What does this module / this process contain:
Creation: The contract management process begins by identifying contracts and pertinent documents to support the contract's purpose. Templates are used to create the contract, which automatically assemble a contract from several text modules based on the results from the eSourcing tool.
Collaboration means negotiating the contract. After the contract has been drawn up, the employees are able to send the contract to the supplier, track change requests and compare contract versions with the supplier and note any deviations in order to shorten the negotiation time.
Approving the contract: getting management approval is the step where most bottlenecks occur. With tailored approval workflows including parallel and serial approvals, decisions can be quickly sourced internally.
Signing the contract with a digital signature saves both parties an enormous amount of time.
Tracking the obligation management: This requires a great deal of project management to ensure deliverables are being met by key stakeholders and the value of the contract isn't deteriorating throughout its early phases of growth. Tracking revisions and amendments: gathering all documents pertinent to the contract's initial drafting is a difficult task. When overlooked items are found, systems must be in place to amend the original contract.
Auditing and reporting: Contract management does not mean drafting a contract and then pushing it into the filing cabinet without another thought. Contract audits are important in determining both organizations' compliance with the terms of the agreement and any possible problems that might arise.
Renewal: Manual contract management methods can often result in missed renewal opportunities and lost business revenue. Automating the process allows an organization to identify renewal opportunities and create new contracts.
Upload of the contract to Procure-to-Pay: this contract can be selected like items and all items ordered in the e-catalogue will be automatically linked to the corresponding contract.
What are the main goals:
- Ensuring quality is related closely to the concept of adding value but has more to do with the employees you have on contract than it does with the vendors you take on board. The contract management process is essential in making sure employees follow and respect the company's policies and procedures and, in turn, are welcoming, friendly and open to communication with customers.
- Process cost reduction is achieved because the supplier always uses the currently valid contract template and no new clauses are agreed that result in complex approval processes.
- Risk reduction through automatic reminders when contracts can be terminated, but also through risk management capabilities integrated in the tool (for tools that offer AI and ML capabilities).
Specifics per industry:
Manufacturing has some special requirements for contract management, because mostly no contracts are created for individual parts, but rather framework agreements are made with suppliers. In addition, production companies have a number of additional standard contracts that they conclude with suppliers, starting with non-disclosure but also agreeing on quality agreements and supply contracts.
Construction industry has special requirements as you create contracts with a general contractor and owner or developer and multiple suppliers in one contract.
Latest innovations:
Generative AI in drafting and negotiation: contract tools now draft clauses, compare a supplier's markup against the company's playbook and suggest fallback positions. Contract AI has become strategic for large software vendors: Workday acquired Evisort in 2024 for this reason.
Risk management based on AI: Thousands of old, existing contracts are automatically read out here and risks in the contracts are analyzed fully automatically using AI. This can also be used to identify payment terms, special liability clauses and guarantees without having to manually read and categorize a large number of contracts.