How to Implement Great Commercial Contract Management
Encompassing a broad range of agreements with other business entities, your organization’s commercial contracts are an important tool for driving company performance and reducing any risks that are inherent in your dealings.
The development of mutually-agreeable commercial contracts is only half of the challenge of dealing with such agreements – more often than not, the difference between successful and failed agreements come down to contract management. And if you’re looking to achieve exceptional results from your contracts, it’s imperative to take an organized, systemic approach to how you manage your commercial contracts.
What Are Commercial Contracts?
For starters, it’s helpful to understand what commercial contracts encompass. These refer to your agreements with other businesses and may include contracts that pertain to:
The supply of goods and services;
Financing and loan agreements;
Copyright and intellectual property agreements;
Licensing and franchising agreements;
Joint venture agreements;
Other types of agreements with other business entities.
When you consider the broad range of business activities these include, it becomes clear that exceptional commercial contract management is also the path to good business. So how do you get on track? It comes down to applying these three principles.
Before you enter into any agreement, it’s crucial to have a detailed understanding of what it needs to address. While terms that are directly related to the exchange of goods, services or other provisions, their costs and delivery details may be obvious, your contract should also cover a range of extenuating circumstances that might arise during the contract term. This way, if anything unexpected occurs, you have a legal and agreed-upon framework for dealing with it.
Common scenarios or details that may need to be addressed during the administration of a commercial contract can include things such as late payments and deliveries, interest charges, insurance and indemnity provisions, the handling of intellectual property, how changes during the contract term will be addressed, and other highly-specific (and important) terms. At the earliest stages of commercial contract management, it’s important to develop and negotiate agreements that reflect these terms. Though some details may vary, in order to ensure nothing important ever gets left out, it’s useful to develop standard boilerplate agreements that encompass all of your must-have terms. Even if an agreement proves to fall outside typical parameters, using standard agreements as a starting off point in the drafting process means all of your requirements are already included.
Get (and Stay) Organized
Instead of thinking of contracts as something you sign and forget about, it’s helpful to think of your agreements as a roadmap for your business relationship. This applies to commercial contracts too. As such, keeping contracts organized and ensuring you are quickly able to access key dates and milestones and can reference specific terms as needed is a must for carrying out effective contract management. There are several steps to getting – and staying – organized. The first involves creating and using a storage repository that meets some basic needs:
It should be easily accessible to authorized individuals who need to reference specific commercial contracts, whether during the course of their day-to-day role or if and when unusual circumstances arise. As the latter may occur at any time, a cloud-based storage solution that can be accessed from any device can reduce delays;
It should be large enough to store all your commercial contracts in one location;
Instead of a large, general storage space, it should offer tools such as tagging and metadata and alerts and notifications that are specific to the types of tasks and milestones common in contract management to help you better keep a handle on your portfolio and tasks related to administering each specific commercial contract within;
Because contracts may evolve – even during the contract period – it should allow you to keep track of progressive versions of documents and changes that have been made within your agreements.
Continue to Improve
With time and experience, you will likely find that certain terms and conditions within your contracts can increase the odds of a successful outcome or are more effective when it comes to mitigating or resolving issues. Because commercial contracts are something businesses deal with again and again (and again and again), they present an ongoing opportunity to improve results – but only if you build the required analysis and reflection into your process.
A post-mortem review at the conclusion of your contracts can help you to identify what worked and what didn’t, as well as bring to light potential opportunities, risks or other factors you may want to address in your new contracts moving forward. As you identify areas that were either underserved – or conversely, that served your organization particularly well – as part of any one contract, you may want to consider updating your standard agreements to reflect these learnings. This helps to ensure that your organization’s approach to commercial contract management is always improving – and that over time, the application of consistent and sound contract management principles will pave the way to exceptional contract management.