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Contract management is defined as a process that manages the creation, analyzing and execution of contracts efficiently and systematically. This method is used for delivering optimal financial and operational performance and for minimizing the risk factor to the lowest level.

Meaning of contract management-The contract management is described in simple terms as the management of the contract with employees, partners, vendors, and customers. The system includes addressing any problem with the contract, monitoring and making necessary changes if required, actively interacting with involved parties to achieve desired objectives and to ensure that both the interested parties can surpass each other’s expectations.

Understanding contract management-

When two organizations decided to work together for a common goal, they need a contract to define their relationship, objectives, work method and goals in explicit language so that issues do not arise afterward. It is the contract that specifies the activities both will be responsible for and the terms and conditions that each one of them will have to fulfill as part of the bargain.

Remember the contract has a direct impact on the profitability of a business. When it is phrased poorly, the firm can lose a massive amount over simple technical fault, or if it is one-sided, then the other side will lose a large chunk of its profit share. One must have an effective contract management process in place because it has the power to create a strong business relationship between involved parties that could down the road lead to better productivity and higher profitability.

Contract management is an on-going process that lasts throughout the contract life. It might seem that a contract is signed and the process comes to an end, but the fact is that the activities continue before, during and after the signing on the dotted line. It is the contract management system that ensures all the involved parties understand what is expected of them and continue to fulfill their contractual obligations and duties as per the terms stated in the contract.

Activities related to this process are grouped under two phases

  •   Pre-contract award phase
  • Post-contract management phase

Both the phases are crucial, and equal emphasis must be given to them. If you lag, in the first phase, the repercussions will continue to the next one where you will be left with correction of omissions, and this will prove wastage of effort and time.

Some of the standard commercial contracts that are dealt with by personnel who handle contract management are for

  • Utility contracts
  •  Purchase orders
  • Sales invoice
  •  Employment letters

Elements of successful contract management-

The delivery of services from all the interested stakeholders is satisfactory from the viewpoint of all the parties

There are no surprises or disputes about the contract on the way

The supplier that an organization has associated with is responsive to its needs and handles every part of his obligation co-operatively and efficiently

The organization has some expectations from the contract, and the expected financial returns and benefits are realized.

Stages of contract management-Contract management is no doubt a time-consuming process where you have to spend considerable time in going through the nitty-gritty details; otherwise, any overlook will come back to bite and harm the business to a very great extent. Everyone must follow all the steps of the contract management process correctly to reap financial advantages. Remember, whenever a person enters into a contract, he opens himself to several vulnerabilities and potential risks.

The different stages of contract management help in mitigating financial and legal risks hence follow them diligently

  • Initial requests
  • Authoring contract
  • Negotiating the contract
  • Approving the contract
  • Execution of the contract
  • Obligation management
  • Revisions and amendments
  • Auditing and reporting
  • Renewal

Benefits of contract management-Most of the organizations have started moving with the changing times, and this means incorporating the use of technology in most of its departments. An essential move in the right direction will be introducing and investing in the contract management software that suits the requirements of an organization.

  • Automate the process
  • Access to critical information
  • Reduce contract cycles
  • Optimal performances and risk mitigation
  • Boost data analytics

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