Contract management technology

Contract management is an essential part of any business that operates with contracts. Effective contract management can help improve compliance, reduce risk and maximize the value of your contracts. In this article, we’ll dive deeper into what contract management entails, explore the benefits, address the challenges, and look at how contract management technology can improve the whole process.

What is Contract Management?

Contract management is a systematic process for creating, storing, managing and monitoring contracts throughout their lifecycle. This process ensures that all contractual obligations and rights are followed, and that contracts meet legal and organizational requirements. Effective contract management helps to minimize risk, improve compliance and increase business efficiency.

By following a structured process for creating, storing, managing and monitoring contracts, businesses can benefit from better control and overview of their obligations and rights.

Creation of contracts

Creating contracts involves drafting contract documents that clearly specify the terms, conditions, rights and obligations of all parties involved. This step includes negotiations and revisions to ensure that the contract meets the needs and requirements of both parties. By using templates and standard clauses, businesses can ensure consistency and reduce the risk of errors.

Storage of contracts

After the contract has been created and signed, the challenging process of storing it in a secure and accessible way begins. Modern and digital contract management systems offer digital storage that makes it easier to search, retrieve and share contracts when needed. This also ensures that the contracts are protected against loss, theft or other types of damage.

Contract management technology can help to secure the data. One example is ShareControl Contract, which uses SharePoint to store documents so that the data is always owned and managed by the business itself.

Administration of contracts

Contract administration involves following up and implementing contractual obligations and conditions. This includes tasks such as invoicing, delivery follow-up, quality control and handling any deviations or disputes. Effective contract management ensures that all parties comply with the agreement and that any changes or additions are handled correctly.

Monitoring of contracts

Contract monitoring involves continuously following up on the status and performance of the contract throughout its lifecycle. This includes keeping track of key dates such as renewals, expiries and other milestones. Automated alerts and reports can help businesses stay informed and proactively manage their contracts so they can avoid defaults and ensure optimal performance.

Contract types

Businesses manage a variety of contracts that govern their relationships with customers, suppliers, employees and other stakeholders. Each type of contract has its own specifications and requirements, and it’s important to manage them correctly to ensure compliance and optimal performance. Here are some of the most common types of contracts:

Supplier contracts

Supplier contracts are agreements between a business and its suppliers. These contracts specify the terms and conditions for the purchase of goods or services, including prices, delivery terms, quality, payment terms and warranties. Effective management of supplier contracts ensures that the business receives the agreed products or services on time and at the right price, and that any deviations are handled quickly.

Customer contracts

Customer contracts, also known as sales or service contracts, regulate the relationship between the business and its customers. These contracts define the deliverables, timeframes, payment terms and responsibilities. Good management of customer contracts helps to maintain customer satisfaction, ensure timely payment and manage any disputes or changes.

Employment contracts

Employment contracts are agreements between employer and employee that describe the terms and conditions of employment, including work tasks, salary, working hours, benefits and termination conditions. Effective management of employment contracts is important to ensure that working conditions are clear and fair, and that both employer and employee comply with applicable laws and regulations.

Lease agreements

Leases are contracts that regulate the rental relationship between a landlord and tenant for the use of property or equipment. These agreements specify the rental amount, rental period, maintenance responsibilities and other terms. Proper administration of leases ensures that both parties comply with the terms of the agreement and that any renewals or terminations are handled correctly.

For companies covered by IFRS 16, Share Control offers its own solutions for storing and accounting for leases.

Benefits of contract management

There are a number of benefits to good and effective contract management, including increased efficiency, reduced risk and financial benefits.

Increased efficiency

Automating and systematically managing contracts can save significant time and resources. Using a contract management system can automate many manual tasks, such as notifications of important dates, generation of contract templates and approval processes. This reduces the administrative burden and frees up time for more strategic tasks. Digitally storing and organizing contracts also makes it easy for employees to find necessary documents quickly.

Reduced risk

Correct contract management can reduce legal risk and ensure that your business complies with applicable laws and regulations. Contract management systems help to ensure that all contracts are reviewed and approved according to set procedures and that all necessary clauses are included. This reduces the risk of legal disputes and sanctions for non-compliance.

Economic benefits

Proper management of contracts can prevent lost revenue and contribute to cost savings. A clear overview of all contracts helps to avoid duplicate payments, translate invoicing and ensure that all billable services or products are paid on time. Effective contract management can also help to identify and eliminate unnecessary costs, such as ensuring agreements on discounts and payment terms are followed.

Contract management can also help to show the total costs and obligations of your contracts. This way you can find out the total costs or opportunities of not renewing a contract or exercising an option.

Challenges in contract management

Contract management can be a complex and challenging process. Here are some of the most common challenges businesses face:

Lack of overview

One of the biggest challenges in contract management is a lack of overview of existing contracts. Without a centralized storage and management system, it can be difficult to keep track of all contracts, their terms, expiry dates and obligations. This can lead to issues such as lost renewal opportunities, missed payment deadlines and failure to follow up on contract terms.

Risk of human error

Human error is a common challenge in contract management, especially when processes are manual. Errors can occur at any stage, from drafting and review to approval and implementation. These errors can be costly and lead to legal disputes, financial losses and reputational damage.

Contract management technology can eliminate a number of errors caused by human error. For example, automating processes and using standardized templates.

Complexity in contracts

Contracts can be very complex, especially when they involve multiple parties, detailed terms and conditions, and legal requirements. This complexity makes it challenging to ensure that all aspects of the contract are followed accurately. Incorrect understanding or handling of complex contract terms can lead to serious consequences, including legal issues and financial losses.

The need to comply with legal requirements

Ensuring compliance with all relevant laws and regulations is a critical but challenging part of contract management. This requires continuous updating and understanding of applicable regulations, which can vary between jurisdictions and over time. Non-compliance can result in legal sanctions, fines and loss of trust from customers and partners. Therefore, it is important to have systems and procedures in place to ensure that all contracts comply with applicable laws and regulations.

Follow-up and enforcement

Another challenge is monitoring and enforcing contractual obligations. It can be difficult to ensure that all parties fulfill their obligations under the contract, especially when the contracts are complex and involve many detailed requirements. This requires a systematic approach to monitoring and reporting, as well as a clear process for handling deviations and conflicts.

A dedicated contract management system can help businesses automate processes, improve tracking and ensure compliance. Using these technologies, contracts can be effectively managed throughout their lifecycle, from creation to termination.

Contract management solution

ShareControl Contract gives businesses full control and overview of their contracts throughout their lifecycle. By centralizing the creation, storage, management and monitoring of contracts in Microsoft 365, the risk of non-renewals and forgotten follow-up is reduced. The solution enables efficient reporting, ensures compliance, and optimizes financial results. The system’s integration with DocuSign also ensures an efficient and secure signing process.

With today’s contract management technology, contract management can help businesses of all sizes. With ShareControl Contract, businesses can manage all types of contracts – from supplier and customer contracts to employment agreements and leases – on a secure and easy-to-use platform.