Learning about Contract Lifecycle Management
The lifecycle of a contract is quite extensive. Not only do all businesses need contracts to define all of their relationships, but they also need a contract to actually work for them. This is particularly challenging, as there are many different stakeholders involved in the creation and negotiation of a contract. This is why businesses need to assess how a contract is going to perform not just when it is being negotiated but also when it is actually signed. Assessing these agreements for performance, compliance, and other KPIs as defined in the contract is essential to knowing whether a contract is actually performing well for you. With that in mind, here is how you can use the contract lifecycle management process to effectively manage your contracts.
The First Phases of Contract Lifecycle Management
Businesses that are looking to enter a contract with another party need to request the formation of a contract before they can begin to negotiate. Contracts are meant to govern new business relationships, although in some instances, early-stage businesses have relationships in place without having contracts to define them. This is a mistake that should be avoided at all costs, particularly when it comes to businesses that assume a lot of legal liability without having a contract in place. You also need to keep in mind that once the contract is created, it is rarely if ever agreed upon without any back and forth.
This back and forth is called the negotiation phase of contract lifecycle management. This is actually not the most important phase of contract lifecycle management, but it is an essential one that needs to be done with both finesse and respect. When negotiating a contract, keep in mind the KPIs that you want to be included in the contract. These are essential to include, as they will be how you judge the success or failure of the contract, which is what contract lifecycle management is all about.
Tracking the Contract for Performance
Sometimes, having a bad contract in place is worse than having none at all. A contract needs to actually be tracked for performance, and you need to use KPIs to actually report on its success. To do this, you should continually monitor these parameters and make sure that both your own organization and the other party is continually in compliance with the language of the contract. For example, if there is a provision that provides for arrears in the event of a missed or overdue payment, then this needs to be enforced, even if the mistake is on your end.
Overall, you want to make sure that both your business and the other party benefits from the contract. Using contract lifecycle management to set up and manage the contract for performance is essential to making sure that a contract is fair and equitable to both parties. Furthermore, a contract allows businesses to continue to have an excellent business relationship, and it is necessary for businesses to know how a contract is performing so that it can better negotiate contracts in the future and renegotiate any bad ones that are not performing well for either or both parties.