Effective contract management is a complex process requiring diligent organization and communication. One key area where a lack of communication often results in decreased contract performance is during the handoff of a newly-signed contract.
In most situations, the person responsible for managing contracts and implementing the terms of recently negotiated contracts will not be the same person who negotiated and signed the contract. To ensure that an executed contract will be properly managed, there must be some level of overlap, however brief, between these parties. Failure to hand over a contract appropriately may result in a misunderstanding of terms and obligations and consequently performance or compliance issues. The following steps can help with contract handover.
Establish a Centralized Contract Repository
For companies that engage in frequent and/or high volume contracting, it is vital to establish a centralized contract repository. As soon as a contract is executed and final copies are circulated to all parties, contracts should be uploaded to the repository and filed accordingly. All employees engaged in the contracting process, whether negotiation, management, deliverables, or enforcement, must be familiar with the contract repository system.
Tag All Contracts
For some processes, simpler is often considered better. But when it comes to contracts, a little extra effort is warranted. A company may have a number of differnt contract types, such as vendor contracts, licensing contracts, employment contracts, and more. Some contracts may impact several sectors of the business, including accounting, human resources, or legal. The bottom line is that contracts can be complicated and may have enormous consequences if breached.
As a result, contracts must be organized with extreme care. Some contracts may need to be filed in more than one folder, tagged, and cross-referenced. The more organized the contracts are within the repository, the easier it will be to monitor them. A best practice is to set up a template of tags for each contract type and apply them consistently. This will simplify finding and monitoring contracts.
Schedule a Handover Meeting and Clarify Parties' Responsibilities
Uploading and tagging contracts and then assuming (or hoping) that the next person will take care of the rest probably isn’t the wisest course of action. It is absolutely crucial for the team that negotiated a contract to meet briefly with the folks that are actually going to have to monitor it or implement the terms.
The team that hammered out all of the fine details can provide a quick summary of the contract’s contents, explain expectations, and outline the company’s obligations. With this information, all parties will know exactly what to look for from the get go. This will avoid misunderstandings and prevent unnecessary problems.