Contracts: who knew they needed to be managed?!
Contracts: who knew they needed to be managed?!
If you’re like most people, you probably stop thinking about contracts the moment the ink is dry, but at every organization there is someone tasked with the job of contract management.
If you’re reading this post, we assume that person isn’t you, but maybe you are the person who gets involved at some point of the contract life cycle. Or maybe your contract manager asked you to help build a business case around why your organization needs to invest in a better contract management solution. Or maybe you’re simply looking for a one-stop shop for all things contract management.
Great news! You’ve found the right resource for all of the above.
This post is your primer on the basics of contract management, including defining exactly what contract management is and the role it should play within an organization. We’ll also cover the types of contracts used in business, contract life cycle stages, and the contract management process as a whole.
Let’s dig in and get clarity into what happens to contracts before and after they’re signed and why it matters for your business’ bottom line.
What is contract management, exactly? Contract management involves putting systems in place around the lifecycle of a contract. Doing this helps streamline the contract process, reduce inefficiencies, minimize risks, and helps businesses find and use helpful data.
About those risks… The “seat belt” analogy is often applied to contract management. If you haven’t heard it before, it goes something like this:
Contract management prevents catastrophic loss like a seat belt prevents the loss of life. Most drivers (like contracts) are perfectly fine and won’t suffer any harm. But seat belts (like contract management) prevent those 1 in 100 instances where something really bad could happen.
As such, contract management is more than just a seat belt. We’ll elaborate on its many benefits next.
So… if the purpose of contract management is to add structure and systems to the contract life cycle, understanding the life cycle is the first step in understanding how contract management works.
At each stage of the contract life cycle, contract management works to:
One quick point before we finish discussing the basics of contract management — you may see the term “contract administration” used when talking about contract life cycle stages.
Contract administration and contract management aren’t quite interchangeable, although there is some overlap (kind of like how all squares are rectangles, but not all rectangles are squares). The difference between contract management and contract administration is that contract management covers the entire contract life cycle, while contract administration is all about the work done before a contract is signed.
There are many types of business contracts. As a general rule, contracts can be broken into three main categories:
Whatever types of contracts your business deals with, you can feel confident knowing that ContractSafe has your back. Our software was designed with versatility in mind, giving you the tools you need to manage any type of contract.
Sign a contract. Stick it in a folder on your computer. Forget about it.
This is the contract lifecycle for most people. After signing a contract with an attorney, for example, do you feel the need to ever look at it again? Unless something comes up during your engagement with them, then probably not!
On the other hand, if you are an attorney, you spend a lot of time on the different stages in the contract lifecycle. While these can vary from one industry to the next, here’s a broad overview:
The seed of a contract is planted when one party proposes a business relationship to another. Then, both parties determine their goals and strategies for this relationship. This stage of the process includes an intake request, clause selection, and a first draft of the contract. It’s always best to be the party that drafts the contract, which gives you more control of the language and terms used in an agreement.
The next step in the process is negotiation, which involves a back-and-forth conversation between parties. The overall goal here is to come to terms that are mutually beneficial. The negotiation stage usually includes redlining, internal approvals and routing, tracking status, and measuring turnarounds.
You’ve come to an agreement! Now it’s time to put pen to paper and sign your contract. Back in the day, this meant an in-person meeting and using literal pens and paper, but these days, it’s more likely to mean clicking a link from your email and signing electronically. Because we think of everything at ContractSafe, we’ve got electronic signature functionality available as part of our productivity package. We also have two-way DocuSign integration built-in to our contract management software, making the collection of signatures and tracking contract status a breeze.
Now we arrive at Stage 5, which is not “filing away the contract and never thinking about it again,” but tracking and monitoring. This is the most crucial point of the contract life cycle, but it’s also the most invisible. Other than the person in an organization who manages contracts, no one really pays attention to a contract after it’s negotiated and signed. Tracking and performance management includes searching, tracking, reporting, alerts, and assigning permissions.
Contracts that have ending dates must be renewed; open-ended contracts may need to be closed. Data needs to be gathered and reports need to be generated. This stage of the contract life cycle is ongoing and without automation, it can be a slog. ContractSafe can come to the rescue here, too, with simple reporting features and user-friendly search options.
As you can see, there’s a lot involved in contract management. With so many moving parts, it’s hard to pull it all off without contract management software. Although many contract managers can create impressive color-coded Excel spreadsheets, these aren’t ideal because, let’s be real: these spreadsheets usually only make sense to the person who created them.
A solid contract management solution is user-friendly for everyone involved in the contract life cycle. Here are some noteworthy components to look for when evaluating contract management software:
If you’re ready to say good-bye to color-coded spreadsheets and messy shared folders on Drive and Dropbox — then come say hello to one of the best contract management solutions out there (hey, it’s not just us saying it!) and request a demo. We look forward to rocking your world.