Contracts are part and parcel of any functioning business. Effectively managing agreements is critical for any organization, whether you’re part of a small business or a large corporation.
A contract management checklist can be invaluable as it helps you take all necessary steps when managing contracts. This article will explore the importance of contract checklists and provide tips on creating and using them professionally.
Whether you are new to contract management or an experienced pro, this article will provide valuable insights and information to help you better manage your contracts.
Table of Contents
Contract Initiation Checklist
Starting the contract management process is often challenging and time-consuming. However, the effort you put into this stage will dictate the quality and success of your contracts. Let these points guide your process in the contract initiation phase.
1. Identify the need for a contract
Determine what goods or services you need and whether you require a contract for a particular engagement. Some deals may only necessitate an informal agreement, while others need a legally-binding contract.
2. Develop contract requirements
Define the terms, conditions, and requirements your organization must include in the contract. Aim to be as specific as possible, as this stage will set the tone for the rest of the contract management process.
3. Identify potential vendors
Research and compile a list of potential vendors to provide the required goods or services. Select a vendor that would suit your needs and mesh well with your organization.
4. Request proposals
Send request for proposal (RFP) documents to potential vendors and specify the requirements for the contract. You may request general documentation or a more detailed technical proposal depending on what you want to see.
5. Review proposals
After receiving the proposals you commissioned from selected vendors, review and evaluate them to determine the best fit for your organization. You would do well to have pivotal people in your firm view the documents to ensure any contract signed meets company standards.
6. Select the vendor
Choose the vendor that best meets your organization’s requirements and begin negotiating the contract terms. After this point, you’ll enter the next stage of the contract management pipeline: approval and execution.
Contract Approval Workflow
Since contracts play a vital role in business operations, you must have a contract approval workflow to ensure efficient approvals and seamless executions. With this process set in place, you’d avoid wasting time and resources on unnecessary back-and-forth.
You can also avoid rogue contracts which haven’t been properly reviewed or gained all the required approvals.
A contract approval workflow contains all the steps and key persons necessary to review and approve an agreement. For most companies, these steps involve the same people or departments. For instance, a legal department checks if the contract makes legal sense, and a finance team verifies if the agreement is financially viable.
Here are the typical persons or teams who are part of the approval process:
- Department head: Typically, they approve requests to initiate a contract and review them to ensure they align with departmental goals and budget.
- Contract Administrator: In large organizations, a separate department manages all of the company’s contracts and ensures these documents meet the company’s standards.
- Legal team: To ensure your contract complies with industry and government regulations, you need a legal staff to review it. You can engage an external counsel to review your contracts if you’re a small company without an in-house legal team.
- Finance team: Someone from the finance department should approve your contract, especially if it involves monetary exchange. They will check if the document meets the company’s financial guidelines and are within the organization’s budget.
- Senior management: Large companies usually require CEOs or CFOs to approve large or extremely important contracts. For smaller companies, the president or owner usually oversees all contracts above a certain amount.
- Final signatory: The final person to approve a contract usually depends on its size and type. Smaller contracts within an approved budget may be signed by the department head or the contract administrator. Larger contracts above a budget threshold typically require the company head to sign off. Once the final signatory signs a contract, it becomes executable.
As seen in the image above, the contract approval workflow involves the following steps:
- Someone initiates the contract and creates the first draft, either with the help of a legal team or from a pre-approved template.
- Designated individuals from different departments review the contract and revise the draft as necessary.
- Once these key departments have reviewed and stamped their approval, a senior manager (who can also be the final signatory) signs off the document.
Download Free Contract Approval Checklist
To ensure your contracts seamlessly move from one department to the next, download our free contract management checklist, which involves the most crucial components of your strategy.
Contract Approval Checklist
You must create, review, and execute a viable contract that benefits all parties involved. Follow this contract checklist to implement successful agreements.
1. Draft the contract
Once you’ve selected a feasible proposal from a vendor, it’s time to create the contract. You may draft this document from scratch or build one with the help of a contract management template.
When drafting the contract, observe the following:
- Input accurate basic information such as the parties’ full legal names, contract title, and date
- Clearly define the contract scope and purpose, including deliverables, timelines, and each party’s obligations
- Include terms and conditions such as the start and end date, renewal or termination clauses, payment terms including amounts, penalties, confidentiality, non-compete or exclusivity clauses
2. Review the contract
Carefully review the contract to ensure that all terms and conditions are acceptable and accurately reflect the agreement reached with the vendor. Depending on your organizational structure, you may need multiple people to examine the contract specifics.
3. Obtain necessary approvals
Obtain approvals from relevant parties, such as your organization’s legal counsel or upper management. Larger businesses typically have a longer approval process than their smaller counterparts, so allot the appropriate time for this step.
This step on its own is a whole different process, which we’ll discuss in detail below.
4. Negotiate any necessary changes
Negotiate with the vendor regarding any changes or modifications you might need to include in the contract. These updates may include deliverables, pricing, timelines, and other relevant terms.
5. Execute contract
Sign the contract and ensure all concerned parties have a copy of the executed agreement. After this point, you will have to inform all relevant personnel from your organization who are central to handling the contract terms.
6. File and document the contract
File and document the contract properly for future reference and excellent record keeping. In addition to paper records, you should consider storing the agreement in a secure cloud storage service.
7. Communicate with the vendor
Establish clear lines of communication with the vendor to ensure that each party consistently meets the contract terms. Effective communication can spell the difference between successful and mediocre contract management.
Contract Tracking Checklist
Once the agreement is up and running, you must continue to track how it affects your organization. If particular components are not working for you, you may make adjustments to ensure the contract benefits your firm. Follow this contract checklist for tracking purposes.
1. Monitor performance
Track all metrics stipulated in the contract, which may include performance milestones, deadlines, and other key performance indicators (KPIs). Monitoring these figures will help ensure you’re on the right path.
2. Review and process payments
Examine and execute invoices and payments under the contract terms. Make sure to follow the schedule written in the agreement to avoid any complications or possible breaches of the contract.
3. Document any contract changes
Get any updates or modifications to the contract in writing and obtain the necessary approvals. Typically, one party may not modify any part of a contract without the express consent and acceptance of all other signatories involved.
4. Assess the contract’s effectiveness
Evaluate whether the contract meets the needs of each party as the agreement runs its course. Arrangements in business only make sense if they tangibly benefit everyone involved.
5. Prepare reports
Draft any necessary reports or documentation for internal stakeholders or external partners. Reporting is a crucial way to determine the viability and impact of an ongoing contract.
6. Maintain data privacy
Secure the contract and its contents by maintaining data privacy at all times. Failure to do so can open you up to legal disputes from other parties involved in the contract.
7. Renew or terminate the contract
Monitor the contract’s expiration date and remind the necessary people to renew or terminate the agreement. You may choose to renew the contract if its performance is acceptable. You could also end the arrangement if it does not benefit your organization.
Try Fill For Effective Contract Management
Contract management can be a tricky endeavor. There are plenty of things to consider, and neglecting even one could compromise your potential agreement. The contract management checklists we’ve shown you are a great start, but you can do better.
That’s where Fill comes in. As one of the leading eSignature platforms in the market, Fill provides users with powerful contract management features. Our convenient web app allows you to create, manage, and sign contracts effortlessly.
All documents you create with Fill are secure, legally binding, and easily accessible in the cloud. Try Fill now with a 7-day free trial.
