Contract Monitoring and Evaluation with Contract Management Software
Contract management software enables organizations to more easily and effectively manage the contracting process, from creation though negotiation to completion. But contract management doesn’t end when parties sign a contract. Rather, another crucial phase of contract management begins – the monitoring and evaluation of the contract’s performance. Therefore, a complete contract management solution also must improve and facilitate post-execution management.
Editor’s Note: To learn more, download our whitepaper on the top 10 contract management best practices.
In this regard, contract management software becomes an integral part of an organization’s overall customer relationship management. Well-managed contract performance monitoring usually leads to improved relationships with valuable customers and vendors.
Post-execution contract management also involves revenue maximization, and contract management software can provide alerts and automatically precipitate actions (e.g., seeking refunds when allowable) to ensure that organizations take advantage of all revenue opportunities.
Measuring the Bottom Line: Contract Management Software Reveals the Value of Contracts
The ultimate purpose of contract management –as with any business process — centers on increasing profitability. Negotiating the most-favorable contract terms and tracking compliance increases a contract’s bottom-line value, but some contracts nonetheless still under-perform relative to expectations.
Perhaps a customer routinely pays late or is high maintenance. Or maybe a supplier frequently misses agreed-upon shipments, causing a revenue loss that the contract terms do not adequately compensate. Or a vendor may simply provide poor service.
Whatever the reason, if a contract fails to provide sufficient benefit or, worse, hurts the business, then you need to avoid similar contracts in the future by renegotiating terms or terminating that particular contract relationship.
“A crucial step in making renewal decisions and evaluating vendor/client relationships is assessing the financial and business benefit of an individual contract,” states the Association of Corporate Counsel in an article on how to provide enterprise-wide contract management. “Innovative companies build management reports that will provide the necessary information to evaluate terms such as warranties, pricing, quality guarantees, service levels, and return policy.”
Contract management software provides ideal support for this evaluation effort by providing automated data generation and reports on all aspects of a contract’s financial impact – whether positive or negative.
Ensuring Legal Compliance: Protection Against Costly Mistakes
Organizations reap another crucial benefit from tracking contract financial performance with contract management software — the software can simultaneously provide alerts for cases of legal non-compliance. Contract management software can flag all non-compliant actions, supply necessary legal documentation, safeguard against missed legal deadlines, and provide evidence of responsible accountability.
This need for legal diligence applies to more than an organization’s own actions because the legal missteps by a contract partner can also have severe negative financial ramifications. Contract value in every other area can be quickly undermined by sloppy legal compliance. Contract management software ensures that legal compliance receives the close attention it warrants.
Pointing the Way: Contract Management Software Shows What Works
In addition to supplying valuable information about how a particular contract performs and whether it should be renewed, contract management software generates data that can be analyzed for strategic opportunities in future contracts with other clients or vendors. If elements of the contract prove particularly beneficial, these features can be identified and emulated. If other aspects create problems, they can be modified or eliminated from the contract model.
This input into future contract design and the desirability of specific types of business relationships serves as icing on the cake. On top of its ability to maximize contract profitability, reveal contract problems that must be resolved, and enforce compliance, contract management software provides highly useful business intelligence to help guide strategic direction and minimize risk.
Takeaway
The contract management process doesn’t end once a contract has been signed. That’s why it’s important for your contract management processes to also cover the ongoing monitoring and evaluation of executed contracts. Contract management software plays an important role in this phase by helping you understand the real value of contracts, ensuring legal compliance, and providing insights to improve the design of your future client and vendor relationships.
