Contract management software is a program that allows businesses to create and manage their contracts effectively. It gives legal sales, procurement, financial management, and administration contract teams a set of incorporated tools to effectively manage their whole contract management process as required. It’s also known to provide a secure opportunity where contract and contract-related data is stored and organized for easy access and reporting.
The main goal of investing in contract management software is to reduce the risks associated with the handling of contractual agreements while increasing the pace of contracts and their efficiency in a compliant and secure manner. Proper management of the software system minimizes financial risk, among other things.
It also allows an organization to do away with time-consuming and manual approaches to managing contracts.
Phases of the contract lifecycle
There are various stages of the contract lifecycle.
Allow me to expound
- Outreach stage
The outreach stage is where the contract lifecycle starts. All parties to be included in the contract will communicate their demands and expectations at this time. It is of paramount importance that intended partners be upfront about their desires, as ambiguous demands may cause the contract to be delayed.
Contracts are normally proposed by one party to the other. One party will identify a growth opportunity and consider various options, in regards to who they can partner with. Once they come to a concrete decision, they will reach out to the party to see whether they are interested in the offer.
Apart from potential growth opportunities, pre-existing arrangements, such as the end of a current contract, can also reveal the intent to reach out for a renewal of the agreement. In this case, when sending a request, attach any accompanying documents that are crucial to the contract terms to help in negotiations.
- Drafting
Once parties have laid the groundwork and communicated their demands and expectations, the drafting of the contract commences. The parties, through the guidance of their legal team, will come up with mutually beneficial terms and conditions.
A contract can be written by a contract manager or other individuals with the necessary authority and not just by a lawyer. At this point, remembering who initiated the deal and who is signing is crucial. The draft also needs to outline the facilities to be provided and any other conditions settled upon clearly.
- Seeking approval from the necessary authorities
Going through this stage depends on the company culture, among other things.
Before going for negotiations and finalizing the contract, some companies expect to look at the contract especially if the contractual agreement will involve dealing with a department and not necessarily the entire company. As such, the department might need a manager’s approval or have audit procedures before going into further negotiations.
In such a case, contract management software will help streamline and hasten the approval process. The contract manager needs to set up an approval workflow in a contract management platform so that whoever wants to approve the contract can receive real-time notifications, allowing them to suggest amendments before moving to the next stage.
- Review and negotiation stage
Most parties are overly excited about the onset of a contract signing. The lucrative growth opportunities are a time when each party wants to shine and showcase their million-dollar idea. Before the initial contract drafting, the intended partners will research, plan, and prepare well. Unfortunately, no amount of research or planning will guarantee a perfect first draft.
For this reason, a review and negotiation stage is imperative.
During negotiations, the parties involved should be transparent and confident on the foundation of the contract. Anticipating the needs of the other party prior to the discussion streamlines the process and establishes a solid base for long-term partnership.
During the redlining process, it is best to use contract management software as it helps both parties showcase their amendments in real-time. This ensures efficient collaboration and faster negotiations.
- Execution
The execution stage is where parties sign the contract, making it legal and actionable. It is the easiest part of the contract lifecycle.
The only challenges that can arise during the execution of the contractual agreement are when some parties are on other errands in other countries or across the globe. Conventionally, obtaining signatures in such a scenario was difficult. E-mails were an option but not efficient enough especially when dealing with time-critical projects, and other parties are in a different time-zone.
Currently, many contract managers are solving such issues that can be solved with online signatures (e-signature). These e-signatures are also legally binding and allow for a fast contract signing process.
- Storage
After execution, companies are required to hold all contracts somewhere for easier referencing. Gone are the days when companies stored contractual agreements in desk drawers. Technological advancements led to the development of contract management software, which facilitates the efficient storage of contracts and any supporting materials. A contract manager can store corresponding metadata for each of the contracts to ensure a quick and accurate search.
- Management
Management is another crucial phase of the contract lifecycle.
Businessmen understand the difficulties that come with handling a large number of contractual agreements. These contracts need dependable storage with cloud storage for easier access and to prevent common blunders such as deletion by accident and unintentional alteration.
Contract management software helps with the proper management of contracts throughout the lifecycle. Apart from being dependable, it also allows contract managers to use automated alerts or send requests to appropriate parties, easing the day-to-day management processes.
- Renewal
Depending on the type and terms of the contract that was signed, the final stage of the contract lifecycle can differ. The renewal process can only be initiated when the parties have a positive relationship and want to continue doing business together.
In most cases, the involved parties will want to avoid going through the time-consuming process of creating a new contract. Instead, they will request an extension that, in most cases, mirrors the terms and conditions of the previous contract.
