Contract management

Contract management includes taking care of the contractual negotiations between client and contractor, implementation of contracts and carrying out of the contract changes for technical, scheduling, human or financial reasons.

Another definition is as follows:

Contract management refers to all activities in the context of project management, dealing with the development, administration, customization, implementation and updating of the set of all contracts in the framework of a project.

Background

Contract management (contract responsibility) is regarded in practice as the foundation for the economic actions of a company and thus represents a global as well as a complex business task dar. In this context it should be noted that almost all departments in an organization along the value chain of this topic are affected. Each department has its own subject-specific requirements for the management of contracts, such as:

• Shopping: The ability to create and execution of contracts with suppliers, brokers and partners
• Distribution: The ability to create and execution of contracts with customers
• Legal department: regulatory compliance (such as KonTraG, Sarbanes Oxley or Basel II), and company rules (eg compliance with company policy ) in the contract being
• Controlling: active risk assessment in accordance with existing contractual relationships
• Revision: improving the audit capability of existing contracts, as well as transparency of all contract processes
• Management: Design and optimization of the internal control system (ICS ) (see also Management Risk Control (MRC ) ), as well as cost reductions based on limited and predictable contractual risks.

General risks that arise from a lack of contract management, are not limited to:

• Failure to comply with the statutory provisions
• Uneven level of information / lack of timeliness
• Difficult finding of contracts
• Substantive risks of contracts
• Loss of contracts / contract documents
• Observance of time limits, contract options, etc.
• Improper machining process
• Not always transparent Genehmigungs-/Freigabeprozess
• High throughput times, no contract controlling
• Accounting and audit compliance (see also Internal Audit).

Sub-areas of contract management

The partial areas of contract management for the prevention of above mentioned risks can be generally summarized as follows:

Contract controlling

The contract control, as an essential part of the contract management, dealing primarily with the active risk assessment in contracting. Typical questions in everyday work can be summarized in this context as follows:

• Who are the top contractors and which volume is purchased in which purchase commitments?
• What is the revenue potential per quarter / year?
• What is the actual difference between new and existing customers?
• What is the value of the existing active sales and service contracts?
• What is the rate of contract renewals?
• What projects are on schedule under the given conditions?
• What are the existing rental and lease obligations?
• How high are the costs on the basis of concluded contracts?
• What are the opportunities and risks per farmer / supplier?
• If balance and audit security (see also Internal Audit) guaranteed?

In addition to these typical questions further aspects such as contract- related planning options, futures and payment monitoring, and financial planning are also in focus. Of special importance also gain accordingly to be prepared reports for the annual accounts, auditors and of course for management.

Contract management (contract execution responsibility)

Contract management is an essential part of the contract management to optimize contract management. The basis of the contract administration forms, among others, the production of contract-related information (metadata about contracts and contracting parties). The focus of attention is naturally also the structuring of this information. However, the optimization in the contract being set in addition to the aspects mentioned also requires the mapping of the relevant contract processes. These processes can be generally defined as follows:

• Comparison and processing of offers ( as the basis for draft contracts )
• Contract preparation and negotiations
• Contract / document checks and contractual structures
• Approval processes (such as signatures)
• Performance of the contract (in accordance with the terms and conditions )
• Contract controlling
• Overview of the main elements of the contract ( notice period, scope of services, billing, etc ).
• Monitoring of deadlines, in particular termination dates and deadlines
• Contract archiving
• Automated billing - for example, in the form of repetitive calculations

To the mentioned optimization and thus coherently to ensure efficiency in contract management always should with the help of contract management, for example, also responsibilities ( both externally and internally ) and of course the parties can be clearly recognized and defined ( quality assurance measures in the context of contract management ).

Furthermore, can be met also legal and / or corporate law requirements regarding transparency in contracting through an active contract management. Order in this regard, for example, cost reductions (personnel and infrastructure costs ), structured approval process to ensure transparent and automated processes, standard software solutions (including contract management software, see ) are in practice increasingly used to automate contract management.

Contract archiving

Contract archiving is in addition to the contract management and controlling a major part of the contract management. The focus here is the unchangeable, long-term and audit-proof archiving of contract-related documents (eg text of the contract, contract drafts, images, protocols and Conditions ) in electronic form ( see electronic archiving). In addition to contract management and controlling the contract archiving also aims at the optimization of the contract being.

In contract law there is in practice an enormous flood of information ( for example, through e-mails with important comments on the agreements, supplements, different contract versions, references to other documents, etc.). The objective is here to capture and centrally archive (central database ) and to provide for the contract administration and control available all this information.

Summary

An active contract management should cover all three sections mentioned, with the objective to increase the efficiency of the business trade of a company. It should be noted here is that the key features of a contract in everyday work is often not sufficient for such objectives. So you need as part of an optimal contract management - especially in negotiations - at least an outline of the main contract data and the ability to have access to all contract details. However, relevance to the contract documents are available without a contract management software in gestures. In addition, difficult and confusing different responsibilities locating these documents and data.