What is contract administration?
Contract Administration: Contract management is all about managing and carrying out sales contracts. It includes a lot of different tasks, from planning the event to delivering the goods or services.
Planning is the first step in managing a contract. It includes finding contracting partners (for example, by sending out RFPs), writing up and finalizing the agreement’s details, and agreeing on terms with potential partners, such as payment schedules, performance expectations, etc.
Planning comes before execution. It requires businesses to follow through on their contractual responsibilities, keep an eye on how well they’re doing against the terms and conditions of each contract, deal with changes in scope or price, and settle any disputes.
By definition, contract administration includes all tasks that are “administrative” in nature.
Synonyms
- Contract lifecycle management
- Contract management
What is an administrator of contracts?
A contract administrator is someone on the team whose job it is to make, negotiate, review, and carry out sales and relationship contracts.
It’s hard to picture being able to do so many things simultaneously. But because contracts are what they are, people who work in sales, law, and management all have a part to play in managing contracts. So, unless it’s a big company with transparent procedures, managing contracts involves more than one person.
Contract managers are in charge of many things, such as:
- Writing and finalizing the terms of contracts
- Making sure that the terms and conditions of the deal are followed
- Keeping track of how healthy goals or deadlines are met
- Resolving any disagreements that may arise between contracting parties.
To do their jobs well, contract managers need to know a lot about their companies, including how they work, what the law says, and what kinds of customers they have. Along with buyers and partners, they’ll often work together with the law team and sales reps, so they also need to be good with people.
Why a contract administration plan is important
Taking care of contracts is like working on a job. It has infinite variables that can be hard to keep track of and control. That’s the reason why every business needs a plan.
A contract management plan keeps track of all the details of a deal in one place and ensures everyone on the team is on the same page. It helps with
- Make sure that contractual responsibilities are met.
- Figure out how to make performance or customer service better.
- Keep an eye on changes to the price or scope.
- Lower the probability of breaching the deal by not meeting the terms and conditions.
- Make it faster to settle disagreements.
- Match up the bank records.
- Make each member responsible for meeting their own needs.
Each contract has its own set of rules and standards. Using a blueprint to standardize the contracting process makes each contract easier to handle and follow, but there will always be small details that need extra attention.
In short, a plan should include:
- Objectives, goals, and results that are wanted
- The people who are part of the process and what their jobs and responsibilities are
- Schedules for keeping track of progress toward goals, due dates, or delivery dates
- Metrics used to measure success based on performance
- Budgeting and keeping track of costs
- Measures to ensure quality, such as audits
The plan should have a lot of specifics, but it should also be fluid enough to allow for changes in scope or price, which often happen with contracts. It must also make sure that hiring partners follow through on their promises.
Responsibilities for managing contracts
Ask for bids.
Businesses often use requests for proposals (RFPs) to find the right partners during the planning stage of contract administration. Contract managers are in charge of writing and sending out RFPs.
They must also look for them, since RFPs don’t just appear in someone’s inbox. Contract managers look for possible business partners on job boards, websites specialized in their field, events, conferences, and social media.
Write up contracts
Contracts are complicated papers that need to be changed many times. Every one of them starts with a draft.
Writing a contract could be a group or individual job, depending on how complicated the sales process is. Most of the time, contract managers are in charge of this because they know their company’s rules and procedures better than anyone else.
Most businesses use templates for some parts of their contracts. For instance, terms and conditions are generally set ahead of time. On the other hand, the specifics about the client or partner need to be agreed upon and changed within the company.
Talks about it
As soon as the person replies, the contract negotiation process begins. Many people are making decisions on both sides of the process, which goes back and forth.
When you negotiate, you:
- Looking over each other’s ideas and replying to them
- Talking about areas where people disagree
- Agreeing on prices, terms, conditions, delivery times, and when the job is done
- Writing up the final version of the contract, making sure that the changes that were agreed upon stand out.
To be good negotiators, contract managers need to know a lot about the company’s processes, the law, different types of customers, and so on. They also need to be good at talking to people and negotiating to get the best deals for their businesses.
Set a timeline for the contract.
A timeline is often included in an RFP or contract draft, but it isn’t always a good idea. After negotiating, the person in charge of the contract or who wants to buy it will often change some of the things that are supposed to be delivered to reach a fair deal. This is called “contract redlining.”
Reasonable timelines should include:
- Due dates for turning in or taking specific tasks
- Essential steps that mark significant steps forward in the contracting process
- Dates and times when each side can look over suggested changes and decide whether to accept or reject them
- Dates of delivery
A contract schedule will usually also spell out who is responsible for what, when, and how to do it.
OK for approval
Before the contract terms are set in stone, everyone needs to agree on them. In this step of the contract administration process, the administrator will first get approval from people inside the company, such as the management, law team, and executives. Then, they’ll make it easier for their outside partners to talk to them so that they can be a part of the review process.
To get a possible partner or client’s OK, you might have to:
- Setting up meeting times or conference calls
- Sending essential papers to be looked over
- Make sure there are open lines of conversation
- Getting proof from all members who are affected
There is an internal approval method and an exchange between parties to a contract. At this point in managing a contract, the hardest part is ensuring everyone is on the same page.
A signature
When the deal is official, the person in charge of the contract has to get everyone to sign it. Most of the time, e-signature software is used for this process.
There is no better and safer way to get approval from many people than to e-sign quickly. Contract theft is less likely to happen, and keeping track of changes, updates, and approvals is easier. Plus, everyone gets a copy of the signed paper to keep.
Keeping things
On the inside, contract managers keep all signed documents in one central location. There are current and old contracts here, which the company should always keep in case of a disagreement.
People no longer store things in filing boxes. It’s usually done in the cloud or on a private document management system. That way, managers and everyone in the company can quickly share it.
Multi-layer protection is another good thing about cloud storage. This saves the contracts from threats from inside and outside the company, like accidental deletions or shares outside the company.
Orders to Change a Contract
A change order is a new agreement to the one that already exists. It could include changes to the terms of the contract, the price, the delivery date, or anything else that comes up during the performance of the contract.
Change orders are usually suitable for the company (which would change the contract terms rather than deal with a disagreement) and the party to the contract (who probably doesn’t want to file one).
Contract managers often deal with change orders because things rarely go as planned. If anything, they show that the jobs for managing contracts were done well. Sometimes, both sides are ready to make changes because they have communicated well.
Monitoring for Contract Compliance
Contract compliance takes care of everything, from legal issues to business policy. As the contract administrator, your job is to ensure that everyone who is part of a contract follows that contract’s rules.
Some important parts of following through on a deal are:
- Checking internal processes regularly for any mistakes or issues that might have to do with contracts
- Making sure that the other party to the contract has met all of the due dates, deliverables, payment plans, and other terms of the contract
- Making sure that all parties to the deal follow the company’s rules and guidelines
- Keeping track of what people say to each other to make sure everyone is on the same page
- We are helping partners inside and outside the company if disagreements or misunderstandings occur.
Of course, the person in charge of contracts can’t keep an eye on all of them at once. If something strange about a contract, like a project cycle that seems to last a long time or consistently low-quality metrics from a channel partner, raises red flags and leads to a compliance check,
Management of Renewal
Contract renewal is the easiest way to ensure you’ll get paid for another year (or another time). To handle a contract, renewal management usually includes the following:
- Looking at both sides’ success indicators, such as sales numbers and customer satisfaction
- Responding to comments from both sides about the goods and services offered
- Talking about the terms of renewal, such as price and arrival times
- Making changes to the contract wording as needed to reflect any changes to the agreement
- Getting everyone involved in the refresh process to sign the document
Companies can handle some parts of renewal management. Software for managing contracts that sends emails and alerts automatically, as well as client self-service websites, can all help with this process. Still, the administrator will usually help work out new terms for renewal, like price hikes, savings, or changes to the scope of the work.
Management of Terminations
Not all business contracts are renewed. Some don’t even make it through the whole contracting time. If there is a need to end a contract, it is the job of the contract supervisor to make that happen.
Along with communication, it’s essential to keep all the paperwork about the end of the contract in one place so that everything is easy to find (for example, invoices and past performance measures). This makes it easy to keep track of obligations after the contract ends, like returns or refunds.
If the administrator ends the contract correctly, it will build trust between the parties and could lead to more chances to work together.
But that doesn’t always happen. One example is a customer who doesn’t pay their bills on time, which starts a cycle of threats and warnings. Also, a partner could break a deal.
To ensure that ending the contract always goes as smoothly as possible, the person in charge should have an exit plan that includes a way to file and keep track of disputes and get money back. To avoid these kinds of problems, it’s essential to communicate clearly throughout the lifecycle of a contract.
What is the software for managing contracts?
Contract administration software does exactly what it sounds like: it helps people in charge of contracts keep track of and handle them. It gives all the contracts in the system a central place to store information, which makes it easy to store, access, and share documents with people who are allowed to.
The following are features that most software for managing contracts has:
- Templates already made to make writing faster, with language for important legal terms
- Automated approval processes to get parties on both sides to agree.
- E-signature to speed up the signing process and keep it safe
- Options for extensions and renewals
- Notifications of when something is about to expire
- Keep track of payments
- I could always see the state of the contract in real-time, including updates and notifications.
- Powerful search tools and a document library
- The ability to connect to other programs (such as CRM, ERP, CPQ, and bills)
- The ability to report
Contract lifecycle management (CLM) can be done on a single platform with contract administration software. It’s the best way to ensure the administrator is always on top of their jobs when managing contracts.
Pros of using software to manage contracts
Cost-effective management of contracts
Because managing contracts is complex and has many moving parts, it might be cheaper to use software instead of doing everything by hand.
Software for managing contracts can do things automatically, like writing contracts, keeping track of signatures, entering data, and storing documents. Instead of doing things by hand, this can save time and money. In the same way, technology also means that mistakes happen less often.
Better security and visibility
When you use software, contracts are automatically tracked and saved safely. This makes it easier to get to essential papers when needed and review the whole contracting process.
The administrator can also spot possible risks before they become a problem, leading to disagreements, by observing how each contract is carried out. The boss can stay on top of their work better when they see more and feel safer.
Better collaboration
Software for managing contracts also makes working together easier for people signing the contracts, especially if the platform has features like automatic team sharing. This makes it easy for everyone involved to get to anything they need, like the legal counsel and the sales team. Better teamwork makes it easier for teams to work together and ensures that tasks are completed on time as the contract requires.
Contract Follow-Up
Companies that use software to manage contracts can set parameters for terms and conditions, like when payments are due. This helps ensure that all contracts follow the rules set by the company.
Setting up contract administration management software to limit who can see contracts with private or sensitive information is easy. It is even safer with rules-based access and user authentication.
Efficiency in Contracts
When it comes to contracts, speed is critical. Lead time is the main issue with contracts. The process is slowed down a lot by waiting for approval from a team member who forgot, making changes to a document that takes days, and looking for a specific contract.
By simplifying every step of CLM, contract administration software eliminates processes that aren’t working well. Automating tasks requires fewer manual steps, and everyone involved in contracting can always see what’s going on with a particular contract.
