Contract Management: Everything You Need to Know

If there is one thing that every company needs to do, it is managing contracts! Whether with business partners, suppliers, employees, or even the rental of your office space. But not all companies manage these documents well, and that is when problems start to arise. 

Neglecting the steps or not complying with them properly can result in financial losses, fines and lawsuits. Contracts have a life cycle and, precisely for this reason, they need to be monitored and revisited frequently or, eventually, readjusted or terminated. 

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

Happy reading! 

The life cycle of contracts 

A contract is any document with legal value that sets out the obligations and rights of both the applicant and the supplier in a commercial transaction. For this reason, a contract has a life cycle. 

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

• Execution: At this stage, the terms of the contract are fulfilled in accordance with the rights and obligations of each party. It may be necessary to include revisions and amendments to the document. 
• Closing: When contracts come to an end, it is time to review them to see if there are any obligations or duties that have not yet been fulfilled. If there are any outstanding obligations, they need to be renegotiated and fulfilled; if not, the contract can be terminated. 

So why manage contacts? 

All stages of a contract described above need to be monitored to ensure that no problems occur, requiring great attention on a daily basis. 

When managing contracts, it is possible to anticipate and minimize possible risks to the business, avoiding losses, for example, by renegotiating clauses or deadlines before penalties are applied. 

Furthermore, it allows the company to organize itself financially and in relation to delivery/receipt deadlines for goods; it reduces the chance of financial losses, and may even be responsible for increasing profitability; it reduces the opening of lawsuits, which promotes greater security and legal support for the business; and it can create a healthier and more efficient organizational environment, as it enables saving working time and provides a better relationship between supplier and contractor. 

How to optimize contract management? 

In order to have control over the details of what is happening, it is necessary to have a view of the whole. And the simplest way to do this is by concentrating the information in a single place, making it easier to view each stage of the contract, its pending issues, its deadlines and the percentage of obligations and duties fulfilled. 

THE ContractPlus, for example, is a native contract management module for SAP Business One. In it, it is possible to monitor each of the stages in detail, control the following pending issues, add contract revisions and amendments, and even carry out partial or total terminations with both customers and suppliers. 

Want more tips on how to optimize the management of your contracts or your clients?

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