Improve Your Contract Management with These 5 Tips

An agreement with a supplier to work with you is a contract.

Is the supplier only just meeting their obligations or are they performing above and beyond this? If you are not monitoring things closely, you could miss under-performance and ultimately get poor results, so you should get a good contract management system in place.

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What Is It?

Not all contracts are huge legal documents. You can have a contract with a supplier in numerous ways, and contract management is actually more focused on managing the relationship with your supplier. According to Business News Daily, contract management maximizes operational and financial performance.

Five Things to Consider to Get Contract Management Right

1. Right Structure and Format

A contract is a legal formalisation of a relationship, but contracts come in various formats, so make sure you consider which is the most appropriate. This is your opportunity to set the boundaries surrounding what you need and how you would like the relationship to operate.

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2. Include Key Performance Indicators

Think about what performance indicators would be best and have these included in the agreement as contractual obligations. Doing this with the supplier can give you an indication as to how committed they are and can encourage further discussions after they realise their increased accountability through these contractual provisions.

3. Provide for the Relationship

You can have both a contract and a relationship. A relationship creates a mutual commitment, encouraging both to work in each other’s interests, while the contract outlines how this can be achieved. It’s best to have the relationship first, with the contract being developed afterwards to reflect what you have agreed.

4. Consider Contract Duration

There are lots of things that will impact on whether you need a long- or short-term contract. Such factors include market conditions, how hard it would be to change, how many suppliers there are that can meet your requirements, and the leverage you may have. For a good contract management system consider Contract Management System provided by Contractswise.

5. Plan Your Exit Early

Have your exit strategy in place before you sign an agreement. You never know when things might change, and if you know how to get out of a contract, then you will be in a good position should the need arise.

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