If you’ve been running a business, then you’re most likely familiar with signing contracts, whether with your employees or business partners. Contracts are undoubtedly crucial collaboration and communication tools, which significantly impact your business’s relationships and revenue, but simply coming to an agreement with other parties won’t catapult your company to the top.
Beyond drafting a contract, you must also focus your efforts on effective contract management. As your business grows and scales up while working to maximize efficiency, it will become more crucial to count on reliable contract management to maintain agreements.
The Importance of Contract Management
Everything rides on your contracts—these legally binding agreements will determine your business’s stakeholder relationships, pricing structures, the scope of work, warranty provisions, rights and obligations, and more.
As such, you must invest in arranging the terms and conditions in contracts, ensuring consistency, and archiving and conceding to any progressions or corrections throughout the contract’s usage or execution.
Contract management or contract organization refers to the process of managing contract creation, execution, and analysis to maximize operational and financial performance while reducing business risks.
When you keep track of your commitments and familiarize yourself with the contents of your contracts, you’ll be in a better position to practice your contractual rights and avoid being blindsided, which can be costly.
The Contract Management Process
Contract management involves a lengthy and tedious process that requires careful planning, thorough checking, and extensive discussions. Automating contract management has made the process more streamlined and effective, but it doesn’t mean that you can skip any of the stages involved.
For successful contract management, you must go through the six main stages, which include:
Initiation
The contract management process begins with two or more parties expressing interest in a business relationship. Eventually, the parties involved will need to put their agreement in writing, which results in a contract.
Generation
Once the parties have decided on signing a contract to make their relationship or agreement official, the next step is to draft the contract. During the generation stage, the parties will put conditions or terms they think must be included in the contract. Contracts can be drawn by hand or with an automated contract management software to speed up the process.
Negotiation
After reviewing the first version of the contract, parties may raise concerns about its terms or push more favorable terms by using contract redlining software.
Contract Approval
Once each party has compared versions of the contract, noted any discrepancies, and agreed that the contract is satisfactory, they will sign the document, which then goes into effect.
Execution
Signing the contract means that each party is now liable to perform its necessary duties to execute the agreed terms. Non-compliance to the terms of the contract will result in legal recourse for the other party to mitigate any losses.
Renewal or Termination
By the time a contract nears the end of its term, each party must review the agreement and business relationship to determine whether the deal continues to meet their needs. If both parties want to continue the relationship, they will agree on terms for a renewed contract. Otherwise, they will terminate the legal agreement.
Conclusion
Contract management is essential to any business, including yours! With the right contract management tools, you can streamline the process of drafting and maintaining agreements while maximizing the value you can get from each deal. As long as you know how best to manage your contracts, your business is sure to grow to become an unshakeable presence in the industry!
Are you having difficulty with managing your company’s contracts? Then, let our contract lifecycle management solution help you! Anapact, our contract redlining software, works to help small and mid-sized companies reduce risk, ensure compliance, and make the most of their contract documents. Get a demo today!
