Post-Signature Contract Management: The Definitive Guide
Contract development and execution create the issue in such cases. This is where post-signature contract management plays a significant role in better contract performance.
Irrespective of whether it is a customer contract or a vendor contract, desired results often remain elusive—mostly due to the absence of proper oversight. For instance, studies indicate that close to 26% of contracts fail to fully meet their purpose.
What is Post-signature contract management?
Post-signature contract management is the stage after contract signoff when the actual work begins. It consists of two aspects:
1. Contractual compliance: This activity's focus is on the extraction of maximum value from the contract. Contract renewals, terminations, and amendments are examples of activities included in this aspect.
2. Commercial management: Administration of each contract’s financial aspects falls under this process. For instance, it can include aspects like payment schedules, contract utilization measurements, or service credits.
What are the Three Stages of the Contract Management?
To fully understand post-signature contract management, we must understand the phases of the typical contract management cycle. These include:
Pre-contract phase: This is the essential groundwork stage that creates powerful contracts. It starts with contract requirement gathering and analysis. Stakeholders then initiate contract requests to start the authoring process. The contract is drafted via amalgamation of constituents like standard clauses and counterparty information dates. Subsequent reviews and negotiations ensure the best contractual outcomes. Contract approvals after evaluation of the audit trail and the final draft’s review mark the completion of this phase.
Contract execution: Contracts acquire legal status at this stage, with authorized stakeholder signoffs from all involved parties. Physical signatures and eSignatures are the norms. This phase makes all parties legally bound to the contract’s terms.
Post-signature contract management: It marks the commencement of work outlined in each contract. Post signoff, the finalized contract is shared with all parties to inform them of agreed-upon commitments and obligations. Stakeholders accept preset deliverables, milestones, key dates, and other obligations.
What are the Components of Post-Signature Contract Management?
Contracts are the lifeline of every business. These need careful monitoring and enforcement to ensure ideal business outcomes. This is where the following constituents of post-signature contract management prove essential to streamline post-contract management:
Contract administration: This spans the entire contract cycle—right from request and authoring to obligation management and renewals. Proper administration is essential to achieve desired contract objectives.
Detailed contract audits: Regular audits are essential to verify compliance with the contract’s terms and conditions. It involves auditing obligations, liabilities, internal controls, and payments. Contract audits identify areas of non-compliance, risks, and scope for improvement.
Ongoing performance and status monitoring: Post-contract monitoring is crucial to effective contract management and compliance and fruitful partnerships. It ensures that all contractual commitments and obligations are fulfilled as per expectations. Performance and status monitoring also addresses all issues. A central contract repository, reporting tools, and dashboards provided by CLM tools are ideal for ongoing performance and status monitoring.
Penalties for delays, defects, breaches, and shortcomings: These obligations are inbuilt contract terms that monetarily compensate the client in case of contract breaches. Usually, this pre-estimate of losses incurred is agreed upon in advance as part of contractual obligations.
Change request management for long-term contracts: Initiated by either the vendor or client, change requests are proposals that may call for contractual amendments. For example, a change request might be put in by the service provider for price adjustments or timeline extensions due to black swan events like the latest Covid-19 wave.
Risk management: This ongoing process uses risk assessment tools to detect, manage, and mitigate risks in the contract lifecycle. Such risks include those due to the financial, contractual breach, regulatory compliance, or information security issues. This assessment is usually performed across the company’s active contract portfolio to calculate total risk to the business.
CLM tools and Post-Contract Management
Post-signature contract management requires capabilities far beyond that of the traditional document- or spreadsheet-based processes. Contract lifecycle management step up as enablers at this point.
CLM solutions equip businesses with the right data, analytics, reporting, and dashboards for post-contract management. Right from audit trails to risk management and amendments, mainstream CLM tools provide capabilities that address the needs of contract management professionals.
During its initial days, CLM software focused on either just buy-side or sell-side contracts. In other cases, CLM implementations rarely progressed beyond that of a digital contract repository with rudimentary analytics.
Advanced CLM applications can seamlessly streamline post-contract management workflows. It can even recommend possibilities for automation or perform optimal workflow allocation.
As businesses recognized the need for consolidation and management across the enterprise contract portfolio, it paved the way for new-age “Intelligent” CLM software. These highly secure cloud-based tools enable the evolution of contract management from that of a tactical function to a more strategic role.
Intelligent CLM and its evolution
Intelligent CLM solutions like SimpliContract ensure end-to-end management of contract lifecycles. Identification of non-productive legal tasks fit for automation is a notable example of what smart CLM brings to the table.
Artificial Intelligence (AI) and Natural Language Processing (NLP) in CLM applications enable businesses to achieve seamless post-contract management—right from execution and performance tracking to amendments and renewals. For instance, the NLP-based capability to automatically extract obligations is a great boon for sales teams. Another case in point can be purchasing insights that help procurement teams to identify maverick spending.
SimpliContract’s Intelligent CLM possibilities gives an overview of how new-age CLM tools transform pre-contract, execution, and post-contract management.
SimpliContract’s Intelligent CLM enables smarter capabilities like:
- Instant data and clause extraction for faster turnarounds.
- Personalized and highly comprehensive dashboards.
- Self-serve and AI-guided contract process & authoring for business users.
- Collaborative authoring over chats.
- Dynamic approvals and process previews.
- Instantly measure clause-level risks and find alternatives.
- Auto redlining for quicker reviews.
- Secure, cloud-based central repository.
- Obligation extraction and tracking.
- Contract compliance monitoring.
- Comprehensive contract utilization reports.
- Alerts for contract events, milestones, renewals, and expiry.
- Intelligence for evaluation of clause usage and fallbacks.
- Chronological audit trail of contractual events.
- Integration with enterprise systems like ERP and CRM.
How does Post-signature contract management help?
Enterprises must keep track of thousands of active contracts annually. Post-contract management prevents leakages and enhances vendor performance for these businesses. It extracts additional contract value, generates revenue, and increases accountability from partners.
Effective post-signature contract management marks the contract’s transition from just paper to that a business lifeline. This is where Intelligent CLM elevates your contract management capabilities to that of a strategic business enabler.