Manage Contracts Effectively

Managing a contract is all about ensuring that the parameters of that particular contract are followed according to the guidelines laid out.  The contract needs to be managed consistently as long as its cycle continues so that it is fulfilled properly.  But as an entrepreneur, how do you manage contracts effectively so that your business is on track?  What do you do to ensure that there are no roadblocks?

Lay a Strong Foundation

The first and the most important thing to focus on is having the right contract in place so you’ve got a good foundation to start with.  Even though this tip sounds obvious, it’s ignored by many.  Look at the formal contract as a kind of framework that allows you to grow your business relationship.  A poorly constructed contract makes it difficult to take the relationship to the next level.

“Contracts, yeah”.  Recruit Reporting. by 小猫王, on Flickr.  This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License.

Focus on Contract Management

As an entrepreneur, you should be ready to manage not one but all the different aspects of your contract.  Contract management is basically made up of relationship management, service delivery management and, of course, contract administration.  These three areas are to be focused upon equally and are usually outsourced to competent third party management systems like Contract Logix.

Create Value for Money

Every business knows the importance of creating value for money, which can only be ensured when there is balance between the value received and the quality of service given.  This is why you need to encourage more innovation and improvement from the supplier’s end.  When managing the contract you should consider all associated costs such as the cost to set up, recurring/fixed costs, and also company’s own overhead costs.  As far as providing price comparisons are concerned, benchmarking can definitely help.

Manage Risks Efficiently

In contract management, risk comes into play when the outcome is uncertain – regardless of whether it is negative or positive in nature.  So what does it mean to manage your risk here?  It is when you identify and control certain factors that you know can have a significant impact on the contract’s fulfillment.  Once a risk has been clearly identified, it shouldn’t be ignored.  It has to be recorded in a formal “risk register”.  This register then is to be assigned to someone who actively manages it while focusing on best risk management practices.

Work on Relationship Management

This is a key area that you need to work on to effectively manage contracts and get the most out of them in the long run.  Managing the relationship starts with increasing mutual trust and improving understanding.  From there it moves to being more open in communications and putting in effort to improve them so that problems are identified and taken care of early on.  And finally, it’s about putting in joint effort to manage the delivery aspect and ensure that everything goes smoothly.

Finally, see to it that you have procedures established so that the contract documentation is up to date.  It’s important that all changes are controlled.