Today's businesses strive for higher performance in all areas, including contracting. 

And, as up to 80% of business operations are governed by contracts, this area is absolutely crucial for improvements. This article will suggest effective principles of contract management that you can start implementing right away. 


What Is Effective Contract Management?

The answer is simple: it's all about results. If you govern your contracting well, it means that parties uphold their obligations and meet the objectives.

To improve the management process, check the current workflow within your company. Also, don't be afraid to use cutting-edge tools and techniques to make tasks easier for your team.

Being effective also entails maintaining control throughout the contract's lifecycle. Let's look at some things to think about before, during, and at the end of the agreement.


Effective Preparation

If you work with contracts, you know how many tasks companies must complete before signing the papers. And the better prepared you are, the more fruitful your cooperation will be.

During this stage, businesses should focus on tasks such as planning and assigning responsibilities to their teams.



Quality construction begins with a solid foundation - much like any contract begins with planning.

Assume you've found a supplier for your company and are about to sign a contract. Here are the steps you must take to ensure that the process runs smoothly:

  • Prepare clear and concise drafts of documents. Both parties need to understand the terms and conditions, the scope of work, deadlines and other details. They will have fewer disagreements if they have a comprehensive document.
  • Investigate the organisations you plan to work with. Due diligence is a must if you want to avoid financial and reputational risks. Check for financial status, ownership structure, negative media publicity, and so on.
  • Predict potential contract risks and develop a response plan for such events.
  • Make sure you don’t overlook any vital details during negotiations. Legal teams should review the papers to ensure that the terms are fair to all parties involved.

To summarise this section, one of the key contract management principles to follow is to pay attention to the process from the beginning.


People and responsibilities

Contracts can involve a large number of team members and departments on both sides. Here's how to get started with effective communication both internally and between parties:

  • Introduce the departments and employees who will work on the agreement. Determine who communicates with the other party and who is in charge of the project. Complex projects may need financial and technology specialists to support your legal department.
  • Choose a team leader who understands the scope of the contract, remembers deadlines, and controls the fulfilment of the terms.
  • Think of an onboarding process for new project members in case of personnel changes.
  • Make sure stakeholders have access to the latest version of the document and there are no discrepancies.

Lastly, remember that you can automate all the tasks listed above. Legal technology today can assist with document editing, task assignment and collaboration.


Effective Execution

So, you concluded your contract. What to do next?

At this stage, it is imperative to ensure obligations are fulfilled as expected by both sides. Businesses should also analyse if a project is beneficial for them in the long run or if it needs to be terminated.

Below we discuss tasks to focus on during the active stage of the agreement. 


Relationship management and dispute resolution

A productive contract means that both parties are content with cooperation. 

As for short-term goals, it means avoiding disagreements. In the long run, it's about business reputation. If companies prove themselves as credible partners, they will share their experience with other players in the market. In the opposite case, relations may lead to litigation or negative media coverage.

Here are the key communication principles of contract management:

  • Stay connected with your business partners by arranging regular meetings.
  • Be transparent throughout the project and encourage the same attitude from the other party.
  • Communicate any updates, changes or issues promptly.
  • Be open, proactive, and positive in resolving issues.

The last point is extremely relevant in business relations. Contracts are full of difficulties, and sometimes obligations are not delivered as expected. Yet, companies terminate agreements only under the most extreme circumstances. By communicating and resolving disputes, they avoid lengthy litigation and unnecessary financial losses. 


Performance monitoring

If you approach your contracts strategically, you determine clear goals for upcoming projects. At the provision stage, you should analyse if the expectations were met. 

In a competitive business world companies have to manage contracts proactively to: 

  • Ensure that both parties are meeting their obligations. 
  • Make changes if needed. 
  • Ensure the agreement delivers value to the company. 
  • Have an informed answer on the need for prolongation.

Contract management software makes it easier to analyse and monitor performance metrics. For instance, you can automatically track deadlines, payments, and factors affecting companies' ability to meet terms. 


Change management and risk mitigation

A basic principle of contract management to follow is that changes happen.

Throughout your project, you'll likely face legislative updates or personnel changes. Countries your company operates in may pass through political or economic changes. Some extraordinary events, such as the Covid-19 pandemic, may affect business operations and supplier costs. 

Here is what you can do to mitigate risks in your contracting:

  • Check legislation and market information regularly.
  • Ensure your contracts allow updates in emergency events.
  • Communicate with the other party if you believe that changes are required.
  • When updating the agreement, make sure that changes are introduced smoothly and managed accordingly.

Summing up this section, a good practice is to approach your contracts not as once-off documents to be signed and forgotten, but as a process that requires constant attention.


Effective Transition

The way your company manages contracts is an excellent sign of business performance. Thus, it’s worthwhile to analyse what happens at the end of the project. 

Does your company have a smooth transition? Is your paperwork completed properly, so you won't be exposed to unexpected requirements in the future? Have you analysed how the project turned out and made conclusions for your business practice? These are all relevant questions, and we'll elaborate further on them in this section.


Contract expiration

Both parties need to establish a clear procedure for termination or expiration of the agreement. They need to know exactly what steps to take during the transition stage.

Here are some tasks to keep in mind if you want to have a smooth transition:

  1. Organise a debrief meeting with the other party.
  2. Share final reports and feedback on project performance.
  3. Make sure final payments are completed and unspent funds are returned.
  4. Think in advance about transition activities when exiting the contract. As an example, if you stop an agreement with a supplier, you must plan for replacement as soon as possible. 

Of course, if the cooperation was fruitful, you might want to renew the contract. Be prepared for this stage as well. 


Keeping data and records

Keeping track of your completed contracts is relevant for businesses from several perspectives. 

From a performance point, you might want to analyse your contracting history to determine what terms worked or didn’t work well and what can be improved in the future. 

In terms of data safety, you must follow GDPR requirements and other regulations about client records. Breaking those requirements can be a huge risk for the company.



Effective contract management is essential to the success of any business relationship. It maximises value and success for the company and helps to stay in control of risks. 

Productive project and contract management principles suggest being attentive to agreements at all stages, from pre-contract to post-contract. 

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