Getting deals negotiated and signed with a contract is not an easy task for many businesses, particularly in the modern business world. Making sure that these contracts are actually benefiting your business and are performing as intended is even more difficult. Most businesses have various stakeholders, including partners and senior leadership, who are often involved in the creation of a contract.
To gain a better understanding of how a contract will actually perform based on an analysis of similar contracts, companies have increasingly been turning to a process called contract lifecycle management. This process can help businesses better organize their contracts, and track their performance beyond from when they are negotiated and signed. Businesses can also gain a holistic view of how a contract is performing while it is active, including whether the other party is compliant with the contract terms and whether or not the contract is actually having a positive impact on a company’s bottom line. To best understand how to better manage the performance of a contract, it is important to understand the various steps of the contract lifecycle so that it can be better understood.
The initial phases of the contract
In order for a deal to be struck by two parties, no matter what the relationship between them is, they need a contract to legally define the relationship. Before this contract can be signed though, it needs to be requested by one of the parties and drafted. Ideally, the company that requests the contract will have a contract template on hand, and these can be refined over time based on what works and what doesn’t for a particular type of business relationship.
After the contract is requested and drafted, it is important to give the other party leeway to negotiate certain terms of the contract. Once you understand how your contract work, you’ll have a better understanding of what is negotiable and what is non-negotiable within the contract. While you want to make sure that your contracts are equitable to the other party, you also need to be aware what terms make a contract viable to you and which do not. This can be better analyzed and determined by using contract lifecycle management.
Tracking contract performance
After a contract is negotiated and signed, it then has to be stored digitally. This will allow you to regularly check the contract for performance, which is a core part of contract lifecycle management. In doing so, you’ll be able to take a hard look at the KPIs that were set in the contract and ensure that they are actually being followed and that compliance with them is benefitting your company. You may find that your contract terms are slightly too lenient, or maybe even unrealistic depending on what the other party can fulfill on their end. Doing this will help you to better benefit the wording of future contracts and also have a better understanding of what performance issues need to be addressed when renegotiating the contract.
In summary
Overall, businesses can benefit greatly from better managing through contracts through the process of contract lifecycle management. In doing so, business owners will be able to determine how a contract is performing for their business. They can then determine whether they should continue a relationship with a business and what needs to change when it comes to the contracts they create in the future.
