There are few things more important than a signed contract. A contract not only gives life to a business relationship, but it also explains in legal language the specifics of the relationship and what the expectations are from both parties, including what KPIs need to be met in order to continue the contract and what compensation is expected. Contracts are used to govern a variety of business relationships, including relationships between employers and employees, between companies and service providers such as law firms and marketing agencies, and even strategic partnerships between businesses and a vendor or supplier that they work with.
It may seem like you do not need a contract to be so specific, but the truth is that every industry needs contracts that are very spelled out from a legal point of view. This means everything from where the parties tend to conduct business, to what the scope of the relationship is and what the contract does and does not cover. This applies to everything from an internship to a merger or acquisition, as legal protections are always necessary in the event that labor is exchanged for learning, monetary compensation, or other factors.
The problem is that most contracts are created quite loosely. Often, companies, particularly smaller ones, will grab boilerplate contracts and make very minute modifications to them. That is not to say that every contract needs to be completely customized. Rather, it means that a contract needs to be measureable and have specific goals in mind. For example, if a business signs a contract with a vendor, there needs to be specific language that dictates what they will be getting, what delivery time they can expect, and what happens if the products they are purchasing from the vendor do not arrive in a timely manner.
Understanding the importance of contract lifecycle management
When creating contracts, all of this needs to be laid out so that it can be tracked and measured. This can be done within a contract management software, which can be used to hold all of a business’s contracts for continual review. Using a contract management software, companies can use a process called contract lifecycle management to get a better handle on their contracts. This can aid you in reviewing contracts and ensuring that they perform in a way that abides by the terms of the contract from when it was initially signed up until the dates that the contract cover lapse, as well as through renegotiation and potentially ending the contract if it is not working for you.
To fully integrate contract lifecycle management into your contract workflow, you will first need to create standardized contract templates to define each of your different relationships. While this doesn’t mean you should use an entirely boilerplate contract that you found online, what it does mean is that you should create contract templates that makes sense for the type of business you are. Of course, within these contracts, you will want each to meet a minimum standard, including contracts that govern people you hire and contracts that govern the relationship you have with other businesses you are transacting with.
Once this occurs, you can then utilize the contract lifecycle management process to actively manage all of your contracts and continually update which stage they are at in their overall lifecycle. This prevents anything from negatively impacting the contract creation, negotiation, analysis, and renewal process, and is the key to having contracts that work for your business and are both enforceable and organized.\
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