How Does Contract Lifecycle Management Work?
No matter how you slice it, every business transaction needs to be governed by a signed contract. The contract is what gives the business relationship legitimacy, and covers everything from an employer to employee relationship to a business to business (B2B) relationship. Contracts need to be in place regardless of the industry, where the two or more parties are located, or what the scope of the business relationship is. Even if there is an internship relationship in place and a student is providing labor in exchange for experience or college credit, that relationship still needs to be guided by a contract.
However, contracts are often created in a loose manner. Not all businesses realize the value of contracts, and even if they do have contracts, they are generally boilerplate and are not measurable in any way. Because of this, many businesses do not realize that a contract needs to have set KPIS that need to be met in order to analyze the efficacy of a contract. For example, if a business signs a contract with a supplier, there needs to be set KPIs in the contract which dictate how long the supply will take, who is responsible in the event of a delay, and how long the relationship lasts for. All of this needs to be tracked and measured, and in the event of poor performance, renegotiated during the contract newel process.
All of this, ideally, should be managed using a contract management software. This is true whether you only have a handful of contracts to manage or whether there are dozens of unique relationships you need to keep track of. Using a contract management system, you can house all of your contracts in a single place that is easily accessible to you so that you can continually review them for performance. This can be done using contract lifecycle management, which can help you in reviewing contracts and making sure that they perform well for you from when they are first signed to when they expire.
The contract lifecycle management process needs a standardized contract template to work to govern each type of relationship. For example, a supplier relationship looks nothing like an employment relationship and you cannot have the same contract governing these disparate types of relationships. In fact, you need a separate contract entirely for every different type of contract. However, there are certain standards that you are going to want to set when it comes to the efficacy of your contracts. These will be to be created based on data and knowing what works and doesn’t work for your business for each type of contract. Once you figure this out, you can use the contract lifecycle management process to manage all of your contracts and see which stage they are at. This prevents anything from being held up, whether it’s a stalled negotiation, a needed signature or a lack of performance on a contract that needs to be enforced.
By using the contract lifecycle management process, you can track all changes in a contract and see what is working and what is not. You can organize the contract negotiation and renewal process, tracking the performance and whether key KPIs are being filled, and overall add a strong level of organization to the process.