Contract management: Everything you need to know

If there is an activity that every company needs to do, it is generating contracts. Seat with commercial associates, suppliers, collaborators, even if you are the owner of the workshop. But not all companies manage these documents well and this is where problems start to arise.

Neglecting these steps or not completing them properly can lead to financial losses, fines and legal proceedings. Contracts have a life cycle and, therefore, need to be monitored and re-visited frequently or, eventually, readjusted or terminated.

We prepared this article for those who want to understand a little more about this topic that seems simple, but could be more complex than you imagine.

Good reading.

The life cycle of contracts

A contract is any document with legal value in which the obligations and rights of both the applicant and the provider are combined in a commercial transaction. And, therefore, the contract has a life cycle.

• Negotiation or pre-contracting: This is the phase in which the involved parties debate and reach an agreement on what will be contained in the document. Once this preliminary conversation generates consensus, the contract is written.
• Recruitment: This is when the contract is approved and signed. From this moment on, it comes into force.

• Execution:At this stage, the terms of the contract are fulfilled according to the rights and obligations of each party. It may be necessary to include revisions and additions to the document.
• Close: When the contracts reach their end, it's time to review them to check if there are any obligations or obligations that are not fulfilled. If there are pending issues, they need to be renegotiated and fulfilled, otherwise, the contract can be closed.

Why, then, do contract management?

All stages of a contract described above need to be followed so that no problems arise, requiring great attention from day to day.

When managing contracts, it is possible to anticipate and minimize possible harm to the business by avoiding damage, for example through the re-negotiation of clauses or terms before penalties are applied.

Furthermore, it allows the company to organize itself financially and in relation to delivery points/merchandise receptions, reduce the possibility of financial losses, even being able to be responsible for increasing profitability, reducing the opening of legal actions, which promotes better security and legal support for the business and can create a healthier and more efficient organizational environment, which allows for savings in working time and provides a better relationship between provider and contractor.

How to use contract management?

In order to have control over the details of what is happening, it is necessary to have a vision of everything. The simplest way to do this is to concentrate information in a single place, facilitating the visualization of each stage of the contract, its pendientes, its terms and the percentage of obligations and obligations fulfilled.

IContract, for example, is a native contract administration module for SAP Business One. It is possible to follow each stage in detail, control upcoming issues, add revisions and contractual amendments and even carry out partial cancellations o totals with both customers and suppliers.

If you have more advice on how to optimize the management of your contracts or your clients, you can do it with us.