Aligning to the best practices for combating challenges faced in contract management
One of the major challenges is that Organization’s contracting principles are sketched around the package they use and not with respect to the way they would like to do their business. Late 90s and early 2000 is when organization started to invest on Contract Life cycle management packages / tools. This definitely provided a host of tangible business benefits to the end users and also to the buying organization. But, very soon, companies (esp. in Retail and Manufacturing) realized that the package is not flexible enough to manage the growing business needs such as Globalization, changes in business processes like invoicing against contracts etc.
Addressing these challenges has always posed multiple challenges. But like all other packages, Contract Life cycle management packages too will go through enhancements and upgrades. Creating a layer of best practices and plug-ins can definitely help. Some of other challenges include
- Lack of collaboration internally as well as externally,
- Absence of clear metrics and measurements of contract values and compliance,
- Penalties for non-compliance unknown,
- Lack of tools to track and manage contracts
- And finally poor implementation due to poor articulation of user requirements and organization TCM – Transition Change Management aspects not addressed.
Best practices suggest that before investing on any contract management solutions;
- Create a compelling business case by auditing internal contract management processes, systems, and controls. This will ensure there is no inflexibility in the system.
- From the implementation perspective, a typical package implementation methodology needs to be followed.
Some of the other best practices are:
- Central Repository to store all the contracts and all authorized parties should have access to the past and the current contractual information.
- All sub-agreements should roll up to the parent agreement like Item level to Commodity level to Supplier level and Department to Company to Regional org to the HQ.
- Template based contract creation ensures that the appropriate clauses, terms and conditions are used. Item based, service based, geo based... Templates can streamline contracting cycle time, minimize risk, and maximize compliance.
- Event driven notification and alerts on contracts is the latest trend adoption and use of clause library to reduce lead time and reduce risks.
Finally while running the business by measuring program performance and results, look at the areas of improvement to keep the business evolving.
