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What Is Contract Management? Everything You Need to Know

by | Mar 6, 2023

If you are an accountant, you likely deal with contracts regularly – supply agreements, leases, SaaS subscriptions, and various other commitments and obligations. How does your company organize all of these contracts? Is the system your organization is using for contract management system working?

What is contract management?

Contract management is the process of centrally monitoring an organization’s contracts to optimize the operations and financials of an organization. This can include everything from drafting the initial contract to issuing payments and enforcing the terms of the agreement. Some aspects to consider when exploring a good contract management solution include:

1. Understand the needs of both parties

The first step to successful contract management is understanding the needs of all parties involved. What does each party want to get out of the agreement? Once you have a good understanding of both sides, you can begin drafting the contract.

2. Create a clear and concise contract

The contract should be clear and concise, laying out all of the terms of the agreement in plain language. All involved parties should review the contract and make sure they understand everything before signing.

3. Manage expectations

Once the contract is signed, managing expectations is critical to successful enforcement. Make sure all parties know what is expected of them and when things are due. Stay in communication and address any concerns as they arise.

4. Keep accurate records

It’s also important to keep accurate records. This includes everything from drafts and revisions, signed copies of the contract, and correspondence between the parties. If any problems arise, use the retained documentation to help resolve them.

5. Enforce the terms of the contract

Lastly, you need to enforce the terms of the contract. This includes monitoring activities related to the contract, making sure payments are made on time, and ensuring all parties are upholding their part of the agreement.

Good contract management is a critical to successfully running any business. Because an organization may be handling up to hundreds of contracts at any given time, a contract management software is a good resource to keep things running smoothly. With the rise of working remotely and the migration of business data and applications to the cloud, it makes sense contract management is also being digitized.

What is contract management software?

Contract management software is an IT application to help businesses create, store, and track their various written agreements, arrangements, and obligations. It can also be used to manage the contract lifecycle, from drafting the initial contract to issuing payments and enforcing the terms of the agreement.

When researching contract management software options, you should look for one with the ability to:

  1. Create and store contracts
  2. Track the contract lifecycle
  3. Manage payments
  4. Monitor contract terms

Contract management software can help businesses centralize and streamline their contract management process. It can also help businesses avoid mistakes and ensure their contracts are kept organized and up-to-date. By using contract management software, you can reduce the resources necessary for your contract management process and focus on more important things.

The right solution will help monitor all the organization’s contracts in one place. It can also assist with the automation of key functions in the contract lifecycle, from creating contracts to issuing payments. Finally, as a result of automation organizations can reduce errors, be more efficient, and save time and money.

What is the contract lifecycle?

The contract lifecycle refers to all the phases of a contract, from creation until completion and then maintenance. Drafting, reviewing, editing, approval, and execution are significant steps in the life of an agreement or contract. After a contract is executed, the terms and contracted activities must be monitored to ensure the company is submitting or receiving payment, goods, or services per what was agreed upon by all parties.

What is contract lifecycle management software?

While contract management software helps businesses store and track their contracts, contract lifecycle management software is a subsection of contract management software that assists with the steps in the contract lifecycle, from drafting the initial contract to issuing payments and enforcing the terms of the agreement. Both contract management software and contract lifecycle management software are critical tools for businesses that rely on contracts. However, contract lifecycle management software is designed with the features and functionality to complete various tasks in the contract lifecycle.

Summary

The vast majority of organizations have several agreements and obligations which must be monitored and enforced to optimize operations. Centralizing the contract management function with a software solution can increase efficiency and promote financial success. Additionally, organizations that rely on contracts for much of their business can further benefit from contract lifecycle management software.

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