5 Contract Management Best Practices

Contract-management best practice means treating a signed agreement as an operating tool: assigning owners, making obligations visible, managing performance and changes, and preparing early for renewal or exit. The aim is to turn agreed terms into controlled business outcomes.

Contract management is a multifaceted, complex process involving many stakeholders in your organisation. You may have a Procurement Team with embedded Contract Managers or a separate Legal and Contracts team. Regardless, any Procurement Professional must understand Contract Management.

Contract management best practices help you optimise your overall Procurement process by streamlining your organisation's contracting processes and procedures. Making it easier to manage your Supplier Contracts lifecycle to extract total value out of these relationships and contracts. 

Of course, we consider Contract Management from the Procurement lens. So these Contract Management Best Practices will apply only to Supplier Contracts and Relationships. 

The following five contract management best practices will help you overhaul your Supplier Contract Management Process. 

Contract Data is one of the most valuable pieces of information we receive throughout the supplier contracting process. The Contract should be treated like an asset to your business. 

This means you need a Contract Repository, an essential part of any Contract Lifecycle Management Platform. The Contract will have its own record, and most importantly, this Contract Record will need to be linked to a Supplier Record. If it doesn't, your Contract Lifecycle Management Platform isn't truly geared up for Procurement Teams and is likely more sales focussed. 

Contract software can route reviews and approvals, record decisions and help keep the agreed version accessible. Define who reviews which issues and what evidence is required before automating the workflow.

Measure whether that workflow reduces avoidable chasing and makes the approval record more dependable.

Test the features against real contract cases. Product capabilities, integrations and the effort needed to maintain the process differ.

Instead, consider how the Contract Management Platform digitises your processes. With that digitisation, what efficiencies are created in the end-to-end process? 

Regarding contracts, standardisation is the key to streamlining your process. A standardised contract template will help ensure that all your contracts are uniform and consistent. This makes reviewing them easier for both parties and reduces the risk of mistakes.

Furthermore, it allows you and your team to focus on more important matters than formatting whenever you need a new contract. 

Maintain approved, version-controlled templates for future agreements. A template change does not automatically amend a signed contract; any change to an existing agreement must follow the agreed change process and approvals.

Ensuring your Contract Management Platform houses your templates and makes it easy to issue them is crucial here.

Contract analytics can help you measure your current performance and identify opportunities.

Here are some specific data insights I like to pull from my Supplier Contracting Process:

You can break this down further and look at your Supplier Segmentation, Categories and Contract types. 

The Contract Renewals processes need to be red hot. Too often, you'll have leakage here where Contracts are auto-renewing without you realising. In addition, you'll not have a Contract Renewal Strategy or Process in place. This means you're leaving money on the table for these Contract Renewals, which you could be negotiating.

One of the most useful processes I implemented was a digitised contract-renewal workflow. It gave the supplier-management team a shared record, clear ownership and timely alerts instead of relying on people to chase dates manually. The principle is platform-independent: capture the renewal terms, assign an owner, trigger the review early enough to make a decision and record the outcome. See the contract auto-renewal control guide.

It was a true GAME CHANGER.

Following these best practices will help you streamline contract management and capture all contractual obligations and commitments. The tips mentioned above should help you streamline contract management and ensure that all contractual obligations and responsibilities are captured. These practices will also make it easier to manage contracts throughout their lifecycle, from initial negotiation through renewal or expiration.

Track obligations, deliverables, pricing and commercial changes, service performance, milestones, risks, approvals, notices and renewal or exit dates as relevant to the agreement.

Use a cadence that reflects its value, risk and operational importance. Contract events, performance issues, pricing changes and upcoming renewal should also trigger review.

Procurement commonly owns the process and commercial governance, while business, legal, finance, security and operations own obligations within their expertise.

Continue exploring: read what contract management is, CLM for procurement and post-signature contract management.