How to Efficiently Manage Contracts For the Long Haul
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Contracts are dynamic agreements, and managing a heavy contract portfolio requires diligence and a solid attention to detail. However, just because some contracts are limited in duration, this does not mean that the contract management process has to be so as well. In fact, for companies seeking to grow over time, it is important to have clearly defined long-term objectives and to establish a contract management process that is in accordance with them. Here is how to manage contracts for the long haul:
Have a Plan
First and foremost, there must be a strategic plan put into place. Of course, the detail and scope of any plan will depend on how important a company's contracts are to its future growth. But, even if the contracting facet of the business only plays a minor role in the overall operations, there is no way around the fact that any contract can have a major effect on the company budget. As a result, companies must include an assessment of their contracting objectives and determine how best to accomplish them in a way that supports other aspects of the business’s operations. It is important for this to be considered early on so that it can seamlessly develop along with everything else.
One of the reasons that contracting can be so problematic is that there often multiple contracting lifecycles occurring simultaneously. This means that someone is always embroiled in contract negotiations, drafting, renewal, or termination. It simply doesn't make sense to keep trying to reinvent the wheel. After a few contracting cycles, it should become apparent which terms and clauses work for the company and which ones should be abandoned. After a few rounds of trial and error, the team can then make recommendations to create a few templates which can serve as a better starting point than beginning completely from scratch.
Invest in Technology
As soon as a company begins to contract with other businesses, one of the most important investments the firm can make will be implementing a dynamic contract management solution. Technology is constantly evolving, and it is important to select a solution that will evolve with it. In addition, many companies may start off with a small portfolio that will suddenly double or triple, and thus it is also wise to invest in a solution that has the ability to adapt to your company’s unique business needs.
Institute a Review Process
In addition to establishing an online repository for the contract portfolio, it is important to think about how the portfolio and the contracts within it will be reviewed. Managing a contract on a day to day or month to month basis will likely be necessary for certain types of agreements. However, other agreements may only require periodic oversight and review. Thus, for many companies, it may make sense to institute a broader review process that is conducted on a quarterly, biannual, or annual basis. The more streamlined this process becomes, the easier it will be to keep a handle on the portfolio over the long run.
Obviously, the goal is to manage contracts for the long haul, but the reality is that circumstances sometimes change such that adaptations are necessary. Rather than rigidly adhere to one way of doing things, it is important to embrace change and occasionally modify the way things are being done. This flexibility will inevitably make the contracting process a lot simpler, as resisting change. whether due to fear or cost concerns, often ends up causing more problems.
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