How does contract management work?

The profitability of a business depends both on the quality of the products or services that are offered to customers and on the way the company is managed.

Therefore, it is essential for the success and longevity of the business to implement processes that optimize the administrative routine and, at the same time, help to reduce expenses. This is the difference in contract management, which allows you to reduce costs in HR.

In this post, you will understand more about what contract management is, how it works and the importance of implementing it to reduce costs in the HR sector. Don’t waste time and check right now how to implement the idea!

What is contract management?

Before dealing specifically with ways to reduce costs through the use of contract management in a business, it is important to explain what this practice consists of.

As the expression itself suggests, contract management is part of a set of management techniques that are used to efficiently manage the activities carried out in a company.

In this way, contract management is a management methodology that encompasses several principles, resources and administrative procedures aimed at supervising the fulfillment of established legal obligations. This monitoring of fulfillment of responsibilities concerns both the company itself and its suppliers and service providers.

The main objective of this practice is to act in the management of contracts throughout their entire period of validity in the company, that is, from the moment they are formulated and signed between the parties until their termination or termination. Through contract management, it is possible to have a real dimension of the fulfillment of the stipulated responsibilities and, if necessary, make adjustments.

Contract management also plays an important role in planning — commercial, productive, organizational, financial, fiscal, etc. — which is carried out in the different sectors of a company. This is because most market transactions are carried out based on this type of document, which in turn reflects the conditions and demands of the business.

How does contract management work?

The operation of a company’s contract management is directly linked to the dynamics of its sectors. Thus, for this methodology to be efficient, it must be linked to the company’s administrative and financial departments, which enables those responsible for each area to have detailed knowledge of the content of documents and to take correct decisions.

Based on the integration of information between sectors, professionals responsible for contract management develop certain activities. Among them are:

  • monitoring of the entire contractual process;
  • analysis of the history of contracts for new negotiations;
  • detection and resolution of contractual problems;
  • control of validity and renewal terms.

It is also up to the contract manager to:

  • verification of payment and receipt maturities;
  • analysis of the need to carry out additives;
  • filing and proof of contractual discharges;
  • preparation of periodic management reports;
  • elaboration of ways to reduce costs and risks;
  • mediation between contractor and contractor.

Therefore, contract management works based on the sharing of information between the company’s sectors, to ensure that the contracts signed meet the needs of the business. But that doesn’t happen automatically. For these demands to be actually met, the contract must be fulfilled and, if applicable, adjusted during its term, providing operational efficiency .

What is the importance of adopting this practice?

Working with contract management cannot be seen as a mere option, as it has become a prerequisite for success in the corporate world. And this happens for a simple reason: it is the management of contracts that allows the company to have proper control over its investments, which considerably reduces the risk of incurring losses.

In practical terms, contract management is the activity responsible for enforcing what is written in the document. It will verify the conditions and charge for the adequate provision of a service or the delivery of a product in accordance with the purchase specifications. It is also a function of this practice to ensure that the company respects the clauses of a document if it is in the contracted position.

Contract management also contributes to providing greater efficiency to the negotiations carried out by the company. The adoption of this methodology speeds up contractual procedures, reduces bureaucratic tasks , avoids rework resulting from possible errors, as well as ensuring transparency in the hiring processes and their compliance with the corporation’s policies.

How does contract management reduce costs?

We have already explained that contract management plays a fundamental role in company planning. And it is precisely at this point that it can be the great differential in the company’s accounts. This is possible because the permanent supervision of contractual processes makes it possible to generate savings with the purchase of products, contracting services and costs with administrative procedures.

Thus, when monitoring the progress of a contract related to the purchase of a product necessary for the company’s production chain, the manager has exact information about stock, delivery terms and conditions for contract renewal. Without this data, there is a risk that the product will run out, production will be stopped and there will be price increases for the additive or a new contract.

Following this same logic, contract management makes it possible to find more affordable prices among suppliers. If there is a high amount of raw material in stock or a long time of service provided by a third-party company, the company can make a greater number of quotations in the market and, therefore, save. This would not be possible without the supervision of existing contracts.

The use of this methodology reduces the costs of administrative procedures for formalizing the contract, as it avoids the appearance of extra expenses with the creation of new contracts or the implementation of amendments. And this process can be made even more cost-effective with the use of electronic signature through process automation.

What about contract management to reduce costs in HR?

The HR sector of a company, without a doubt, is one of the most complex to manage. After all, we’re talking about working with people — the most important assets of any organization.

In this way, HR becomes even more challenging when, in addition to dealing with personnel management and employee training, it is necessary to carry out hiring processes. Several items, such as salaries and benefits, require meticulous care and also impact the operating expenses of the company in question.

Thus, managing the hiring processes in the best possible way contributes to the good performance of the entire management, which includes the fact of reducing costs in HR.

What tools can help manage contracts and reduce HR costs?

To reduce costs in HR, this sector needs to be integrated with all other areas of an organization. In this way, they all work towards common goals. That said, see what tools are needed.

CRM

CRM, which stands for Customer Relationship Management or Customer Relationship Management, is a tool that can integrate all areas of an organization — such as sales, marketing, production, finance and HR.

Since the demand for products is growing, all sectors will know that it is necessary to review contracts or have more employees. This agility allows for a gain in time and efficiency, which allows the company to meet all demands.

Online platform for contract management

Manually managing contracts is repetitive, tiring work that can lead to human errors that compromise the entire production chain. Therefore, automation is very important for companies to maintain their competitiveness.

In this sense, contract lifecycle management (CLM) systems can bring agility by automating the steps of creation, negotiation, execution and storage of all contracts. However, choosing a software that is suitable for your organization is the first step to succeed in this endeavor.

If you’re looking for a solution, our suggestion is DocuSign CLM , which automates manual tasks, aligns workflows that are more complex, and eliminates errors and risks with intelligent contract management.

digital HR

Still thinking about reducing HR costs, one of the best options on the market is the DocuSign Agreement Cloud , which allows you to connect and accelerate processes involving employee signatures — thus, the HR team’s time will be spent with people, not bureaucracies . You can use the platform for hiring, onboarding, leaving and managing employees.

One of the differentials of DocuSign solutions is the world-class legal guarantee for all digital transactions . In other words, we have certificates that comply with the legislation of the country in which we operate.

Contract management is a strategic practice that significantly contributes to the efficiency of the management activities of a business. Adopting this technique allows the company to exercise greater control over its investments and guarantees a real reduction in the costs involved in the hiring processes.

Thinking specifically about Human Resources, you’ve seen that some solutions are vital. However, it is still necessary to connect all sectors to bring about a real change in mindset. Thus, the digital transformation makes it possible to reduce costs in HR and throughout the company.

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