Contract management best practices

Ineffective administration of contracts can cost organizations up to 9 percent of their annual revenue. After contracts are signed, there is a greater likelihood that problems will be addressed in a reactive rather than a proactive manner.

The proper administration of contracts can save between 30 and 50 percent, develop long-term partnerships with contractors, and improve the efficiency of project implementation. The following are thirteen best practices used while putting the required processes and checks for contract management.

Create well written contracts

Contracts that are written unclearly can cost businesses millions of dollars and put their customer base in jeopardy. Contract formation is made more difficult by regional and service-based variations in the contract provisions. The precise preparation of a contract typically takes legal teams several weeks or even months.



The amount of time and resources necessary to generate contracts can be cut down by establishing a centralized repository of standardized templates that are tailored to certain conditions and integrating these templates into lifecycle contract management systems. Creating templates ensures that resulting drafts are free of errors and comply with all conditions and legal requirements.

Follow the acceptance of the deal.

After creating the contracts, the legal, financial, management, and product teams each give their approval. This procedure can be made more efficient, and audit records can be kept by automating the workflows involved in the approval process. By drawing to the attention of approvers only the sections of the agreement that are unique, using technology to pre-approve standard agreement sections can shorten the time needed for approval.

Ambiguity in the list of approvers could result in lost approvals or security breaches if unexpected parties read a secret contract because of the lack of clarity. Increasing productivity while simultaneously reducing the number of mistakes made by defining separate approver responsibilities for various circumstances. In conclusion, software for digital signatures does away with any manual processes.

Establish KPIs that are unique to the contract.

After a contract has been agreed to, it is necessary to devise performance measures to monitor the progress and accomplishments of the agreement. Metrics show whether or not contracts are achieving the expected outcomes or whether or not the coarse adjustment is necessary.

Time spent on creating, approving, and fulfilling contracts can provide insight into the amount of efficiency achieved. Renewals are evidence of a healthy connection with the seller. Key performance indicators (KPIs) for contract execution, such as deadlines met, quality delivered, etc., indicate if the contract should be extended or whether a new vendor should be found.


Evaluate contract risks

It is essential to identify any potential dangers both before and after a contract has been issued. There is a possibility of dangers relating to finances (cost escalation) as well as schedules and features. Controlling compliance and regulatory issues is also necessary; a violation of customer data committed by a contractor could result in a significant amount of financial punishment.

To assess a contract’s risk quotient, translate macro risk criteria into micro-level factors. Past vendor data can reveal monitoring parameters.

Maintain a healthy balance between protection and availability

 The terms of a contract are typically kept private and are limited to a select group of employees. They have to be stored in a vault that is both secure and unbreakable. However, retrieving contracts shouldn’t be so complicated that they are unreachable to the parties involved. A central repository that is hosted in the cloud is available to everybody.

Constructing roles and groups, as opposed to individually granting permissions, is preferable. After that, users can be added with the permissions that correspond to them. Inactive users must be deleted, and illegal users must be reported as soon as possible.

Ensure That Contracts Are Effectively Communicated

 If the central procurement office of a company and the contracting agencies don’t communicate well, it can lead to missed opportunities, erroneous drafts, and broken partnerships. The typical, ad hoc method of relationship-building individuals employ is no longer productiv It is essential to establish communication guidelines, suitable team collaboration methods, and a list of key stakeholders who must always be kept informed. Also essential is establishing a list of key stakeholders who must always be kept informed.

It is necessary to incorporate these components into the contract lifecycle (before, during, and after the contract award) to ensure that stakeholders are informed of any document alterations or potential dangers.

Find productive solutions to conflict.

Problems are discovered throughout the process of evaluating KPIs and monitoring risks. Conflict may arise as a result of issues in communication between the teams. It is in everyone’s best interest to reach an amicable and speedy resolution to disagreements and claims as soon as possible.

The fact that it is not always evident who is accountable for finding a solution to a particular problem is one factor contributing to the situation’s complexity. You can divide up responsibility by establishing a task group for the resolution of disputes that includes representatives from both your organization and the vendor.