Problems are inevitable, which means organizations must be prepared for the unexpected and be able to adjust contract terms when needed. Avoiding unwanted surprises requires careful research and clarity of purpose in the actual contract.Ĭontract management requires a level of flexibility for both parties involved and a willingness to adapt contract terms to reflect any changing circumstances. During the pre-award stage, employees should focus on the reason for establishing the contract and if the supplier can fulfill the terms of the agreement.Īdditional consideration is needed to understand how the contract will work once awarded. The foundation for contract management relies on the implementation of successful post-award and upstream activities. The delivery of services is satisfactory to both parties.Īctivities that comprise good contract management.The organization encounters no contract disputes or surprises.The supplier is cooperative and responsive to the organization’s needs.The expected business benefits and financial returns are being realized.When a contract management strategy is successfully implemented, organizations can expect to see:
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Employees must be augmented with the presence of processes and software companions to satisfy increasing compliance and analytical needs. It isn’t enough that an organization has professionals in place to handle contract management. Elements of successful contract management We’ll discuss a deeper view of the process later. Those three basic stages are a simple way of looking at contract management in three phases, but the process is more complicated than that and can be viewed in more stages depending on how detailed a view you’re taking. This is where a lot of contract management and maintenance comes in. This includes all the paperwork to make the agreement final. The middle stage is when the process is awarded. This is all the work that takes place prior to a contract being given to someone, whether it be a business or an employee. There’s the early stages or pre-award phase. Generally, contract management involves a few key stages. These occasionally require management and alterations that help both parties. The precise wording of contracts is crucial to contract management.Ĭontract management also applies to managing different contracts with freelancers or employees. It’s a good idea to include a legal department or a lawyer in contract management discussions.
Effective contract management can ultimately create a powerful business relationship and pave the road to greater profitability over the long term, but only when managed correctly. When a contract is phrased poorly, one organization might lose countless thousands of dollars over a simple technicality they lacked the resources to identify. Contracts affect business profitability in a very large way due to the emphasis on revenue and expenses. When two companies wish to do business with each other, a contract specifies the activities entered into by both organizations and the terms through which they will each fulfill their parts of the agreement. Contract management proves to be a very time-consuming element of business, which facilitates the need for an effective and automated contract management system. Organizations encounter an ever-increasing amount of pressure to reduce costs and improve company performance. What is contract management, and why is it important?Ĭontract management is the process of managing contract creation, execution, and analysis to maximize operational and financial performance at an organization, all while reducing financial risk. If you’re unsure of how the contract management process works, it’s important to understand the basics. It’s not talked about much, but contract management is an important business topic. Other times, businesses need to manage contract agreements with other businesses. Some of these conversations will deal with contract management.
Managers interact frequently with employees, and some of those discussions and situations naturally relate to compensation. Managing contracts is an overlooked form of management.
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