What is contract management?

What is contract management?

Contract management is the overseeing and analysis of contracts within an organization that have been created between clients, partners, suppliers and employees.

If a contract is going to deliver a successful outcome, it must be effectively managed from start to finish. Good contract management will improve the chance of successful contract delivery and provides a profitable outcome for your business.

The contract management process includes:

• Storing and organizing individual contracts or collections of agreements
• Negotiating new contracts and terms
• Ensuring that parties comply with the terms and conditions
• Analyzing contractual data and progress
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Explore all stages of the contract management process in our CLM hub.

Contracts can be standardized and straightforward, or highly complex and intricate. But either way, all contracts need effective management to continue delivering the desired outcomes on time and in budget.

If contract management is completed to a high standard, it can enhance performance while also minimizing risk. However, it can be challenging for businesses that need to manage hundreds or thousands of contracts at once.

Why is contract management important?

Every company uses contracts. They are legal agreements that ensure each party knows what is expected from them in their commercial relationship, and mean that either side can be held to account if they don't deliver on their requirements. But agreeing and signing a contract isn't the end of the story.

Contract management is important because primarily, it reduces the legal and financial risk for the business. When completed correctly, it will identify any errors or hazardous provisions, and makes sure that everything follows both corporate and regional laws.

By regularly managing their contracts, businesses can also improve inefficient processes and avoid costly mistakes by analyzing the progress of a contract, who it is assigned to, and any important contractual dates.

What does a contract manager do?

A Contract Manager or a legal professional's role in contract management can be incredibly broad. For example contract management may involve working closely with the parties involved in each contract, making sure they generate the expected benefits for both sides.

A business can employ a specific 'Contract Manager' (a job role commonly found in construction projects) or a legal professional or team can complete the contract management process. This employee owns the contract on behalf of the organization and they work to ensure that each contract is meeting its stated objectives.

Once the contract has been signed, it is the responsibility of the contract manager to make sure it is achieving what it was designed to. Throughout the life of the contract, it will need reviewing and revising to identify opportunities for business process improvement.

Contract managers tend to act as the main point of contact between a business and other parties, and they are responsible for keeping track of deadlines and deliverables. They will need to continuously monitor the execution of work, confirming that it complies with both internal procedures and industry standard. This can lead to some difficult discussions if a party is performing poorly or if they are breaching contractual terms.

What is the contract management process?

The contract management process can vary between business sectors and the type of contract being used. However, we've included the key stages of contract management that can be applied to all businesses.

1. Creation: During the contract creation phase, the parties gather the required information and documents to define the terms and conditions, clauses, and important dates for the new agreement.
2. Negotiation: The negotiation stage of contract management will involve a draft contract being passed backwards and forwards between the parties to create amendments until everyone is satisfied with the final agreement.
3. Approval: When the negotiations are complete, the parties will then sign the contract to show their approval to the provisions.
4. Executing: Both parties are now bound by the terms of the contract. Monitoring compliance will be an ongoing process for the lifetime of the agreement.
5. Management and renewal: After a contract is executed, it is managed and securely stored. CLM solutions typically offer a centralized repository, simplifying the process of locating any contract.
6. Reporting and auditing: Businesses use the reporting stage of the CLM process to extract relevant data from their contracts, identifying trends and uncovering key insights.
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Explore all areas of the contract management process in more detail in our CLM Hub.

What is contract management best practice?

Effective contract management can mean juggling many things at once, especially when you are going through the process with hundreds of contracts at once. But when it comes to contract management best practice, there are some simple things firms can do to improve their operations and make contract management much easier.

Firstly, businesses should digitalize all of their contracts. By storing them securely online, they can be accessed at any time and from any location, providing you have the correct security level. Digitisation can also save a corporation time when checking terms and conditions, as it can be completed remotely with search tools, saving hours from a manual contract review.

Secondly, communication between all parties should be regular and useful. Entering a contract is the beginning of a business relationship and, like all relationships, it requires effective communication. Set guidelines around how regularly meetings should be held between the parties to flag any potential issues or opportunities.

KPIs can also be helpful in shaping the communication between the teams. Not only is it critical to measure outcomes, but it can also help to establish a framework; highlighting any problems that need to be discussed.

Finally, utilize contract management software. Intelligent tools like Summize have transformed contract management by simplifying and speeding up the process of managing deadlines and deliverables, reducing human error and decreasing risk.

“Summize has allowed us to have a cleaner contract repository, better handling of supplier renewals contracts, better ability to pull data on legal risks and obligations in aggregate.”

Rosie Hawkridge, Legal Counsel at Littlefish.

What is contract management software?

Contract management is a function that can generate huge benefits for a business, but there is no denying that it can be very complex and time consuming. Businesses should explore which contract management practices could be automated using tools like Summize.

These tools will allow users to analyse each contract in detail, identifying key dates and important clauses, and displaying the lifecycle status of each agreement. Contract management software also shows which contracts are assigned to each user and tracks their progress, creating actionable insights.

‍Contract management software is fast, secure and accurate; saving your business time and resource. Summize understands your organization and works by your side wherever you do.

Exploring Summize's contract management software

Summize's contract management software helps businesses streamline their contract management throughout the entire contract lifecycle. By using Summize, businesses simplify the filing process, extracting essential data, enhancing workflows across the organisation and mitigating business risks.

• Intelligent insights: Instantly highlight risk and find opportunity with the intelligence of Summize AI to surface key contractual information into a simple, yet useful summary of key clauses extracted from your contracts.
• Enhanced decision making: Summize's AI-powered data engine gives businesses improved visibility of detail contained within contracts across the wider business.
• Streamlined workflows: Digitalize the tracking and management of contracts across the entire business with smart workflows. An integrated CLM solution your familiar tools (such as Teams, Outlook, HubSpot, Slack, Word) as the primary business user interface, making full business-adoption and success simple tasks.
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To understand more about Summize's approach to contract management software, book a casual demo with our team today. We'll listen to your existing contract challenges and your future goals, and we'll show you an overview of how Summize can benefit you.