Businesses live or die by their inter-business relationships. Your contracts are everything.
Yet, as your business grows, you will have more contracts, and they will probably become more complex. Managing the contracts becomes a full-time job in and of itself. How can a business keep up with contract management without sinking tons of money into a management team? There are various tools and techniques that can help, and some of the best will be discussed below.
Procurement Resources
Let’s start by looking at something specific. Contract management applies to a lot of businesses, but it’s a bigger financial component for anyone in production. To make goods, you have to procure raw materials, refined materials, components, or whatever else goes into your products. It’s usually the largest business expense for the company.
Procurement contracts dictate how procurement works, so managing these contracts is clearly a vital part of running the business. You can utilize specialized procurement management resources that help you understand, manage, and optimize your contracts. This helps to ensure coast efficiency within this realm of your business.
It’s a specific way that specialized contract management solutions exist in various industries. Even if you aren’t in the manufacturing space, there are likely comparable contract management solutions that can benefit your business.
Simplification
Simpler contracts are easier to manage. That’s easy enough to follow, but it’s not always easy to find ways to simplify your contracts.
In general, there are two strategies that can help a lot. The first is consolidation. Any time you can consolidate resources into a single contract without losing value, it’s worth considering. Consolidated contracts give you less to track, and that means you don’t have to spend as much time and money keeping up with them.
The other easy way to simplify contracts is to designate your contract management resources. Create a team that is specifically responsible for contract management (maybe among other duties). Or, as awkward as this sounds, outsource your contract management. In that way, you’re really just keeping track of the one contract (with the contract manager) while they handle the rest.
Automation
How do you make anything better in the business world? You automate it, of course.
The truth is that you can already find plenty of technology that will help you automate contract management. With such software, you can ensure that all of your payments are on time. You can also track that your business partners are on time with what they owe to you.
Essentially, contract management software keeps everyone on the same page (similarly to procurement software), and it allows you to stay on top of everything without having to spend quite so much on contract management labor.
Co-Sourcing
This might sound counterintuitive, and it’s definitely going to sound like a contradiction of earlier advice, but hang in there for a moment. Co-sourcing is a hybrid between outsourcing and insourcing. The idea is that specific parts of a job are outsourced, but that work is folded into something that is still internally managed.
Here’s an example. An accounting department could outsource data entry. So, the department would give a contractor access to the accounting data. That contractor would enter everything into a spreadsheet, and then the accounting department could then more easily analyze and manage the data. (Admittedly, this could be done with automation software too, but it’s a simple example.)
How does this help with contract management?
Even though co-sourcing might lead to more contracts for your business to manage, it can also make those contracts more specific and more affordable. So, you’re losing some of the advantages you gained from simplifying and consolidating your contracts, but you’re getting more optimization within each contract for your trouble.
Legal Analysis
Ultimately, contracts are legal agreements. Having a lawyer look over every letter of every contract can prove expensive. Failing to catch something important in a contract can be even more expensive. The trick here is to partner with your legal resources. Try to find a cost-effective and efficient way to keep them in the loop so that your contracts are properly analyzed by legal experts.
In the end, contract management is unlikely to be your largest expense, but it will remain a pivotal aspect of running the business. Invest in reliable tools, and you’ll maintain contracts that always offer a net benefit.
