Your contracts are valuable, so don't miss out on good contract management
Contract management, or contract lifecycle management, is an activity that companies are still neglecting...
... but not for long, as its strategic value is becoming increasingly apparent.
Indeed, contract management promises a host of benefits: saving time and money, protecting against financial and legal risks, and so on.
But what exactly is good contract document management? What does it involve? And what exactly is the role of the contract manager?
Read our article and find out how you can add value to your business through your contracts.
What is contract management?
Contract management definition
Contract management is the activity :
- streamlining the entire contract life cycle (from drafting to closing) ;
- while ensuring that risks and opportunities are properly managed.
It therefore involves a number of operations, including
- Administrative management of the contract and all related documents,
- negotiations and general relations between the various parties,
- Ensuring performance and proper execution of the terms of the contract,
- managing discrepancies and complaints, and preventing disputes.
The aim is therefore to optimise the contractual cycle as a whole, and not just one aspect such as administration or dispute management.
💡 The professional in charge of these tasks is the contract manager. He or she may operate on a single contract at a time (generally of significant size and complexity), or on a portfolio of contracts.
The emergence and challenges of contract management
Contract management work emerged in the context of major projects with high stakes, such as those in the construction sector.
Contract management has subsequently developed, particularly since the 2000s, under the impetus of the rise of risk management, a rise driven by the strengthening of professional regulations and legal frameworks.
Today, more and more contract management vacancies are appearing in France, even outside the context of large-scale projects. The profession is increasingly winning over smaller organisations, which are aware of the value of managing their contracts more strategically.
Why contract management? The benefits
Contract management offers a number of advantages for companies:
- Perfect visibility of all contracts. For example, according to a Deloitte study, 52% of companies are unaware of the expiry dates of their various contracts, which can lead to unwanted renewals or even disputes.
- Controlling financial and legal risks. This is particularly important in a context of increasing regulatory inflation. This is why certain sectors, such as banking, are increasingly integrating contract management into their activities.
- Improved relations between the various parties. Thanks to good contract management, everyone's expectations are perfectly clear. At the same time, the risk of errors that could undermine good commercial relations is reduced.
- Greater awareness of opportunities. Clear, sound contract management makes it easier to identify potential cost reductions or ways of improving the sales cycle.
- Increased margins. In particular, contract management makes it possible to avoid potential losses of money (late penalties, litigation, etc.).
IACCM research shows that companies lose an average of 9.2% of revenue each year due to poor contract management.
Source : leeway. Blog
In short, the whole value of contract management lies in safeguarding the company's interests (particularly its financial interests) as far as possible when drawing up contracts.
How are contracts managed? The contract management process
The contract management process is based on the various stages in the contract life cycle.
Stage 1: Contract creation
The contract creation phase extends from the expression of need to the delivery of the company's proposal to the customer.
It involves :
- considering all the requirements and obligations of the various stakeholders (What levels of service? What payment terms? What lead times? etc.);
- recording them;
- identify any risks and legal issues.
Stage 2: negotiating the contract
A large number of negotiations can take place, particularly in the case of large contracts.
These negotiations are not just about price, but also about a number of other aspects, such as :
- general terms and conditions
- special conditions
- service levels
- confidentiality agreements
- intellectual property, etc.
The objective? To ensure that the clauses negotiated are as advantageous as possible for the company, while remaining acceptable to the customer.
Stage 3: Approval and signature of the contract
Approval becomes effective when the contract is signed by all the parties concerned. This conditions the launch of the project under the terms approved by both the company and the customer.
The contractual document is stored according to the archiving system set up by the organisation (paperless system, for example).
Stage 4: monitoring the project
This stage, which takes the longest, involves monitoring the implementation of the project to ensure that it is in line with the terms of the contract, right up to its expiry, termination or renewal.
This is when the deliverables are produced. The contract manager then ensures that they meet the contractual requirements, particularly in terms of :
- deadlines
- quality
- compliance with sector regulations and any changes to them.
At the same time, the customer must make the first payments if agreed in the contract.
Stage 5: Closing the contract and contractual relations
The purpose of this stage is to complete all the tasks relating to the contract in question, such as managing and checking the last invoices.
However, if the contract is renewed, the life cycle of the contract starts again. In this case, certain phases, such as negotiation, are quicker (because they are based on what has already been established). They just require a few adjustments.
Stage 6: Audits and analyses
Ideally, the contract manager carries out analyses at the end of the life cycle of each contract, to identify any areas for improvement.
This is also an opportunity to gather customer feedback.
What is a contract manager?
Contract managers are becoming increasingly sought after as a result of the growth in contract management activities.
As a cross-functional role, the contract manager is at the heart of project management, while also taking on more commercial, legal and relational functions (customer and supplier relations). So much so that they are often attached to different departments within the same company.
Understanding the contract manager's field of action and skills means understanding all the issues involved in contract management.
The tasks of the contract manager
Here are the main tasks carried out by the contract manager:
- Analysing the project environment in order to understand the ins and outs of the future contract.
- Drafting and negotiating the contract, taking into account the customer's needs and the functional, environmental and technical characteristics of the project to be carried out.
- Regulatory and contractual management. This includes knowledge of all the regulations in force in the company's sector of activity, so as to :
- draw up contracts in due and proper form ;
- settle any commercial disputes effectively.
- Identifying risks (legal, financial, commercial and operational) and their level of criticality, and proposing solutions to protect against them, in line with agreed clauses and legal obligations.
- Advising project teams, particularly on administrative and purchasing processes.
- Liaising, particularly in the event of disputes or during the negotiation phase.
- Identifying opportunities to ensure the best possible profitability.
- Budgetary, economic and financial management.
- Legal monitoring.
Contract management training
There are several routes into the contract management profession. In particular, there is a specialised course leading to certification, run by the E2CM (European School of Contract Management).
It should be noted, however, that because the profession is new, many contract managers are lawyers who have chosen to change direction with the years and experience they have gained.
What about contract management software?
As we have already mentioned, contract manager positions are still largely the preserve of large companies.
That's why we're seeing the emergence of contract management software, known as CLM (Contract Lifecycle Management).
What are their objectives?
- To streamline and automate as far as possible all the tasks involved in the contract life cycle;
- to save companies as much time as possible ;
- while limiting the risk of errors and loss of money.
To illustrate our point, let's take the example of recurring contracts, with no particular features or complexity. Thanks to a dedicated tool, it is now possible to draw them up using templates, for greater productivity.
Which contract management software should you choose?
🛠️ The contract management module in the DiliTrust Governance suite allows you to :
- centralise all your contracts and leases for greater visibility within a single secure platform;
- structure and automate contract lifecycle management processes as far as possible;
- never miss a deadline thanks to the alerts system;
- ensure traceability of actions (creation, update, consultation, modification, etc.) to facilitate audits.
With DiliTrust Governance, companies have more bandwidth to devote to high added-value contract management activities, such as negotiation.
From now on, contract management will hold no secrets for you.
As you will have realised, a contract is more than just a piece of paper; it involves many issues. Properly managed, it can guarantee a better margin. On the other hand, it can give rise to disputes, which can be time-consuming to manage and have damaging consequences for your company's reputation. All good reasons not to take contract management lightly...
Article translated from French