By Norman Kretzmer, the founder and CEO of Contract Understanding

No business is an island, every company in the world depends on a delicate network of relationships with customers, suppliers, service providers, employees, contractors and other entities and people to run its operations. In most cases, these business relationships are governed by legal contracts that outline the obligations and entitlements of each party.

Organisations, understandably, spend a great deal of time scrutinising and negotiating the terms and conditions of each legal agreement that they enter. But once the contract is signed, it will often be filed in a cabinet or scanned and uploaded to the cloud, forgotten about until someone realises the other party is breaching the terms or that a deadline for cancelling the contract has been missed.

Research from World Commerce & Contracting finds that 9.2% of annual contract value is lost through poor management across the whole lifecycle, most of it after the contract is signed. Businesses that thus treat their post-signature contracts as a living asset to be proactively managed and optimised can unlock significant value.

Here are some processes that fall under the umbrella of post-signature contract management:

1.      Storage and visibility of all contracts the company has signed

The most fundamental aspect of post-signature contract management is gaining visibility of which contracts the business has signed, who the counterparties are, and which internal signatories are responsible for managing the commercial or legal relationship. All too many businesses lose track of contracts that are in force because they’re scattered across different business units or departments - with no way of categorising them or knowing who has access to them.

2.      Managing deadlines

Most contracts a business signs will be for a limited term, with clauses in the agreement setting out when the contract can be renewed, renegotiated, or terminated. If deadlines and milestones are not properly managed, the business may find that a contract gets renewed before it negotiates more favourable pricing or cancels to switch suppliers. Or the contract might expire and leave the business without access to essential services.

3.      Avoiding penalties and breaches

One of the vital aspects of post-signature management is ensuring that the business meets any obligations of the agreement, such as service level agreements or deadlines. It’s essential to have full visibility of terms and conditions and ways to monitor adherence, so that the business doesn’t suffer any penalties for breach of contract.

4.      Maximising benefits and incentives

Commercial contracts will often include incentives for exceeding service levels, discounts for early settlement of invoices, commissions for providing leads to a partner company, and other benefits. Forward-thinking companies will want to be proactive about maximising these benefits to ensure that they’re getting the full value from each business relationship.

5.      Keeping track of amendments and correspondence

Contracts often change over time as addendums and amendments are made. There is also often a lot of correspondence associated with each contract. Keeping on top of this documentation is a key part of the post-signature process.

6.      Contract management workflow

Through the lifecycle of a contract, there are many admin-intensive tasks that need to be handled. It’s best practice to have clearly defined workflows and automated processes to streamline this work. This includes triggering workflows for events catered for in the documentation when they occur e.g., force majeure, cancellation, and breach.

7.      Monitoring performance

Post-signature contract management also focuses on monitoring and optimising business value derived from contracts. Leading companies will closely track contract performance, financial implications, and other relevant metrics. This can help the business improve decision-making, processes, and contract strategy formulation.

Automation can enhance post-signature contract management

Many companies still think about contract signing as the endpoint, neglecting the critical post-signature phase. But those that treat it as a strategic necessity will be able to maximise benefits, mitigate risks, and ensure compliance. Today, artificial intelligence (AI) and automation can simplify what was once a tedious and time-consuming burden, so that businesses can turn contract management into a strategic advantage.