Contract management plays a crucial role in overseeing the creation, execution, monitoring, and renewal of legally binding agreements. However, many businesses continue to depend on manual processes for contract management, which often leads to inefficiencies, increased compliance risks, and missed growth opportunities.
What is contract management?
Contract management refers to the administration of legally binding agreements throughout their entire lifecycle, from creation and execution to monitoring and renewal.
It ensures that all parties fulfill their contractual obligations while minimizing risks and maximizing value. A well-executed contract management strategy aligns agreements with company objectives, improves compliance, and boosts operational efficiency.
Historically, contract management has been a resource-intensive task, involving significant manual tracking, navigating disjointed systems, and handling a high volume of administrative duties. Typically, teams in legal, procurement, and contract management are responsible for overseeing contracts. However, other departments like sales, finance, and operations often play a role as well. These stakeholders work together to ensure contracts are well-managed, compliant with regulations, and aligned with the organization's goals. Cross-team collaboration is crucial for optimizing the process and reducing risks.
Seven steps of contract lifecycle management.
There are seven high-level stages of contract management and it's important to understand each of them in order to properly optimize your processes.
1. Initiation
The first step of contract administration is to know the reasons you need to enter into a contract. Outline your goals, risks, and expectations from the start. This will make every stage of the process flow as smoothly as possible.
2. Negotiation
During contract negotiation, both parties meet to work out the contract terms so that the partnership is as mutually beneficial as possible. At this stage, the parties might draw up and sign a memorandum of understanding to acknowledge their intentions to formalize these talks into an agreement.
3. Generation
Once both parties have settled on the details of procurement, the actual contract creation and authoring begins. This is when it's important to know how to write a contract. Companies may use CLM software to create multiple drafts, and it’s important to keep these iterations handy for recording and proofing purposes.
Many contracts are a collaborative effort between the stakeholders and their respective legal teams, which adds time to this stage, but it’s best practice to be as thorough as possible and make milestones and pricing clear for all parties.
4. Approval
At this stage, management must approve the contract and officially set the partnership in motion. Bottlenecks often happen during the contract approval process; prompt management is often needed to keep the contract workflow moving. Before you sign off on a contract, be sure to consult a legal professional or your team’s legal department.
5. Execution
Once the contract is approved, it’s time to turn words into action. Store your contract, but keep it on hand to resolve any disputes or questions as they arise.
6. Auditing
The job isn’t over after the contract is in motion. You should establish an audit trail and schedule regular contract reviews to make sure contractual obligations are being upheld on both ends. You can save time hunting for stray documents by using a digital contract repository to organize and store key contracts, and make all contract data and metrics easily searchable.
7. Renewal or termination
If the contract renewal dates aren’t specified, you’ll need to evaluate whether to terminate the agreement or draw up a new contract. Businesses miss out on a bigger bottom line by letting contracts expire. This is one area where a contract management tool can make all the difference, by helping you renew contracts and collect signatures using automation.
How to optimize contract management.
Contract management can be a time-consuming and complex business, but Adobe Acrobat for business can help. Companies often hire a contract manager and automate the process with contract lifecycle management software to keep partnerships running smoothly.
Whether you’re an independent wedding photographer or a growing tech startup, the challenge of managing contracts grows as your business grows. If you’re juggling many contracts at once, it’s wise to keep them all safely in a centralized repository. One CLM solution is to create a digital contract management control center or document management platform. This will help you manage everything from sourcing to procurement to contract execution, minimizing the risk of human error and maximizing the value of your contracts.
Companies that embed contract management within a comprehensive vendor and contract lifecycle management strategy gain greater oversight, efficiency, and compliance. By connecting contract workflows with vendor performance tracking, risk evaluation, and procurement planning, businesses can optimize their processes. With the help of CLM software, you can optimize contract management and achieve:
- Greater transparency. Contracts and vendor relationships are interconnected, and integrating their management provides a clear view of vendor performance, risks, and obligations.
- Enhanced risk mitigation. Evaluating vendor risk alongside contractual terms allows businesses to proactively address potential supplier-related issues.
- Stronger compliance. A unified contract lifecycle management framework ensures that regulatory and contractual requirements are consistently met throughout vendor and contract lifecycles.
- Maximized cost efficiency. Coordinating vendor negotiations with contract renewals helps organizations secure the best possible value from their agreements.
- Improved cross-team collaboration. Legal, procurement, and finance departments benefit from a centralized system that promotes accountability and maintains data consistency.
Take your contract management digital with Acrobat.
From electronic signatures to reviewing PDFs on the go, a digital contract lifecycle management solution is the best way to keep your contracts on track.
Go paperless.
Kick off the process with Acrobat for business and create your own contract template. E-docs save your business time and money and eliminate logistical nightmares involving mail deliveries, lost documents, different time zones, and more.
Collaborate from anywhere.
Throughout the negotiation process, it’s crucial that all parties can access, edit, and comment on the document. With Acrobat, you can collaborate in real time, from any device, and keep everyone on the most current draft of the contract. When it’s time to sign, everyone can esign online.
Sign, seal, and deliver (sans paper).
By automating your approval workflows, you can skip the management bottleneck and collect e-signatures in one click. You can even keep track of your contract’s progress on any device.
Dial in your workflow with integrations.
You can pair Acrobat with a contract management system that you already use, like IBM, Salesforce, Oracle, and more. Streamline your complex contracts and maximize their functionality with CLM integrations.
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Contract management processes made easy.
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