What is Contract Management?

The primary goal of contract management is to optimise contractual arrangements to realise maximum value for the organisation. This goes beyond simply storing documents; it is about active management and strategic deployment of contracts.

Key goals of contract management are:

• Transparency and control: Always insight into current contracts, terms and obligations.
• Efficiency: Automate contract management to reduce manual operations.
• Risk management: Preventing unexpected extensions, penalties or legal conflicts.
• Cost savings: Avoid double spending and negotiate better terms.
• Compliance: Complying with laws and regulations through timely audits and reporting.

Dirk Jan, Solution Consultant at ISPnext, explains why contract management software plays a major role in this: "Many companies only realise how inefficient their contract management is when something goes wrong. Contract management software allows you to work proactively instead of reactively, saving time and money."

Effective contract management offers numerous benefits at both operational and strategic levels.

• Overview and insight: All contracts and associated documents are centrally available.
• Increased efficiency: Less time spent on manual processing and follow-up.
• Better risk management: Timely detection of contract extensions and expiry dates.
• Optimisation of supplier relations: Better compliance with agreements and negotiating power.
• Stronger compliance: Automatic reports and audits to follow regulations.

"By using contract management software, companies can not only manage contracts more efficiently, but also use them strategically to reduce costs and minimise risks," says Dirk Jan.

Contract management consists of several phases that ensure that a contract is properly managed throughout its lifetime.

1. Contract creation: Drafting contracts with clear terms and objectives.
2. Negotiation: Agreeing terms and conditions with involved parties.
3. Approval and signing: Formal recording of the contract by all parties.
4. Implementation and monitoring: Monitor commitments, deadlines and performance.
5. Evaluation and renewal: Assess whether to renew, amend or terminate a contract.

"A structured contract management process ensures that companies avoid surprises and can make timely adjustments when necessary," says Dirk Jan.

Although the terms contract management and contract administration are often used interchangeably, there is an important distinction.

• Contract administration focuses mainly on the administrative side: recording, storing and monitoring contracts.
• Contract management goes further and includes strategic optimisation, risk management and cost reduction.

"Whereas contract management is mainly about keeping track of agreements, contract management ensures that these agreements contribute to the business strategy and financial goals," Dirk Jan explains.

A good contract management process helps organisations work more efficiently, cut costs and reduce risks. By using contract management software, such as that from ISPnext, companies can automate and strategically optimise their contract management.

Want to know how contract management software can help your organisation? Contact us or request a demo!