Contract management plays an important role in improving the efficiency of businesses. Let’s have a look at the top contract management trends in 2020.
No matter what type of business you have, one aspect that plays a great role in your organization’s function contracts. It is a contract that forms the backbone of all the relationships that a business has with its customers, partners, and suppliers.
It has been said that a contract management process that guides the contract lifecycle can break or make an organization. So, it is quite essential to have a sound contract management system.
In this discussion, you will get to know about top contract management trends. But before that, let’s know the contract management definition.
Also Read: Electronic Signature is the Future of Business Contract Signing
What is Contract Management?
Contract management is the process of managing the creation, execution, and analysis of the contract. A business always looks for a way to lower the risk and enhance the efficiency of the operation. This is where contract management comes to play. Effective contract management can greatly take your business performance to the next level.
To understand how it works, you should know about the types of contract management. Here are the different types of widely used contracts:
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Fixed Price Contract
Under this, the service provider offers a particular service for a fixed time period. The receiver will pay a certain amount of money.
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Unit Price Contract
This form of contract is food when multiple contracts require different expertise for initiation.
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Cost Reimbursable Contract
It includes cost reimbursement for the expenses that happened during the contracts. However, here the service provider must provide detailed information about the allocation of resources in the project.
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Incentive Contract
Such contracts are quite standards for contracts that cover pilot programs or harness the latest technologies.
No matter what the contract type is, all the contracts go through certain stages. All these contracts follow some common stages of contract management.
Stages of Contract Management
Contract management can result in significant improvements in terms of cost savings and efficiency. Effective contract management is achieved by following different stages of contract management. Followings are the stages of contract management:
Stage 1: Initial Requests
The process starts with the identification of the contracts. Besides, it covers the verification of documents that can support the sole purpose of the contract. This step is also called drafting an agreement.
Stage 2: Writing Contracts
All the terms and conditions need to be written very carefully and clearly. If you go for a manual writing process, then it can take a lot of time. But by using the best contract management system, you can do it quite easily.
Stage 3: Contract Negotiation
After the draft, the negotiation process between the involved parties starts. The negotiation can cover factors like pricing structure, rights, terms & condition, renewal & termination of the contract, and more. While negating, there should be transparent communication between the parties.
Stage 4: Approval of the Contract
This is the stage where most issues will occur, and it is quite natural. However, every organization needs to have the best workflow for contract approval. Besides, one also can follow a tailored contract approval process, like serial or parallel approval.
Stage 5: Contract Execution
After all the stages, the execution of the contract by all the involved stakeholders begins. Here the participants need to sign the contract to show their consent. To faster the process, one can utilize an electronic signature to sign the documents.
Stage 6: Obligation Management and Auditing
Remember that contract management doesn’t end after the execution of the contract. There are some post-execution formalities that need to be followed. It is quite vital to make sure that the parties are meeting their required obligation related to their payments, timelines, and performance.
Besides, the contracts need to be audited periodically. This helps to detect the possible risks. Experts suggest that regular auditing helps in implementing an effective risk mitigation system.
Stage 7: Contract Renewals and Termination Management
As the contract duration reaches its end date, you need to keep track of the contract’s renewals or termination. Remember that if you miss the contract renewal date, then it can lead to a considerable loss. Besides, it can affect the relationship with stakeholders. Furthermore, it also implies you will have to initiate a new process based on the requirements of the same contract.
The best contract management system can help you with that. However, with time contract management has gone through a massive revolution. Thanks to the rapid advancement in technology, contract management tools have gone to a whole new level.
There are different ways in which electronic signatures are changing how contracts are signed. Read on our previous article to understand the importance of Electronic Signature for Contracts.
Top Contract Management Trends
If you want to get the best out of it, then it is quite essential to have sufficient knowledge about contract management trends. So, let’s discuss some trends in contract management in detail. Here are some major contract management trends you should know about:
1. Smart Contracts
This is one of the most critical contract management trends. Speaking about this trend, here, and the intelligent codes automate the performance of the agreement’s crucial aspects. It works based on the provided data. To understand this, you can take some instances like applying discounts for buying from major suppliers, to periodically confirming eligibility for contractors or employees and more. The best thing about the smart contract is it doesn’t require blockchain technology and can also be used with a traditional deal.
2. Smarter AI
AI and machine learning are considered as the major factors that bring revolution in contract management. Smarter AI leads to effective search results. Besides, it lets the system to consume lower bandwidth without compromising the performance. It creates a perfect place where one can easily draft custom contracts.
3. Data Privacy
One of the most significant contract management trends that will remain for years is data privacy. All most all the organizations have understood that compliance is not a one-time effort; it needs to be carried out continuously.
The advanced contract management software can detect what is there in the existing contracts and with whom you are sharing information. It delivers required notifications, collecting consent, and more. All these will help to develop a robust trust among the customers.
4. Easier Collaboration
Contracts can’t be made one-sided. In 2020, more companies will find that collaborating different contracts will be much easier and comfortable than ever. There is no need to have a huge-sized network folder with a lot of iterations of a particular contract. An advanced contract management software will ensure that all are working on the updated version of the contracts.
5. Climate-aware Contracting
In 2019 CDP published a report which shows that around 215 largest organizations of the world are now considering climate change as a major threat to their business operation. So, there is a huge popularity of climate- aware of contracting. Digital contracts mechanism can streamline different processes related to climate-aware contracting.
Those processes can be re-negotiating, updating, and carrying out of supplier agreements. The modern contract management system can effectively reduce the climate impact on contracts. There are different types of contract management available for this.
6. Engagement of Stakeholder
Stakeholders are a significant part of contract management. They can be external and internal. Ensuring effective communication and ideal cooperation between the stakeholders will be one of the important types of contract management trends.
An effective stakeholder engagement brings out perfect solutions to resolve conflicts. Besides, with this, the contract management team will feel more empowered to act efficiently.
7. Digital Identification
For all the major contracts, industry regulation may ask for from the verification, may be in-person ID verification. For effective ID verification, different US states are now planning to come with digital driver licenses pilots.
In 2020, people will witness the introduction of eID programs. So, it is expected that most of the contract management technologies will leverage these standards for identity verification. It will greatly simplify the process for consumers as well as for businesses.
8. Faster Workflows
The technological advancement in this field has made contract management systems more effective to automate the process. Now, one can use electronic signature for the faster workflow in contract management. Once done, the contract management system will immediately send a reminder to the higher authority to sign the contract. Furthermore, the cloud-based software makes it quite easier to check the current status of the contract.
Also Read: Top 10 Uses of Electronic Signature
9. Risk Analysis
Effective risk analysis will be emerged as one of the crucial contract management trends to follow in 2020. The modern contract management systems are now becoming a full-fledged contract system. They are capable enough to perform an effective risk analysis of different contracts. With this, the organizations can now prevent accidental breaches.
10. Employee and Customer Experience
There is no doubt that experiences will emerge as a vital factor that can drive both employees and customers’ satisfaction. So, in the year 2020, we can expect to witness more efforts to experience personalization.
Besides, some systems may come equipped with a feature to anticipate customers’ requirements in advance. In the world of contract management, this means completing all the required paperwork on a different device. This will be one of the major contract management trends in the coming years.
Why is Contract Management Important?
Before going deep into the contract management trends, let’s understand why is contract management important. For this, you can consider understanding the benefits of contract management. So, let’s have a look at some major benefits of contract management.
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Helps to Keep the Business Functioning
It has been proved that efficient contract management can significantly assist in simplifying how a company operates. It gives a perfect shape to the company’s expectation and evaluates the required mechanism to fulfill the expectation.
Besides, it lets the business owner understand how they can meet the objectives. The information obtained from the contract management can help you in identifying the areas which can be optimized to generate more revenue by reducing the cost.
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Enhances Functional Efficiency
Some contract management trends are based on this benefit of contract management. If you go for the best contract management techniques, it utilizes advanced level software and tools. These tools completely automate the process of contract management.
By lowering the amount of manual effort, this dramatically enhances the efficiency of the business. As a business owner, you can now focus on strategic factors of contract management. For example, detecting and working on the areas for improvement, analyzing the performance of the contract, and more.
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Reduces Maverick Spending and Enhances the Spend Visibility
Different studies have proved that contract management can greatly simplify performance and transactional tracking. You might be thinking how? Contract management structures the engagement of a business with its suppliers and other stakeholders. This effectively enhances spend visibility and transparency. You will be able to know where your investments are going.
One of the most common issues that every business deal with is “Maverick spend.” When you have better spend visibility, that can help you to an agreement with undocumented expenditure. Besides, contract management also helps you in identifying various cost savings opportunities.
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Enhances the Supplier’s Visibility
Suppliers play a major role in every business. Most of the companies involve suppliers to deal with products and services. This positively affects performance. With proper contract management, a business can track its suppliers, access their performance based on certain criteria given in the contracts. Besides, contract management acts as an ideal mechanism to build a long-term relationship with the business’s suppliers.
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Helps in Improving and Enforcing Compliances
A contract management system which can recite procedures, terms, and conditions can help in implementing and enhancing compliance level among the stakeholders. With this, an organization can lower the chances of some serious risks.
There are a number of benefits that an electronic signature can bring to your business. Here are the top reasons to adopt Electronic Signature for Your business.
Other Significant Elements of Successful Contract Management
If you think it is enough to have a professional to handle the contract management, then you are wrong. All the employees need to be aware of the process and software to satisfy growing compliance requirements. By successfully implementing a contract management strategy, a business can expect the following things:
- Realization of projected organizational benefits and ROI
- Supplier’s cooperation and responsiveness toward business requirements
- Effective elimination of different contract disputes
More companies now realize the real importance of using a contract management system. With the successful integration of such software, you can quickly free up countless manual works and automate all the contract management process. However, don’t forget to consider these contract management trends.
Keep in mind these contract management trends and choose a contract management system to attain competitive advantages!
