Contract management is the systematic recording, administration and analysis of all contractual obligations of an organization with its service providers. It provides an overview of contract management with regard to

• Contract status (active or terminated),
• terms,
• documents,
• notice periods and
• costs as part of contract controlling

This means that contract management is much more than just document management. Contract management primarily means the systematic filing of contract documents so that they can be retrieved more easily at a later date. This is merely the basis for structured contract management.

Since contract management deals with all the steps in the contract lifecycle, it is also referred to as "contract lifecycle management" (CLM). The contract lifecycle includes many phases, from the initiation of a contract to its creation and negotiation, review, various approval processes, signing, and fulfillment, all the way to legally compliant and audit-proof archiving.

Have you also been confronted with questions like the following by superiors or colleagues?

• Where can you find the e-mail correspondence and contact history that resulted in this draft contract?
• Which employee in which department was responsible for negotiating the terms of the contract in a specific case?
• To which purchase order with which purchase order number does this contract document refer?
• Hasn't this contract already been terminated?
• By when do we have to cancel this contract to avoid another billing period?
• Is this invoice received justified?
• Where are the follow-on contracts to this contract filed?

We all know the still most common digital tool for contract management: Excel. One tries to create an Excel list of the contracts with all modalities, which is already a first step towards a better overview. At best, this also gives you an overview of costs. However, an Excel list cannot be called a contract management system. A contract list or table does provide an overview of which contracts have been concluded, which ongoing costs are incurred and who is responsible for which contract, but this is often the end of its possibilities.

In most companies, contract management is divided into contract administration and contract control.

Contract administration

Contract administration includes the following aspects of contract work:

• proper archiving of all documents
• structured organization that enables all parties involved to work with the contracts
• regular checks of contract deadlines
• Digitization of analog contracts and documents to achieve a paperless office.

Contract control
 

Contract controlling is concerned with the analysis and evaluation of the contracts organized in contract management. Those responsible for contract controlling ensure that...

• contract data is evaluated and the appropriate conclusions are drawn.
• contract risks are identified and managed.
• contract obligations such as payments and services are fulfilled.

A typical work process could, for example, consist of identifying a contract that is “useless” or risky for the company in the contract controlling process. The contract administration then takes over the termination and communicates this information to all parties involved.

Dedicated contract management software supports its users by automatically reminding them of review and termination deadlines and minimizing administrative work at all stages of the contract lifecycle. As a result, users no longer miss termination deadlines and are regularly reminded to review existing contractual relationships. But that's not all: good contract management software supports all steps and processes in the contract lifecycle. For the following twelve reasons, you should definitely not do without a contract management system:

At Projektron, we currently have 23 ongoing cell phone contracts for our company cell phones. This can easily lead to missed cancellation deadlines and thus to unnecessary costs. In the past, it happened that contracts had been cancelled long ago, but invoices received by mistake were still ordered to be paid by the processor. Only later did an audit reveal that the equipment mentioned in the invoices was no longer being used at all.

To avoid such costly errors, we recorded the mobile phone contracts individually per phone number in Projektron BCS in addition to the framework contract. The structured filing in the contract management system enables us to:

• Invoice verification, as the monthly costs are stored in the system.
• Subsidization of cell phones
• Rate optimization (rate adjustment is based on the usage behavior of individual users)
• Overview of termination dates such as next possible end of contract or next possible termination date

Good contract management software organizes contract inventories and effectively prevents you from forgetting deadlines and dates. As such, it is an effective cost-saving tool, in that it

• helping to maintain an overview and deadlines,
• facilitating decisions,
• reduces administrative effort,
• automating processes,
• accelerating workflows and
• reduces risks.

If you want to purchase contract management software and already use project management software, it makes sense to choose a system that combines both functional areas. Projektron BCS users can add contract management functions at a favorable price and thus save costs compared to purchasing separate contract management software. With the optional add-on module, you establish fixed and reliable processes for your contract management and integrate contract documents and contract management processes quickly and seamlessly into the workflows of your project work.