Lifecycle. Process. Whatever you call it, effective contract management doesn’t only involve developing agreements and getting them signed – it’s a series of actions that guide you from the earliest stages of developing holistic processes for handling each and every company agreement, through to the steps to seeing contracts through to their conclusion.
Having a clear understanding of what happens at each stage is an important way to ensure your contract management processes meet all of the requirements and objectives to deliver optimal results.
Here are the seven essential stages of contract management.
1. Planning stage
Before you can implement a process, it’s important to develop a system that will best suit your company’s needs and resources. To keep things streamlined and organized, it’s also important to develop contract management processes that can be implemented company-wide.
Your contract management strategy is a flexible roadmap consisting of processes that account for all types of company agreements, from standard employment contracts to the paperwork from highly specific and complex deals. The first step to developing your strategy is to determine your needs, including answering the following:
What types of contracts do you have to manage and in what volume?
Are there standard agreements you use again and again? What needs to be included in these?
Who is responsible for each stage of contract management and what do they need to perform their job?
What common problems have occurred in the past, or what issues might arise during the management of a typical contract?
What resources are required to implement your contract strategy?
Understanding the remaining stages of contract management will help to inform your processes.
2. Implementation stage
Once you have outlined your contract management processes, you will need to implement your plan before you can start using it. This includes deploying contract management software to help you to execute contract-related tasks, as well as migrating your contracts to a centralized repository.
A crucial part of your implementation plan is onboarding – making sure everyone involved understands your vision and objectives for contract management and is comfortable with the tools they will be using.
3. Pre-contract stage
Now that you have your contract management foundation set up, you can begin to implement it for new contracts. That means developing new contracts or implementing boilerplate agreements for more standard situations. The key challenge of this stage of contract management is developing a specific document that will deliver what you need and reduce your risks.
For standard situations, this stage may be as simple as finding the right contract type, entering the relevant information and perhaps making a few tweaks. More unusual or complex contracting scenarios may require the development of a whole new document. Developing a contract from scratch can be made easier by looking at other agreements that might be applicable and adapting those terms. Don’t forget to carry over any important requirements such as compliance obligations or branding standards. Once you have agreed on the terms and developed your contract, e-signatures can keep things moving.
4. Handover stage
It’s common – especially in larger companies – that the individuals involved in executing a contract are not the same as those who negotiated it. Thus, in order to ensure the contract is fulfilled as expected, it’s important to ensure a smooth handover. Rather than assuming stakeholders have everything they need, it’s useful to spend some time walking through all of the contract details and confirming roles, responsibilities and milestones.
5. Contract stage
The contract stage is when all of the goals of your contracts come to life – if you manage them properly. And much of the contract management work you’ve performed thus far is setting you up to do just that.
But the contract stage doesn’t manage itself – it’s here where you must play close attention to all of the terms laid out within your agreement and perform regular monitoring to make sure everything is happening as it should. It’s useful to have a plan for doing so, with a clear sense of key milestones and performance metrics that will let you confirm everything is on track – or provide an early warning system if any problems arise.
6. Pre-renewal stage
Nothing lives forever – not even your contracts. But there are several ways your agreements may come to an end: one-off agreements may wind down to a natural conclusion, you may renew an agreement, or choose to terminate it. Often there are specific terms – and even possibly penalties or default actions, should you fail to do anything – that can affect the outcome, which is why it’s important to start thinking about the end of your contract in a proactive and timely manner. Now is the time to evaluate how your contract performed and decide whether you want to renew and/or make any changes. Make sure all stakeholders are aware of termination and renewal dates and that you have enough time to consider all the information before you get locked into any decisions.
7. Post-contract stage
Once a contract ends, there is still some housekeeping to do to ensure that everything is wrapped up properly. This includes ensuring termination conditions have been met, issuing or paying final invoices, and archiving your contract. It’s also useful to perform a contract post-mortem, which can provide valuable information and learnings that can improve the results of future contracts.
The Master Checklist for Contract Review & Management
Tips and best practices for a successful contract management process.
ContractWorks Featured in Legal Tech Buyer's Guide