One of the most important parts of running a successful business is ensuring that your contracts are legally binding and enforceable. However, managing your contracts can be a daunting task. From drafting to executing to tracking, there are many tasks involved in making sure your contract lifecycle management processes are up to snuff. Even more so when you have multiple vendors and subcontractors. To help you get a handle on this, here are some best practices for managing the contract lifecycle.
Understand the different stages of contract management
To avoid the headaches and stress of contract lifecycle management, it’s a good idea to understand what each phase entails. There are a few stages to consider, such as the proposal stage, the deliverables and services stage, and the exit. Knowing how these phases work and how to manage each stage helps you to successfully manage your contract.
Start with the proposal stage
The first stage of contract lifecycle management is the proposal. This is when you submit the first round of proposals to your vendors and subcontractors. This stage involves an initial overview of the project, requirements, and any questions. Ideally, you will begin preparing this proposal prior to accepting the initial proposal that a vendor or sub-contractor sends.
Also, make sure to list the dates that the proposal will be due.
Set expectations for your vendors and subcontractors
It is your obligation to inform your vendors and subcontractors that you expect them to be paid in full for any work done, and not to simply throw in the towel if they don’t receive payment. Giving yourself a grace period to allow vendors and subcontractors to make good on payments can be beneficial for your company’s cash flow, but just give yourself a warning and don’t make exceptions.
It is important to set your expectations upfront so you can help both vendors and subcontractors stay motivated.
Create an effective contract lifecycle management system
It’s easy to create a sloppy and incomplete contract. This is why creating an effective contract management system is key to keeping your business moving. Even the smallest changes to the document can cause your contract to become invalid, so it is important to make sure that you’re staying on top of things.
To create your contract management system, you will want to establish and adhere to the right channels and processes. This means incorporating processes in your workflow. For example, you can have a contract read before it is signed or reviewed before it is executed. Or, you can have specific people review the contract before it is signed. Or, you can have your attorneys review the contract before it is approved. Implementing contract lifecycle management software can be very helpful in keeping track of the different stages of contract lifecycle management so that nothing falls through the cracks.
Keep tabs on your contracts with a contract dashboard
One of the best parts of running a business is having the freedom to expand and contract without worrying about your vendors or subcontractors. This is especially helpful when it comes to handling subcontracting and outsourcing. Being able to change suppliers and subcontractors on the fly is a big asset in ensuring you’re not having to spend too much time tracking and maintaining contracts.
Fortunately, there are many different contract lifecycle management options that automate many of these tasks. These tools often make it easy to keep track of contracts and to find the details you’re looking for when updating, negotiating, or revising contracts.
Additionally, contracts are often reviewed at key milestones or milestones along the way.
Reviewing your contracts to avoid breach of contract
Your contracts are your agreement with vendors and subcontractors. It is in your best interest to make sure that everything that is contained in them is up to snuff. This means you should review and update your contracts regularly. This will enable you to know when things change. This will also help avoid conflicts down the road.
Copies of your contracts should be prepared in advance
This is a common practice, especially among big organizations. A lot of companies prepare copies of their contracts for subsequent reference. However, small and medium-sized companies don’t do this. In fact, they may have no contract at all. This puts you at a disadvantage as you are unaware of your obligations in your dealings with these vendors.
Creating a system for termination of contracts
Creating a contract termination system is critical for keeping all of your vendors happy, both during and after the contract period. For larger organizations that require extensive contract monitoring, this may mean hiring an outside service to manage the contract termination process.
There are many reasons to have a good relationship with your vendors and subcontractors. Ultimately, it is about business. If you maintain good relationships with your vendors and subcontractors, they will do business with you again. When this happens, it saves you time and money. Taking time to get to know your vendors and subcontractors will also lead to other business benefits like better supply chain management and more effective bidding and tendering.
Ultimately, building a good relationship with your vendors and subcontractors will also help you avoid surprises, expensive disputes, and other unpleasant business events. This relationship can best be managed through contract lifecycle management software, which can help to automate the contract terms of these relationships to make sure that both parties are getting the most out of the contracts they have created and signed together.