Though a contract is an essential tool for making sure that you achieve your organization’s desired outcomes from your agreements, the contract document itself is only half of the equation. Understanding and getting the full value out of your business contracts require more than just creating a great agreement that clearly outlines deliverables and services as well as related terms and conditions.
The document should also be signed by all the involved parties. A properly executed and strong contract is essential. But a well-thought-out contract monitoring plan is also an essential aspect of contract management that ensures all obligations are clearly specified and met.
Effective contract monitoring refers to the process of making sure that your organization’s contract performs as planned. Just as you would do not go on a diet without timely weigh-ins to track your progress, it is equally important to take the right steps throughout the entire life cycle of your business contract to ensure that everything is progressing as planned. In addition to supporting your organizational operations, effective implementation of contracts will create professional relations with the parties involved.
Generally, contact tracking or monitoring requires a highly disciplined and organized approach because you must compare the actual performance against the deliverables specified within the agreement. It would be best if you did this on an ongoing basis as long as the contract is in effect. This article focuses on the best practices that can help reduce common pain points and ensure effective contract monitoring.
Formalize the entire contract handover process in your company
It is very common in organizations, particularly larger corporations, that individuals best positioned to monitor contract performance are not the same people who create it. That means there is a gap or disconnect that can lead to a further gap, especially if you are not careful to bring those responsible for the entire contract monitoring process up to date. This is usually done through a contract handover process.
It is beyond any doubt that contract handovers are sometimes informal. However, the most effective way to make sure that the people responsible for monitoring your contracts understand all the pertinent information is to formalize the specific steps of this communication process. That means you must deformalize the entire contract handover process in your organization.
Essentially, you must take the time to define every step of a successful contract handover as an integral part of your overall contract tracking, monitoring, and management approach. This will give you a checklist that must be followed every time a contract is handed over from an employee or department to another. A comprehensive handover process must include identifying the entity that will be invoiced in the contract monitoring and execution. Establishing a security repository that can offer access to the appropriate individuals is also essential.
Keep in mind that a contract handover plan must include all the information those responsible for contract tracking and monitoring will require to understand their duties. Part of this information includes the contract deliverables, the contract contents, key dates, key performance indicators, and how frequently these issues should be evaluated and reported.
Ensure all contract monitoring-related tasks are part of your schedule
Contract monitoring might not seem like a priority on any day, but failure to monitor your contracts could spell disaster for your organization. Effective, systematic, and ongoing contract tracking makes it a lot easier to identify red flags, notice potential contract breaches, and determine other contractual risks.
Indeed, you can minimize contract-related risks by prioritizing contract tracking and monitoring instead of performing such tasks only when you have the time to do so. Some contract monitoring software has outstanding features like automated reminders. Such features make it easy for contract managers to stick to the tracking plan because they will be getting timely reminders of important milestones.
Create and implement a monitoring scorecard for your contracts
Sure, some of the elements of your organization’s contract tracking process can be effectively implemented for contracts generally, the specifics of your contract tracking and management depend on the aspects of each contract. This includes the key indicators you will need to evaluate the overall contract’s performance throughout the contract’s lifecycle.
In addition to specifying these criteria, it’s equally important to determine all appropriate benchmarks for every contract. This will make it easier to know every contract is progressing as planned.
Many contract tracking experts unanimously agree that having a scorecard that lets you compare the actual contract performance against the expectations outline in the contract itself is the best framework for evaluating progress. Please pay attention to any red flags as they indicate potential pitfalls to avoid or areas that require improvements. You should also pay attention to various contract performance trends as this makes it a lot easier to predict future contract performance.