Effective contract management is key for business progress in today's competitive business environment. It has become an essential pillar of organisational success because contracts are the cement on which companies are built; they are the key to contracting, business relationships, procurement and a whole host of other operations. However, managing these vital documents can be a complex and demanding task. Whether you're a legal director, in-house counsel or any professional in charge of drafting and managing contracts in a corporation, read on to learn how to boost your work with the best contract management strategy.
We'll explore what contract management is, its importance to your business, the key stages of the process and the risks of ineffective contract management, then dive into practical tips on how to optimise your contract management. If you are looking to transform the way your company manages its contracts and improve operational efficiency, read on to discover how you can take your company's contract management to the next level.
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Contract management is the process of handling a company's contracts efficiently and systematically from conception through creation to conclusion. This complex process includes the negotiation of terms and conditions, as well as ensuring compliance with agreed aspects, documentation and coordination.
Contract management is essential to maintain control over a company's obligations and rights, enabling better risk management and compliance. A robust contract management system not only helps to create and maintain contracts and facilitate work on them but also ensures that the terms are adhered to, avoiding disputes and penalties.
Contracts are vital because they form the basis of every business transaction and relationship in companies. These pieces of paper, whether physical or electronic, are the backbone that defines expectations, responsibilities and the provision of services and products, protecting the legal and financial interests of the company.
A well-managed contract ensures that both parties fulfil their obligations, avoiding disputes and strengthening business relationships. In addition, well-drafted and managed contracts can provide clarity and certainty, enabling companies to operate more efficiently and securely.
Each of these phases is crucial to ensure that contracts are managed effectively, reducing risk and improving operational efficiency. Technology can play a key role in automating and improving these phases, facilitating more accurate and faster management.
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Inadequate contract management can lead to what is known as revenue leakage, a loss of revenue that occurs due to failures in contract enforcement and administration. This is often caused by poorly negotiated contract terms, a lack of follow-up on deliveries or manual errors in documents that result in severe legal risks. Studies estimate that 5-40% of the value of contracts is lost due to inefficient operations, which can result in a loss of up to 9% of a company's annual revenue.
A study by World Commerce & Contracting found that companies can lose up to 9% of their annual revenue due to poor contract management.
Efficient contract management is indispensable to maximise profitability and minimise risk in any organisation. Implementing robust contract management practices not only protects company assets but also facilitates smooth and efficient business operations.
And that's it for today's article! If you want to know more you can follow us on LinkedIn to keep up to date with the latest in innovation for the legal tech sector. If you would also like to learn how to adopt a comprehensive contract management strategy and start your company's contract management transformation now, request a demo with one of our legal operations experts and get advice from a winning team.