Contracts
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Every company deals with contracts in its day-to-day activities. That’s why the contract management process is inevitable. While you may be thinking that managing contracts involves authoring and signing agreements, there is more than that.
Contract management involves a series of phases. You’ll be better prepared for the process when you understand how each step works. This helps you meet all the contract goals and objectives while maximizing results. Here at the contractsafe UK, we take you through the seven stages of the contract management process.
Let’s dive in.
Planning is crucial in contract management. Here you develop a flexible system that best suits your company’s needs, objectives, and resources. In this stage, you weigh the objectives and set the goals of your agreement. This allows you to come up with appropriate management strategies to address potential risks while maximizing efficiency.
Take the following into consideration as you develop your strategy:
- What contracts do your company mainly work with?
- Who is responsible for managing each stage?
- Are there common problems that arose in the past?
- What are the potential risks that might occur during the management process?
- What resources do you need to put your contract strategy into practice?
When you put the above into consideration, you’re now ready to move to the next phase.
You have already outlined your contract management process. Now it’s time to put your plan into action. Here, you’re required to set up a contract management software system to perform tasks related to agreements. During this stage, the system automates the migration of your contracts to a single central database.
Further, onboarding takes place in this phase. Here, you need to ensure all the stakeholders clearly understand your goals and can use various tools as you progress. This will reduce the likelihood of errors during the management process.
You have now laid the base for the management process. Now you must apply it to new contracts. At this stage, you will create templates that meet your business needs and objectives. This will help you save time and comply with regulations. If there are uncertainties in the contract, you should consult the relevant authorities.
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Upon signing the agreement, it is given to the party who will implement it. Usually, the person expecting the contract is not the one negotiating it. It is advisable to ensure the agreement is applied as desired. This is achieved by providing a smooth handover. Establish a time to go through contract details with all parties so that you can confirm responsibilities and milestones.
This is the stage you quickly achieve your contracts targets when you do proper management. Poor management of contracts can pose financial and operational risks for your business. It can destroy relationships with suppliers, which could result in significant losses. To avoid these, optimize your process to monitor the contracts effectively.
In this stage, pay attention to contract conditions and always review to ensure all steps are working according to plan. It would help if you used a contract management system to help you plan and manage your contracts.
Contracts don’t last forever. Their end is based on several ways, such as natural termination, renewal, or premature termination.
When you decide to terminate a contract, ensure you clearly understand potential fines that could arise. This is the reason why you need to closely monitor your contracts, particularly those that are nearly approaching expiry dates. This will help you evaluate whether to terminate or renew the contract. The contract management system sends you alerts regarding contract expiration dates and deadlines. This ensures you don’t miss an important date.
Post contract stage
When a contract comes to an end, there are specific actions that you must take. This includes meeting the termination conditions and paying invoices. So, you must understand all the contracts conditions to avoid inconveniences.
Further, you need to archive your agreement. This will help you to use it to make future contracts adjustments whenever an improvement is required. You’ll be able to evaluate contract performance and make adjustments to improve your contract management process.
Each stage of contract management is essential. The process may look complex and involves alot of work when done manually. Adopting contract management software to automate the process makes your job easier and enjoyable. Automating the process of contract management saves you money, time, and energy. This increases your business productivity and efficiency.
Additionally, the contract management software enhances excellent organization and monitoring of your contracts to minimize financial and operational costs. The above stages will help you better understand the contract management process and prepare you for the actions to take to mitigate potential challenges that might arise at any stage.