Creating contracts and making sure that they perform well for your business is one of the largest challenges that business face in the modern world. Because there are often many different stakeholders involved in a contract, it is often hard to understand how a contract will actually perform for your business. What companies can do to gain a greater understanding of the performance of their contracts, and your business should invest in, is contract lifecycle management. Contract lifecycle management helps organizations organize their contracts not just during the negotiation phase, but also to help track performance, compliance with contract terms, and other factors that determine if the contract has a positive impact on your business. Because of this, organizations should consider using contract lifecycle management with any other business or party that they enter a contract with.
The First Phases of the Contract Lifecyle
When two parties want to strike a formal deal, they need to enter a contractual agreement. However, before a contract can be negotiation and tracked for performance, it actually needs to be requested and drafted. The purpose is this contract is to govern the terms of a new business relationship, and you should not have any existing business relationships that are not defined by contracts. After a contract is requested, then you need to have a draft of the contract prepared for the other party or business to look over. Keep in mind that most people do not sign contracts as-is, particularly if the relationship is meant to be a strategic partnership or something else equitable.
Once the contract is negotiated and agreed upon, you will need to set up the final contract terms. This will include any KPIs that both parties want to use to judge how well the contract performs. For example, if a business is negotiating a contract with a supplier, they are going to want to put in terms that dictate how long the supplies will take to get to the business after ordering, minimum order requirements, and what happens in the event of disruption to services or damaged goods.
Using Contract Lifecycle Management to Track Performance
After a contract is finalized, you will then need to store your contract digitally so that you can continually check it for performance. Using the contract lifecycle management process, you can look at the KPIs that were initially set for the contract and make sure that they actually are benefiting you. You can also track the contract to see if deadlines are met and that your organization is actually benefiting from the wording of the contract. For example, you may find that a particular clause is unfavorable to you. If this is the case, you may want to see if you can renegotiate the contract or just bring it up once the contract is up for renewal.
It is very important to make sure that the contracts that you sign are tracked using contract lifecycle management. When doing this, you will be able to see how a contract is performing for your organization and whether any adjustments need to be made either immediately or down the road. Knowing what you need to be looking at when it comes to contract performance is essential, as it will allow you to see how well the performance of the contract is working for you and whether there is any area for improvement.