Any legally binding agreement between two or more parties is known as a contract. The ability of an individual to administer such contracts with customers, employees, partners, or vendors is simply known as his contract management skills.
However, it must be understood that administering such contracts at an organization involves, creating, executing, as well as analyzing them for the purpose of minimizing financial risk and maximizing financial as well as operational performance.
Contracts have a huge influence on the revenue and expenses of a firm. Therefore, contract management skills are very important in order to ensure that they have a positive impact on business profitability, thus, becoming a valuable asset for the firm instead of a liability.
Why is contract management important
When two or more parties decide to enter a contract, they are investing a considerable amount of time, effort and resources to conclude it in their interest. However, poor contract management can cause the companies to bear heavy fine, go through costly litigations, miss incredible opportunities for savings, and have significant relationships broken.
Effective contract management is not only about maintaining good supplier-vendor relationships by defining payment terms, expected level of service, and workflow, but it also ensures the mitigation of any supply chain gaps as well as chances of losing customers. Therefore, no matter how mundane contract management sounds, it must be deemed as an indispensable element contributing to the progress of any business.
How to improve contract management skills
Following are some helpful tips for anyone who wishes to improve their contract management skills:
- Phrase the terms carefully. The terms of a contract between any two (or more parties) specify the activities through which each party is obliged to fulfill their part of the agreement. Often when such contracts are poorly phrased, companies lose large sums of money for lacking the ability to identify simple technicalities. Therefore, for improving one’s contract management skills, it is important to focus on phrasing the contract appropriately.
- Create a contract calendar and set reminders. Often it happens that a contract that is signed and executed by a company is never reviewed again by its personnel. Therefore, it becomes difficult to remember the contractual obligations and rights relevant to each contract, which is capable of causing a lot of stress. The best way to tackle such issues and improve one’s contract management skills is to set reminders and alerts in a dedicated contract calendar. This way it is easy to have an overview of all the contract-related actions that need to be taken in the near future.
- Show flexibility. A certain level of flexibility is vital for improving one’s contract management skills. It is sometimes a necessity to willingly adapt certain terms of contract in order to reflect any changes in the circumstances. Showing enough flexibility to adjust the contract in case any problems arise will not only improve your contract management skills but also improve your working relationships.