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Contract management means good organization and customer support and therefore plays an important role in today's corporate environment. No company should therefore neglect its contract management system.
What is contract management?
Contract management comprises all steps of contract processing within a company. This starts right at the time of contract negotiations. It then continues with the initial preparation of the draft contract, through to necessary adjustments, the signing and finally the subsequent administration of the contract.
The purpose of contract management is ultimately to provide an overview of all contract documents that a company has signed or will sign.
Contracts are the legal binding between two parties and essential in business transactions, which in turn means that a successful entrepreneur must sign a large number of contracts. This is of course not enough, as it is only after signing that an essential aspect of contract administration follows: The contracts must be archived, supervised and analyzed in a structured way in order to benefit from the advantages of effective contract management.
The main aim is to be informed with whom, when and which contract was concluded. In addition, the essential deadlines must also be observed: How long does the contractual relationship last? When does it have to be renewed and what are the corresponding contractual obligations and compensation obligations?
This makes it easy to see that contract management involves significantly more tasks and functions than you could assume at first.
Contract controlling
Another aspect of contract management is so-called contract controlling. This involves monitoring the components of the contract from a different perspective. It involves risk management and the assessment of the risks arising from the contract. Specific questions such as what obligations could the company violate, or what happens if the contractual partner does not fulfill its performance obligation, are discussed here.
Contract controlling is therefore probably one of the most important parameters of successful contract management and yet often fades into the background.
With the help of contract controlling, a company can prepare for potential failures or other difficulties by reliably preparing for potential failures or other difficulties and thus ultimately counteract high sales losses.
The typical tasks of contract management
Some tasks that are important when managing contracts include:
- Comparing offers from contract negotiations
- The creation of contract templates based on previous completed deals
- Intensive review of contracts
- Monitoring and compliance with contractual obligations
- Structuring the contract components and providing a clear overview for all departments involved in the respective contract
- Deadline and deadline checks
- The storage and archiving of contract documents
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Why is contract management important?
Efficient contract management saves immense time and increases the organization of contracts. By archiving contracts, an efficient structuring of data can be established, from which a wealth of valuable information can be obtained.
Better collaboration
Above all, contract management generates a high degree of transparency within the company, which thus results in better cooperation within a team and also across departments.
As soon as a functioning contract management system has been integrated into the company, every employee who is involved in the specific contract is ideally up to date with the latest developments and can react appropriately and promptly to any changes or tasks to be fulfilled.
Different colleagues from different departments (Legal, Sales, Compliance,...) often work together on a draft contract. As soon as a reliable contract management system has been established, which comprehensively informs all persons involved at all times, the risk of misunderstandings, bottlenecks and frustrations can be avoided and, as a result, a general increase in productivity can be achieved.
Productivity increase
Contract management is closely linked to an increase in operational and financial performance and a parallel reduction in financial risk. Companies are under increasing pressure to cut more and more costs while increasing their productivity.
One point that has a significant impact on success is the proper management of contracts. For many companies, this is exactly where the potential for significant improvement lies. Since contract management is a very time-consuming task, it is a good idea to use efficient and automated contract management software in order to save countless staff hours and automate repetitive processes.
Reducing chaos and confusion
The introduction of a functioning contract management system usually removes a lot of clutter. It is no longer necessary to look through tons of email attachments to find a specific document, meaning that working time can be used for other quality services. There is also no risk that important deadlines are forgotten or missed in order to cancel, extend or possibly renegotiate contracts.
The goal of contract management
The ultimate goal of appropriate contract management is to increase business management and therefore to maximize profit. Working more economically saves enormous amounts of time and money, which is a big step towards the desired goal. In addition, a structured and frustration-saving way of working promotes general employee satisfaction and more effective cooperation between departments.
