Nowadays, modern businesses leverage contract management software to automate and track stages of their contracts’ lifecycle. The contract management process involves all steps from creation, evaluation to monitoring and cessation.
At this point, it is essential to comprehend contract management processes to execute the contract life cycle successfully. So, let’s begin with the contract life cycle basics!
Contracts
Contracts or business agreements are mutually-consented documentation that lawfully ties two or more parties to a specific proposal, project, or task. Every contract signee must concede their obligations to evade financial losses or accord breaches.
Contract Management & Contract Life Cycle
Contract management is a crucial process that involves oversight of each contract step, from its creation to termination or renewal. Companies must learn to manage the contract lifecycle to capitalize on the contract management process. We have compiled contract life cycle steps below to make things easier for our readers.
Step 1: Contract Proposals
The contract begins with the countenance of the intention of the signing parties, such as what they want to get out of the agreement. One party, often businesses, creates the contract and bids pertinent information from the customer (in the case of B2C) or other businesses (in the case of B2B). This information may include:
- Identities of agreement signing parties
- Contract objective pertains to the services or products proposed by one party
- Consideration of what the other party has to give in return
- Modes of amending or renewing
- Milestones
- Apt dates (beginning and termination)
Step 2: Contract Authoring
After confirming specific requirements, the next phase is contract authoring. It involved writing terms and conditions in the contract as per the signing parties. It also includes clauses to ensure reliability and finalize further applicable components such as milestones and deadlines. Irrespective of distinct jurisdictions, such agreements assure the legal capacity of parties and their mutual consent and offer a clear and satisfactory consideration.
Step 3: Negotiations
Contract negotiation is the phase when signing parties narrow down their preferred conditions or terms. It is the most critical step in the contract life cycle, as extended discussions may lead to delays in contract establishment and, subsequently, business activities. Also, if the parties communicate on different platforms and lack an agreeing repository for their mutually agreed-upon conditions, there is a risk of agreement reversals.
Step 4: Approvals
After negotiations, a second draft of the contract is created for review as per mutually agreed terms. At this stage, it is significant to understand that the approval phase might take some time due to organizational hierarchy. The contract signing parties should keep an updated and accessible record of all changes to promote a seamless and efficient contract approval cycle.
Step 5: Signatures
The next step is to proceed with signing the agreement. In today’s digitally evolving era of cloud-based workflows and automation, contract management software with reliable electronic signature capacities expedites this phase, eradicating the hassles of conventional signatures. E-signatures are a time-saving way to digitalize the process at highly affordable costs.
Step 6: Agreement Obligations
After the contract approval, it is time to track assigned duties, task escalations, approvals, milestones, and expenses, among others, to seamlessly operate agreement obligations.
Businesses can avail themselves of a one-stop and centralized solution – contract management software. It manages all obligations and can deter contract violations and other potentially costly consequences.
Step 7: Compliance
Efficient administration of contract compliance reduces the chances of unexpected legal expenses, late fees, and other workflow delays to establish a potent groundwork for forthcoming arrangements. The compliance phase entails uniform evaluations of current contracts, a task that can be neglected without the support of a dedicated contract management software system.
Step 8: Agreement Renewals
The leading stage of the contract lifecycle may vary based on the agreement type. In some cases, where both signing parties find the business relationship profitable and desire ongoing collaboration, contract renewals are always a possibility. Contract renewal enables the tied businesses or parties to review and alter any potential terms and conditions, so it might lead to re-negotiations.
Contract management software makes such renewal and revising processes easier and creates streamlined contractual workflows. It simplifies the design of an amended agreement and includes new clauses, thus improving efficiency in a well-organized and automated manner.
The Bottom Line
Contract management empowers enterprises to govern legal bindings, conduct fair transactions, gather relevant policy requirements, and maintain transparency throughout agreement negotiations. And to avoid any potential risks, businesses should adopt advancements to sustain their reputation and profitability.
Undoubtedly, contract management is a compulsory yet time-intensive task for any business. However, companies can leverage contract automation software to streamline their contract life cycle processes and prevent errors, security breaches, or document mislaying. Automated contract life cycle management assures reliable provisions and efficient assistance to the business.
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Author Bio:
Qurat-ul-Ain Ghazali, aka Annie, is the growth manager at Contractbook and looks after all the organic channels. She has been with tech startups and scaleups for a couple of years with a B2B focus. You can find her socializing, traveling, indulging in extreme sports, and enjoying the local desserts when she is not working.