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Streamline Your Company’s Contract Management With These Practices
An organization may find each business unit under it having a dissimilar contract function. This usually occurs when business units distance themselves from one another due to reasons such as acquisition or the existence of ‘silos’. Each distinct unit applies a different approach to business aspects.
As such, contract management is not parallel and uniform among the different units of the organization. In such scenarios, the organization must implement certain standard procedures to bring cohesion into the contract management process. Particular practices can assist with the implementation that will support the organization in realizing its objectives whilst reducing risk and organizing the contracting task, boosting its efficiency.
Let us check out a couple of practices a business can embark on to consolidate its contract management:
1. Implement Mutually Accepted Contract Templates with Straightforward Language:
Whenever creating contract templates, it is important to consider the perspective of each business unit. Moreover, their language should be simple and easy to understand with little legalese. This will introduce stability in the contracting process and reduce the requirement for the involvement of the law department. Nevertheless, this will increase the know-how of contractual responsibilities and reduce negotiation cycles.
2. Install Self-Service Stations for Standard Contracts:
Standard repeating contracts are simple with predetermined terms and are possibly non-negotiable. They require no intrusion from the law department. Hence, the company can provide self-service options through means such as online websites or kiosks. This approach will expedite the contracting process as it will require minimal physical work, allowing users to access necessary information at their convenience.
3. Constantly Reevaluate Clause ‘Starting Points’:
Business practices evolve over time. Hence, the pre-established conventional contract template language becomes outdated and is often negotiated. Certain clauses in this standard language that repeatedly become the point of negotiation must be constantly reevaluated and kept up-to-date to stabilize the contract drafting process by reducing negotiation cycles.
4. Carry Out a Financial Review of The Contract Prior to its Implementation:
Lack of sufficient involvement of the organization’s finance unit with the contractual process often leads to inaccurate revenue recognition. The contractual proceedings often leave the finance unit unaware. Therefore, it is crucial for the finance unit to review the contractual details and proceedings, enabling the implementation of appropriate pricing and collection procedures.
5. Evaluate Contract Performance:
An analysis of the available data related to the contract will allow an organization to gauge the ‘worthiness’ or usefulness of each contract. A business must ensure it is getting the maximum out of a contract while maintaining a positive association with the vendor. A comprehensive report will present important facts that will enable the business to analyze conditions like pricing, expected service standard, the standard of quality, warranties, and more.
6. Direct Contract Work to Appropriate Staff:
Different contracts have different values and risk levels attached to them. Depending on the value and risk level, the contract drafting needs to be directed to correct personnel. Contracts with low value and risk level should be directed to non-attorney professionals that possess the know-how of negotiation as well as drafting as these contracts are likely to be simple, not requiring too much negotiation or adjustments.
This will shift the focus of attorneys to the high-value and risk contracts allowing them to fully invest themselves in the process. Distributing contract management services in this way will boost efficiency levels.
7. Centralize Contract Information Network:
A common practice among businesses is to have a decentralized contract information database among different business units. This implies that one unit does not have a direct connection to the information stored by another unit, which can result in inefficiency and hinder communication within the company.
The network must be structured in a way that important information concerning contracts is saved in a centrally accessible system. Such a network will allow for accurate, reliable extraction of required contract information for purposes of dispute resolution or renegotiation.
This kind of system may likewise be used in situations where the vendor/organization needs to exchange information. A centrally accessible system that contains all relevant contract information can assist both parties to manage the contract efficiently.
These practices, although few and perhaps inapplicable to each organization, show that cohesion among different units of a company can allow it to achieve its goals in a reliable manner. It’s important to note that the objectives of the company must drive any necessary changes to instill these practices, rather than the other way around.
Recommended Post: Why Choose Cogneesol for Legal Contract Drafting & Reviewing
In case your company needs any help with contract drafting services or their management, get in touch with us at Cogneesol today. Call us at +1 646-688-2821 for a free consultation.
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