Contract Management: What You Don't Know Can Hurt You
Tracking & Monitoring
Consistency may be the most important facet of any management process. There must be a consistent strategy, consistent leadership, and consistent oversight. Of course, this is particularly true for contract management, as failing to pay attention to contractual obligations can have calamitous consequences. For the most part, when it comes to contract management, it is precisely what you don’t know that can hurt you the most, and here is how:
Don't Know Where Contracts Are Or Where They Stand...
If the management team does not know where a contract stands at any given moment, or worse, loses track of where the actual contract is even located, this is a recipe for disaster and a breach is almost inevitable. Sure, it may not be easy, or even feasible, to stay on top of every aspect of every contract, but there has to be some kind of system in place that will facilitate such oversight. Some companies continue to (inexplicably) rely on spreadsheets to oversee their contract portfolio, but even this requires a fairly active approach to avoid missing something important. The only way to consistently know where a contract is and monitor where it stands is to utilize dynamic contract management software.
Don't Know Contract Milestones
Even if your company has a centralized contract repository and the team has divided the portfolio so that someone has a general sense of what is happening for a certain batch of contracts, this method still relies heavily on the strength of a person’s memory. Obviously, humans have to be involved in contract management, but it is usually best to automate a few things, like the reminders for key milestones at a minimum. It is crucial for a company to know about key milestones within any company contract well in advance so that the appropriate planning occurs and actions are gradually taken so that there is not a last minute scramble.
Don't Know Outstanding Debts Or Payments Are Missing
Contracts usually involve the exchange of money at some point, and payment plans are often tied to performance or established according to a set schedule that is outlined in the contract. Regardless of whether a company is contracting for the purchase of some good or service on the basis of credit, making monthly or quarterly payments for that good or service, or perhaps is the intended recipient of any exchange of funds, it is key to stay on top of all financial matters as they are supposed to occur. It is always more difficult to settle accounts retroactively, and as a contract progresses and problems are more likely to arise, the money may not even materialize.
Don't Know Renegotiation Periods Or Renewal Deadlines
In addition to monitoring payments, the contract management team must pay attention to special provisions within a contract relating to renegotiations, renewals, or cancellations to ensure that any possible cost savings are realized. If the team is bogged down by the management process and unable to act on these terms, thousands and even millions of dollars may be wasted having to find a new vendor or negotiate a new contract.
The Buyer's Guide to Contract Management Software
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The Importance of Unambiguous Contract Terms: Part 3