By UpCounsel Attorney Nate Kelly
Whether you run a software business or a construction company, you regularly enter into contracts. As everyone knows, these legally binding agreements create rights and responsibilities for all parties involved.
What you might not realize is that contract management could make or break your business.
It’s critical that business owners ensure the accuracy and defensibility of contracts at every step of a contract’s lifecycle – from authorship to termination.
What is Contract Management?
Contract management is the careful process of creating a contract, including determining the terms of the agreement. It also covers contract negotiation, renewals and execution (getting the parties to sign off).
Inept contract management can lead to the loss of a big sales deal.
Implementing a contract management system enables your organization to keep track of its obligations to clients, customers and vendors in a way that makes these important details clear to key personnel.
For example, when a salesperson secures a sale of your product to a business or customer, the parties must enter into a contract.
The Importance of Proper Contract Management
Although contract management can be extremely time-consuming and complicated, it is nonetheless an essential part of running a business. Improper contract management can reduce efficiency and can even result in the termination of an agreement should an obligation go unfulfilled.
Among other things, a lack of effective contract management can lead to:
- contractually imposed fines
- missed opportunities for renewal
- soured business relationships
- litigation and legal fees
- customer attrition
- issues with supply and workflow
- loss of goodwill in your industry
Consider a sales contract. A midsize company may be managing 100 to 200 contracts at once. This high volume can result in a slow down in the sales cycle and/ or inaccuracies. If the contract is done right the first time, the sales team is empowered to push a contract through quickly and complete a sale.
On the other hand, inefficiencies created by inept contract management can slow down the sales cycle and easily lead to the loss of a big sales deal.
A Seasoned Lawyer can Help
Fortunately, as a business owner or executive, you don’t have to manage contracts yourself.
Working with an experienced attorney is often the most cost-effective solution, whether your company is a startup or a mid-size or large business. Alternative fee arrangements, including revenue sharing, are often available for contract management.
Additionally, a good lawyer will have the expertise to handle every aspect of the process, including:
Handling a high volume of contracts yourself, on the other hand, could lead to errors and omissions that will have negative consequences for your business. Your lawyer will have the necessary skills to negotiate – and, if necessary, enforce – the agreement.
Your lawyer will have the necessary skills to negotiate – and, if necessary, enforce – the agreement.
Although you’ll want to set prices for your company’s services and determine expectations for your business’s performance (including customer service), it’s highly advisable to outsource contract management and especially the most important aspects of your contract, including drafting the details of the term and termination of the contract. Your lawyer will also have the necessary skills to negotiate – and, if necessary, enforce – the agreement.
The Bottom Line
The bottom line is that contract management is an essential part of any successful business and that as a business owner, trying to handle it yourself is likely not the best use of your time and resources.
By hiring a knowledgeable attorney, you ensure that the contracts your business enters into are enforceable and that they accurately reflect the agreement between the parties.