What is a Contract Management Plan: How Strategy Can Improve Your Contract Procedures
Businesses today juggle more contracts than ever before, meaning that an effective management strategy is imperative to ensure that these agreements reach their full potential. When your business takes the time to implement a strong contract management plan, routine contract work will run much more smoothly through efficient oversight of the lifecycle.
What is a contract management plan?
Contract management plans are both practical and useful. Contrary to popular belief, they are more than just a summary of the agreement. CMPs are working documents that bring together all of the practical details needed to manage your agreements efficiently. This includes key contacts, critical milestones, delivery statistics, performance measures, etc. When your business has a clear plan in place, it is better equipped to tackle agreements efficiently and account for any issues that may occur down the line.
Who needs to create CMPs?
Every business should create contact management plans for their key agreements. It is a tool that helps your legal team, contract manager, procurement officer, and any other parties involved in the administration of an agreement. With an effective plan, your team can easily define, monitor, assess, and fulfill obligations. It’s helpful to think of the purpose of a contract management plan as a blueprint to complete your goals.
Creating a contract management plan outline
Having a detailed strategy before you begin the contracting process helps to give your team a clear set of goals and instructions on how to meet those goals. However, to have a solid management plan, you need proper methodology. Being as detailed as possible in your plan is essential because it ensures clear communications between stakeholders, clients, and vendors, which can protect high-stake agreements and reduce risk.
Here are some of the key elements of a contract management plan:
- Assigned roles and obligations
- The working relationship between the two contracting parties
- An agreed-upon level of management depending on the value/ risk profile
- Agreement goals and objectives
- Critical dates and deadlines
- Performance management indicators and framework
- Compliance monitoring
- Defined risks and issues
- A clear exit strategy
The components of a contract management plan
Having a contract management plan in place will save you stress, mitigate errors, and ensure that you’re getting the most out of your business deals. Managing key contracts without one is risky, creating room for diminished relationships, lost productivity, and even financial losses.
In order to have an effective agreement management strategy, there are a few critical components that you must include in your plan:
- Administering the contract and managing the parties’ relationship
The first step in contract management plan implementation starts with administering the contract. This includes identifying the obligations and details of each party, determining the relation between the stakeholders, and devising a risk management strategy. Once the agreement is in place, you must strategically monitor the relationship between you and the other party. To do this effectively, you should track compliance to ensure that both sides fulfill their obligations.
- Service delivery requirements
Next, your management strategy should include a method to track the performance of your agreement. To monitor service delivery requirements, you should use a timeline of key milestones, deliverables, and payment dates. Once your timeline is figured out, you will need to determine how to achieve your key deliverables and ensure they meet quality standards by measuring their KPIs.
- Financial details
Without a clear strategy for the monetary elements of an agreement, the other party may submit late payments, underpay you, or submit invoices less frequently than you agreed upon. To optimally track the finances of an agreement, you should outline the payment procedures and frequency of the deal. Then, make the invoicing requirements clear to the other party.
The benefits of an effective agreement management planning strategy
A strong contract management planning strategy is necessary for any company that wants to get the most out of its partnerships. Having one in place allows your team to focus on what needs to get done rather than hastily figuring it out when errors have already occurred.
Some of the most noteworthy benefits of implementing a management strategy include:
- Effectively monitoring and mitigating risk by using information gained from the plan
- Boosted tracking of performance and obligation compliance
- Improved lifecycle organization that leaves room for productive collaboration
- Easily manage and support the development of fundamental business relationships
- Reduced financial expenditures and increased profit margins of agreements
Developing a contract management plan using intelligent software
A foolproof way of developing a strong management plan is by utilizing the automation features of a contract management platform. A data-driven management solution with a cloud-based repository and collaboration features fosters easier information navigation, effective strategizing, and quicker deal closures. An end-to-end solution allows you to implement a plan that will ensure that your agreements reach their full potential and encourage healthy business relationships.