The importance of contracts in the business world should never be downplayed. Apart from implementing a contract, you need to make sure that the contract you have is properly managed. The best way you can do this is by implementing a contract management framework.
If this is your first time encountering one, this article will help explain things to you in more detail. Here’s what you need to know.
Key Components Of A Contract Management Framework
There are plenty of elements that you can include in a contract management framework. But if you are looking for a contract management framework example, these are the ones that you should not forget to include:
Contract repository
Organizations need to be able to properly store all their contracts in one central location, even when the project has been completed. But how can you manage all of your contracts if they are all over the place?
The good news is that you should have a contract repository so you can store and organize your contracts. This should also include easy access, security features, and version control. By having a repository, you can properly manage and track your contracts, as needed.
Contract lifecycle management processes
The next component that should be part of your framework is a contract lifecycle management process for reviewing, approving, and executing contracts. In this component, you should be able to evaluate the terms and conditions, risks, and necessary approvals of the contract.
Roles and responsibilities of the contract management team
As mentioned, your contract management framework should include clearly defined roles and responsibilities that each individual involved in the contract needs to meet. Detailing these will ensure that each individual knows what is expected from them.
It also holds them accountable for their actions, in the event that they failed to meet their roles.
Performance metrics and reporting
The best way to measure metrics and report on these metrics is to conduct regular monitoring and management. If there are some changes or amendments that need to be done to the contract, these should be included right away.
At the same time, any reports need to be generated and regularly shared across parties so that progress can be tracked. Each side also has the chance to identify potential risks or issues and make necessary changes to address them.
Contract management software tools
There are tools that you can use to help you monitor your existing and completed contracts. By using these tools, you no longer have to do things manually. Every single step can be automated by the contract management software you chose to use.
Challenges And Solutions In Contract Management Framework Implementation
Following a management process for your contracts may also lead to some challenges. This is why it is important that you are aware of such challenges and be aware of how you may be able to remedy them. Here are some that you should know about:
Lack of resources and budget
The common challenge that organizations face in their management process is not having enough resources and budget. Unfortunately, this causes delays and some inefficiencies. To deal with this problem, some organizations decide to outsource their contract management process to a third-party provider.
You can also opt for using contract management software to automate the entire process. This also limits human error since you don’t have to hire someone to do it for you.
Difficulty in standardizing contract terms and language
Contracts are complex documents that usually use legal jargon that not everyone understands. Fortunately, there are tools you can use that offer a contract management framework template to simplify things and make them easier to understand.
Limited visibility into contract obligations and risks
Software tools are available for providing real-time visibility into the different risks and obligations involved in a contract. This way, you become aware of your contractual obligations and you don’t miss anything.
Managing contracts with multiple vendors and stakeholders
If you are dealing with several vendors and stakeholders, it can be difficult to keep up with your contracts; especially if you are handling things manually. This is where software comes into the picture. By using these tools, you can manage all your contracts in one place and make sure that you achieve your goals.
Mitigating legal and regulatory risks
One last challenge that is common in contract management is mitigating legal and regulatory risks. Thankfully, these tools come with features that monitor a contract’s compliance and report on these. Through this, you can be aware of your legal and regulatory obligations right away.
Benefits Of Implementing A Contract Management Framework
So now that you know the importance of a contract management framework, the next thing to know is the benefits of implementing a system in your organization. Here are some of the advantages you can get out of this:
- Conducting a contract audit and inventory – One of the advantages you get with a framework is that you can improve how you trace processes. If a contract involves more than two people, it can be tough to monitor the contract’s progress. By using software, you can monitor any changes and minimize human errors or losses that may occur.
- Ensuring contract compliance and monitoring – Proper contract management allows you to monitor the contract’s progress at any time. There are even tools you can use that will give you a dashboard or automatic alerts for end-of-contract terms and any other information you need from the contract. As such, you can make timely actions with these alerts.
- Establishing a contract review and approval process – When you store your contracts in a central repository, you can easily search through these documents for any terms and metadata that you are looking for. This allows you to avoid incurring financial losses from having to search for the right contract you need, especially if you have numerous contracts to go through.
- Developing a contract renewal and termination process – When you need to renew or terminate a process, it’s important to have access to data-driven information. This way, you can make effective decisions that won’t affect your existing contracts. Using a framework can help you save money and easily compare data.
Streamlining Contract Management With Fill
If you’re looking for contract management software that provides framework assistance, Fill is the right choice to look into. We offer plenty of features that help address the common challenges listed above.
Register for a free account and see what you’re missing out on in your contract management process.
