In this highly professional environment, contracts are indispensible for every business entity, ranging from business between two individuals, to the functioning of multinational companies. Historically, written agreements, signed by the concerned parties have been the most reliable form of acceptance, but with the ever advancing technology, various forms of digital and electronic signatures have come into use. The digital revolution has not only changed the modus-operandi of the various domains of businesses, but has also added new dimensions to them. Contract management includes negotiating the terms and conditions in contracts and ensuring compliance with the terms and conditions, as well as documenting and agreeing on any changes or amendments that may arise during its implementation or execution. It can be summarized as the process of systematically and efficiently managing contract creation, execution, and analysis for the purpose of maximizing financial and operational performance and minimizing risk.
Today’s business models are driving the complexity of contracts, their terms and conditions. Similarly the number of contracts is rapidly increasing. The way contracts are managed must be changed. Managing contracts manually and in an ad-hoc manner is resulting in higher risks and costs. For example, according to the analyst company Goldman Sachs study e.g. improvement in reduction in erroneous payments can be as high as 75-90% and negotiation cycle can be much faster (50%). Additionally lack of clear executive ownership of contract management issues is one of the major reasons for operational weaknesses.
The implementation of contract management can be described as a three step process. These steps overlap each other but they can be separately dealt with. The first step is to simply get the basic contract management operations established. These include such as a centralized contract repository or Contract Database, appointment of person(s) responsible for each contract, a contract management handbook, company contract templates and defining proactive alarms for the contracts. The second step is to make the contracts “alive” – in other words, be part of the business. This covers issues such as contract management process, deeper involvement of business units, use of contracts in operations such as project management, and active use of contract management as a business tool. Finally, the third step in the process of contract management – it is the strategic step. As this level of development is achieved, an enterprise is able to evaluate contract and partnership network from a strategic point of view. This final step integrates contract management as a corner stone for long-term planning, strategy formulation, and strategy implementation. The process of preparing and launching of contract management in an enterprise can take years. Above-mentioned phases can be used to formulate and schedule a stepwise project.
Some of the key issues when selecting the software tool are the following: whether to choose a ready- made solution or tailor-made, that security issues has been addressed, that access to contract information is flexible (preferably via web-browser) according to pre-defined user profiles, that extensive reporting is supported, that contract repository is in place, and finally that proactive management is supported with alarm functionality. The downfall with tailor-made solutions is the cost and time. It is often forgotten that tailor-made solutions rarely have maintenance and all changes are costly. The good thing about tailor-made solutions is that they should address your unique needs perfectly. Otherwise packaged standard solutions should be always opted. Luckily some state-of-the-art standard solutions available offer the same flexibility as tailor-made solutions without trade-off related to cost and efficiency benefits.
When all above-mentioned considerations and decisions have been made it is time to get started. First, physical contracts must be searched and collected from each part of the organization. Secondly responsible person for each unit and also each contract must be appointed. Third step is to feed in all the information into chosen contract management tool. This part of the project requires time, resources and diligent work. This usually takes from 4 to 12 months considering that other work has to be done during the project as well. When step 1 is completed, basic contract management functions, procedures and tools are in place. The goal of the first step is to get things organized in order to generate cost savings in contract management administration work and to reduce unnecessary costs related to uncontrolled continuance of contracts. To know more about <a href="http://www.contractdynamics.eu ">
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Contract Management-indispensible for all types of businesse