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These 5 Contract Management Best Practices can do Wonders!

These 5 Contract Management Best Practices can do Wonders!
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What is Contract Management?

Contract Management is the management of contracts businesses sign with their employees, customers,  partners, and vendors. The person in charge of contract management is a contract manager who takes care of the whole process of negotiating, supporting, and managing contracts.

Role of Contract Management in Procurement

Be it in any business; regular institute management is a critical part of business administration. In procurement, it plays a vital role in ensuring contracts are duly acknowledged and signed by both parties. Furthermore, the process helps avoid any risk involving fraudulence.

Learn More: Zycus iContract Solution;

Top 5 Contract Management Best Practices

Below we share the five best practices adopted by best-in-class organizations concerning contract management.

First of all, create dynamic contract repositories that reflect operational requirements

  • Include escalation and de-escalation clauses during contract negotiation and link these to market parameters like foreign exchange & commodity indices
  • Set a system of alerts and reminders for the specific escalator/de-escalator clauses linked to commodity or Forex indices
  • Track and measure the compliance and if possible, quantify the savings accrued from these contracts

Secondly, define, communicate, and effectively manage specified contract metrics

  • Link contracts to spend to establish parameters of measurement
  • Establish benchmark parameters concerning peers and industry
  • Communicate and elicit inputs from concerned decision-makers while determining parameters
  • Track and measure contract compliance and utilization on established parameters and benchmarks

Thirdly, institute regular contract audits for creating opportunities

Improve visibility in the following areas-

  • Currency change and conversion
  • Volume discounts
  • Buyer turnover
  • Clerical errors
  • Carryover provision for replacement  contracts

Fourthly, standardize and accelerate contract authorship through contract template and clause library

  • Define mandatory/nonmandatory clauses
  • Define templates and clauses based on geographies and categories
  • Ensure continuous updates of all clauses and ensure access to relevant stakeholders to modify templates

Finally, create a standard workflow for collaborative authorship and contract negotiation

  • Create a standard workflow with set protocols and procedures
  • Define hierarchies for the approval process
  • Ensure access to all necessary stakeholders during the contract authoring and amendment process

In addition to the above best practices, we recommend that you keep an eye on the recent trends and industry best practices. Because of your compliance with contract management legalities, you can save a fortune for your company. Furthermore, effective contract management adds reputation to an organization. It seems like you have no two way about ignoring contract management and hence delay no longer to start now.

Related Read:

  1. Blog – 10 Best Practices for Procurement Manager
  2. Blog – Ultimate Guide to Contract Management: Benefits & Best Practices
  3. Blog – The Greatest Contract Ever Signed
  4. Contract Management Software
  5. Analyst Report – Contracts as a Connector – The case for improved contract management
  6. White Paper – The Why, What & How of Contract Management
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