Contracts are the most important part of any business and are what make businesses run. They define all of a business’s various relationships, from how suppliers and vendors work with a business to the pay and benefits that an employee is provided for by the business. As such, businesses need a codified contract system to actually manage their contract to make sure that their contracts are sound and to avoid putting their business in legal jeopardy.
Because of this, it is important to know the risks involved in contracts. Not only are you legally responsible for the wording that is any contract you sign, but you also need to abide by any of its key legal provisions. As such, it is important to understand exactly what you are getting into from a legal standpoint when signing a contract. You also need to have a system in place to make sure that your contracts are stored in a contract management system and managed correctly using a process called contract lifecycle management.
Legally Review all Contracts
Firstly, every contract that you intend on signing needs to be reviewed by legal experts. It cannot be overstated how essential this is. Often, companies do not realize how tenable a contract is for them and how it will affect their business. As such, it is important to be aware of how compliant the contract is with laws and industry regulations. The issue here is that many businesses let salespeople and other inexperienced people negotiate contracts on their behalf. This causes problems when a contract is ready to sign with a prospect, as they may have bent the contract terms a bit in order to generate a sale or entice a prospect. To avoid this, make sure that all of your contract are reviewed legally before they are signed so that you are not on the hook for anything that hurts your business in the long run.
Use a Contract Management System
Every business that has contracts needs to actively manage them. The best way to do this is through the use of a contract management system, which is a software that stores all of your contracts. This can be used in conjunction with contract lifecycle management, which is a process that allows you to track the efficacy of a contract throughout its lifecycle. What this means in practical terms is that you should be looking at the KPIs in the contract and making sure that these are being met by both your own business and the other party you are doing business with.
In order to manage your contracts in this way, you’ll have to use the contract lifecycle management process. Not investing in this and the software to go along with it may make the cost of doing business higher. This is particularly the case if you do not enforce specific provisions in the contract in the event of a mistake or a missed deadline by either yourself or the other party.
Ultimately, it is important for your business to benefit from the contracts it signs. By making sure every contract is legally reviewed and tracking it for performance by using the contract lifecycle management process, you will have a much better chance of managing your contracts correctly and avoiding any issues down the road .