A contract outlines the terms and conditions for a transaction between two parties. For instance, a consultant contract specifies the work a business wants a consultant to perform, from holding seminars to training managers. Once a contract is signed, the contract assumes legal meaning. If a party does not conform to a contract’s terms, the business may file a breach of contract lawsuit.
In today’s business world, a contract is the insurance policy behind business transactions. A given corporation has hundreds of contracts relating to all kinds of internal and external transactions. Contracts are meant to specify a party’s work for the business. For example, when a vendor agrees to deliver materials to a company, a contract specifies which days he will deliver them and how much he will charge them per delivery. Contracts are beneficial for both parties because they spell out when the business will be rendered goods or services and when the other party will receive payment. However, without contract lifecycle management, it is simple for a party to claim to step outside a contract’s boundaries.
Contracts are complex documents that require painstaking organization, regulatory oversight, and joint understanding between parties. Often, contracts concern entire teams of workers, so it is essential that each team member understands his or her role as outlined by the contract. Contracts typically address the entire work cycle of an undertaking, from the initial setting-up of a project to its final deadline.
Contracts are also essential today because of increasing government regulations. For instance, a company that hires an accountant to perform auditing services would present a contract that addresses the recent Sarbanes-Oxley Act. This legislation was released by Congress in 2002, to get a handle on the disastrous strain of corporate accounting scandals. Among the many regulations in the law was that accountants who perform auditing on a corporation are not permitted to give consulting services. Therefore, a contract that hires an accountant to do auditing is required by law to specify that the accountant will not provide consulting to the company. It is of utmost importance that the company keeps this contract in easy reach should government authorities step in to do federal auditing.
When contracts are only paper-based, they are extremely difficult to organize. Losing a contract is a dire situation because a lost contract gives the party leeway to not abide by the contract’s terms. Without a contract, a company has no power to reprimand the party for it. Unfortunately, contracts are so voluminous among corporations that it is easy for companies to lose them.
Therefore, contract lifecycle management is a strategy designed to maintain contract organization and make contracts easily accessible through a secure database platform. Today, the typical contract lifecycle management platform is computer-based. Microsoft Office has contract lifecycle management software that is popular among many businesses. Selectica also has an equally popular software system. Both brands enable companies to save and track contracts related to diverse endeavors, from intellectual property contracts to safety contracts. This software also provides templates to facilitate the creation of new contracts. Furthermore, most software brands permit the company to customize the software to their trade, such as by programming company policies into the software that are automatically included with each contract template. It also enables contracts to “remind” the company of when they are due to expire, prompting the company managers to decide whether to renew or cancel them.
Most contract-management software enables multiple users to access and work on a given contract. This is especially helpful for multinational corporations, who can refer to a contract to remind themselves of job responsibilities or to modify a contract following new government regulations. Moreover, outsourced operations have equal access to the software so they feel connected to the central base of operations. Thanks to contract lifecycle management software, corporate communications are thriving. Employees and stakeholders are feeling more that they have an equal share in the company’s administration.
However, getting employees to understand their role in contracts is a particularly difficult obstacle to overcome because contracts require the interpretation of contract managers. Nonetheless, it is another goal of contract lifecycle management to augment the understanding of the parties concerned in a contract by providing clear-cut language and guidelines. Therefore, since all employees have equal access to the contract database, they can review the contracts in order to remind themselves of a contract’s provisions. The software’s ready access to contracts also enables personnel to input new changes into contracts, such as new prices that fall into a contract’s adjustable-rate parameters. In addition, the software is used by project management personnel in order to remind themselves of deadlines and project goals.
Contract lifecycle management is the ultimate risk-management strategy for businesses. As a result, it is increasingly common at corporations and now part of the common contract manager job description. Therefore, contract managers are required to gain solid understanding of this lifecycle-management software. Fortunately, many university programs in contract management utilize this software as part of coursework.
