What is contract management?

Contracts are essential to ensuring that both parties in a business agreement are protected by law and know what is expected of them. Contract management platforms help businesses stay on top of their contracts by assisting with the creation, editing, and upkeep of agreements. 

Because a contract is an ongoing agreement, you can’t simply sign it and then forget about it — you need to continually assess it to ensure that it meets your needs and that you are still adhering to its terms. 

How does the contract management process work?

A clear agreement in a contract ensures that you know your responsibilities and the deliverables you can expect. Contract management is the process of overseeing all areas of your contract throughout its lifecycle. Understanding contract management keeps you compliant and minimizes potential risks. 

Contract management has various phases:

1. Drafting: This is the beginning of a contract between two parties. During drafting, a written agreement states each party’s obligations and other terms of the contract, like important deadlines.
2. Negotiation: If one or more parties are dissatisfied with or need to update the contract’s terms, the parties can negotiate to reach a compromise that works for everyone involved. 
3. Execution: Once all parties agree to the terms of the contract, they can sign the document, making it a legally binding agreement. 
4. Monitoring: A contract is valid until it ends. Monitoring it to ensure that all terms are still relevant and both parties meet all obligations is essential to avoid contractual problems. 
5. Reassessment: Once the contract period ends, it’s time to reassess what to do next. Usually, parties can decide to either renew or terminate the contract. 

If one party fails to meet the contract’s terms, you can take steps such as suing or claiming damages for breach of contract.

For those who do not have much experience with contracts, managing them throughout their lifecycles can be challenging, especially when they need to stay on top of multiple agreements. Fortunately, contract management makes the process much easier. 

Who can use contract management software? 

Most people use contracts for all types of agreements — from home leases to business deals, employment arrangements, personal arrangements, and more. However, contract management is best suited to businesses and professionals. While any business uses contracts and can thus benefit from managing them, those who will benefit most are companies or organizations that deal with large amounts of complex agreements.

Here are some businesses that commonly use software to help them manage contracts throughout their different stages.

1. Legal professionals

Legal firms deal with contracts much more than any other business type — in fact, there’s an entire branch of legal practice dedicated to contract law for businesses, people and groups. Lawyers need to manage their own business agreements, but they’re also in charge of creating and managing contracts for their clients. 

Even though lawyers are experienced in working with contracts, using a contract management platform can lower the chance of problems and ensure that everyone complies with relevant terms. 

2. Financial professionals

All contracts are important and deserve attention to ensure that everything included in them is in order. However, when it comes to financial contracts, even more diligence is needed, as problems with a contract can have severe consequences.

The terms in financial contracts need to be completely accurate, and the consequences for breaking those terms need to be laid out. Businesses specializing in Finance can use contract lifecycle management software, but any company with a finance department should consider this investment. Integrating a contract with your workflow can ensure you pay all fees on time and avoid the penalties for missing deadlines. 

3. Human resources departments

Human resources (HR) departments are in charge of all job offers and ongoing employee agreements, which means they need to create and monitor multiple contracts while also knowing the procedures for what to do if someone terminates the agreement. 

Contract management platforms free up time and allow HR managers to smoothly onboard and offboard employees and answer any questions they might have about their contract terms. 

The benefits of contract management

If you’re considering using contract management software for your company, you may want to know why. After all, investing in a new platform is a big business decision, so knowing its benefits and importance can help you determine whether it’s the right move for you.

Here are some of the main advantages of leveraging contract management.

1. Increased efficiency

Managing contracts is a time-consuming task, which means that investing in tools to make this process smoother and more efficient frees up more time, which your team can spend on productive tasks. 

Technological advances also allow businesses to speed up the contract process so that they don’t need to start each contract from scratch, saving even more time and boosting efficiency. 

2. Improved security

Many businesses prioritize security, and contract management platforms also care about ensuring their customers’ safety. Because contracts contain confidential information, keeping this data secure is essential. In the third quarter of 2024, data breaches exposed over 400 million private records, meaning companies need to double down on their online security.

Systems designed to manage contracts often have advanced cybersecurity measures in place to help you keep your digital information secure. 

3. Better insights

Businesses are built on insight. The more access you have to data and information, the easier it is to make informed decisions and understand how your business works. Contract management platforms can help you assess how well previous contracts perform so that you can determine what works and what doesn’t and implement that knowledge in your future contracts. 

4. Reduce risk

One of the main reasons so many companies are turning to technological solutions rather than people is that technology is less prone to mistakes. Humans are more prone to errors, especially when they need to handle large numbers of contracts within a short time. 

Contract management platforms help ensure legal compliance. It also helps provide accurate and relevant information without missing any critical details. 

What is contract management in project management?

Any big project requires multiple contracts. Since project management is fast growing and expected to reach a market size of more than $15 billion by 2030, knowing how to improve this department can benefit your business. Your company needs to have agreements in place with everyone involved in the project, from customers to vendors and employees, so platforms that manage these documents can be a big help.

Some of the ways that contract management and project management intersect include:

• Clarity: The clearer a contract is, the easier it is for everyone involved to perform their duties because they know what is expected of them and, more importantly, what they’re legally obliged to do. 
• Cost management: Upfront agreements about costs must be included in the contract so that no one gets taken advantage of due to unexpected expenses. 
• Quality insurance: Contracts also clearly stipulate what is expected from each party in terms of timelines, deliverables, and quality, and having these terms in writing on a platform helps ensure that the expected level of quality is achieved. 
• Alignment: When both parties have a contract, they can align their expectations to ensure no one is disappointed.

Reach out to Agiloft to streamline your contract management

Contract management platforms streamline the contract management process to ensure all parties are in compliance, setting your business up for success. Agiloft is a global leader in contract lifecycle management, and our platform can provide you with the insights you need to grow.

If you’re ready to upgrade your contract management, schedule a custom demo today.