Efficient contract management lifecycle strategies are essential for organizations to ensure that agreements are executed seamlessly, terms are adhered to, and business risks are minimized. The contract management lifecycle includes various stages from creation through execution and eventually termination or renewal, all of which require proper strategies to handle them seamlessly. Managing contracts effectively not only mitigates risks but also improves compliance, saves time, and reduces costs. Here is an overview of: (1) the stages of contract management; (2) the strategies that can be leveraged to optimize the contract management lifecycle; and (3) tools for implementing contract management.
1. Stages of the Contract Management Lifecycle
A typical contract management lifecycle consists of the following stages:
- Contract request and creation: This is where the process begins, and contracts are drafted according to organizational templates or specific requirements.
- Negotiation: During this phase, both parties negotiate the terms of the contract, ensuring mutual agreement.
- Approval: Once negotiations are complete, the contract is reviewed by stakeholders and legal teams for approval.
- Execution: The contract is signed by all relevant parties, making it a legally binding document.
- Compliance and monitoring: The organization ensures that both parties meet their obligations as specified in the contract.
- Amendments/renewal/termination: Depending on the outcomes of performance, the contract may be renewed, amended, or terminated.
2. Strategies for Efficient Contract Management
Standardization of Templates
A robust strategy to improve contract management is the use of standardized templates. Standardization ensures that all contracts align with organizational policies and legal requirements, which reduces the time spent drafting new contracts. Moreover, it minimizes the risks of non-compliance by incorporating essential clauses consistently across agreements. Third-party contracts must be assessed and edited by the legal team to align with the company’s standardized language and terms. This process of reviewing and editing helps ensure that deviations are addressed, and all necessary provisions are included to protect the company’s interests.
Establishing a Centralized Repository
A centralized contract repository ensures easy access to all contractual documents, supporting compliance and risk management. If set up properly, centralized repositories can enhance visibility into the lifecycle of contracts, enabling stakeholders to track key dates, deadlines, and obligations in real time. Using a repository can help ensure that contracts are easily retrievable, and data is organized systematically.
In order to use a centralized repository successfully, a contract management team must ensure that all contract terms are entered into the database in a consistent and reliable format. They not only need to be accurately represented but also be presented in such a way as to be consistent across contract entries – so that legal team members can analyze and compare information across different contracts. For example, a contract database may have a space to include the value of the contract. One contract might list the value as $20,000 per year and another as $5,000 per quarter. Here it is imperative that the team entering the information in the contract management system show the values in a consistent way (likely the annual value) so that the monetary value is represented accurately. Without expert analysis, inconsistencies like these may be overlooked, leading to misrepresentation of financial obligations. By having skilled professionals cross-check deliverables and payment terms, businesses can prevent costly misunderstandings and ensure the accurate interpretation of contract values across all agreements in the repository.
Automating Workflows
Manual processes in contract management can be time-consuming, and some processes can be automated for greater efficiency – such as the contract approval process, notifying stakeholders of deadlines, and tracking key performance metrics. Automation tools can also facilitate collaboration, allowing different departments to communicate and manage their parts of the process proficiently.
Risk Management and Compliance
Effective management includes thorough risk assessment and ensuring that your database has clear and consistent information so you do not end up with contract liabilities that you are not aware of. An essential strategy is to conduct risk assessments during the creation and negotiation stages to identify potential legal, financial, or operational risks. Incorporating compliance checkpoints throughout the lifecycle ensures contracts are adhered to and that organizational or regulatory obligations are fulfilled.
Clear Communication and Collaboration
Communication is essential. All stakeholders involved, from legal to procurement teams, must be on the same page. Using collaborative tools that allow real-time updates, version control, and communication can improve coordination across teams, helping to address potential issues early on and avoid misinterpretation of contract terms.
3. Tools for Optimizing Contract Management
Contract Lifecycle Management (CLM) Software
CLM tools are designed to automate and manage each stage of the contract lifecycle. Some of the features may include:
- Automated alerts: CLM software can set reminders for key dates, such as contract renewals, deadlines, or milestones, reducing the risk of missed obligations.
- Version control: Maintaining clear records of contract revisions and approvals helps avoid confusion, ensuring that only the latest version is in effect.
- Audit trails: CLM software keeps a record of all activities within the contract lifecycle, ensuring transparency and accountability.
While there are many popular CLM tools like DocuSign CLM, Icertis, and Agiloft, it is important to remember that a project team needs to create, manage and update the data in order for it to be helpful and accurate.
Electronic Signature Platforms
E-signature tools like DocuSign, PandaDoc, and Adobe Sign are helpful for ensuring that contracts are signed quickly and securely. They provide systematic ways to handle contract execution, ensuring that no bottlenecks occur when obtaining signatures from different parties.
By implementing standardized processes, automating workflows, and leveraging powerful CLM software, organizations can ensure that contracts are managed in a way that minimizes risk, reduces time, and enhances overall compliance. Transitioning to a more efficient contract management process brings both operational and financial benefits, allowing organizations to maintain stronger relationships with clients and vendors while protecting their interests. For contract management support, contact Baer Reed today.
Mr. Reyes graduated with honors from the Ateneo de Manila University, where he received the Procter and Gamble Student Excellence Award. He obtained his Juris Doctor degree from the Ateneo de Manila School of Law. During law school, Mr. Reyes was part of the Philippine delegation to the Willem C. Vis International Commercial Arbitration Moot held in Vienna, Austria. He was also a member of the Ateneo Society of International Law and the St. Thomas More Debate Society. He completed his internship at the Public Attorney’s Office. He wrote a thesis entitled: “To Kill A White Elephant: An Analysis of the Fiduciary Exception to the Corporate Attorney-Client Privilege”. Mr. Reyes is admitted to practice law in the Philippines and the State of New York.
Ms. Lardizabal-Manzano is a graduate of San Sebastian College-Recoletos, where she earned her B.A. in Political Science. In 2003, she received her law degree from Lyceum of the Philippines and was admitted to practice law in 2004.
Matthew Hersh earned a B.A. in Political Science from Columbia University in 1990 and graduated cum laude from Georgetown University Law Center in 1999. He also holds a master’s degree in international relations from the Georgetown University School of Foreign Service.
Cap. Avi Levak (Res. IDF) graduated from from Israel’s prestigious Ben-Gurion University of the Negev with a Bachelor of Science in Computer Science and Mathematics. He is also a Leadership and Communication coach trained in TuT coaching by Alon gal in Israel. Avi specializes in high-level, in-depth analysis of business and client needs, within systems and software strategy and architecture.
Ms. Tyler graduated cum laude from Georgetown University and received her law degree, cum laude, from Georgetown University Law Center. During law school, she interned at the United Nations Economic Commission for Europe. She also worked on The Tax Lawyer journal and was a member of the award-winning Barristers’ Council Mock Trial Team. Ms. Tyler is admitted to practice law in the State of California and the District of Columbia.
Ms. Cruz-Anonuevo graduated cum laude and top nine in her batch from Miriam College with a degree of Bachelor of Arts in InternationalStudies. She obtained her Juris Doctor degree from Ateneo de Manila University School of Law in Rockwell. During law school, she interned in Rivera, Santos, Maranan & Associates. She was also part of Ateneo’s Labor Law Bar Operations. She wrote her thesis on, “Stealing Privacy: Limitations on Media’s Photographic Invasion.,” Ms. Cruz-Anonuevo is admitted to practice law in the Philippines.
Ms. Aquino-Batallones obtained a Bachelor of Arts degree in Development Studies (with Minors in Global Politics and Hispanic Studies) from the Ateneo de Manila University. In 2011, she received her Juris Doctor degree from Ateneo de Manila University School of Law. During law school, she interned at Romulo Mabanta Buenaventura Sayoc & de los Angeles then became an intern of Ateneo Legal Services Center’s Clinical Legal Education Program.
Mr. De Guzman graduated from San Beda College with a degree of Bachelor of Arts Major in Economics and received his law degree from San Beda College of Law. He is multilingual and is fluent in three languages: Chinese, Filipino, and English. He was admitted to the Philippine Bar in 2003.