Contracts are essential for transactions occurring in any industry and deals that require legal protection. The document can get companies going because it states the terms and conditions between the parties involved in a transaction. If no one keeps track of the contracts, the business arrangement will fall into disarray, and the party responsible for losing the agreement could be held liable.
This is often the catalyst for failure in many companies. Those that lack a clear idea of who will handle contracts rarely succeed, and it becomes a disservice because staff could end up pointing fingers if there’s no one else to blame.
The Chief Product Officer (CPO) often handles contracts. But what if there’s no CPO? If a company has a legal team working for them, it’s possible. However, what tends to happen is that they only get involved in the later stages of contract negotiations or any post-contract awards if an issue arises. In other words, they are more concerned about minimizing the risk and maximizing the value rather than actively doing something that will benefit the company.
To understand contract management ownership better, we’ll be talking about its importance in this article. Read on below to learn more.
A Closer Look at Contract Ownership
The most obvious way to determine the ownership of a contract is to look at who signed the document. However, this isn’t always the case since members of senior management are typically the only ones allowed to be signatories. For the other concerned party, the contract owner will decide the terms and conditions set.
In essence, a company must impose rules to determine who the contract owner is so that they may be easy to reach out to if there’s another contract signing process in the future.
The Role of Process Ownership
Process ownership is a level of authority given to determine what the entirety of the process looks like. It’s the determining factor of the contract management process itself and the contract’s life cycle. Additionally, part of the job entails informing all the parties involved whenever changes require implementation.
Because of the gravity of process ownership, you must place it very high up in your organization’s hierarchy. The bigger the scope of process ownership, the greater the chances that the contract management process will be enforced in the same way everywhere.
For the client, you must offer process ownership to a staff member who also handles contracts, such as the central purchasing manager or the central contract management department. Suppliers typically put the job in the production department because their contract management is closer to primary business processes.
Understanding Contract Administration
Contract administration is no easy task, so you must meet two different requirements for better positioning.
First, the contract manager must be facilitated in their job, meaning that everything in the contract must be strictly followed. Secondly, the same applications must be enforced regarding contracts that the company will receive in future business dealings.
Providing Further Clarifications
The only time you can modify the terms and conditions of a contract is during the negotiation phase. Once everything has been set in stone, other parties will no longer have a say in the matter. If a breach of the terms occurs, those are grounds for breach of contract, a punishable offense.
You can often see contract management as a separate entity in a company because it upholds contracts. If not, then contract management may do more harm than good because of poor decision-making. It’s different for every company, but the most important thing is to make the correct choices to work towards the same goal.
Anapact provides solutions to issues regarding business contracts through the use of a contract administration software. We help our clients by providing them valuable time and reducing the risk in their business to lessen their burdens. Contact us today to learn more!