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The importance of the contract management process for businesses

23/07/2024

As risks increase linearly with the scale of development, contract management operations are garnering more attention from leaders who are studying to find a process suitable for the current and future scale of their enterprises.

With increasingly complex supply chains, mitigating risks and ensuring seamless operations have become top priorities, if not essential for the survival of most businesses. Contract management is a crucial part of this effort. When executed properly, contract management can save time, avoid potential errors, and assess sales effectiveness to make appropriate adjustments to business policies, thereby increasing profitability.

What is Contract Management?

Note: This article mainly focuses on sales contract management. Information on procurement contract management will be detailed in another article.

Contract Management (or Contract Administration) refers to the activities/processes established to create, monitor, and report on contract performance.

The main purpose of the contract management process is to monitor compliance and the execution progress of the involved parties. This process is continuous, starting from drafting, editing, signing, and lasting until the contract is completed or terminated.

Effective Contract Management Process on VT Business Contract Includes 8 Main Steps:

Identify customer needs and requirements, including terms and conditions.
Initiate and draft the contract, prepare service information, and legal terms for drafting.
Control and approve joint drafting between both parties, compare contract changes.
Sign the contract online to ensure legal validity and save time in the approval process.
Implement and execute the contract according to the agreed terms and conditions.
Monitor and evaluate; a critical step that requires a tracking solution to ensure transparent payment information per phase, avoid cost losses, and legal disputes that could harm reputation.
Risk management, with a reporting solution that identifies potential risks, sends payment alerts, reminders, and evaluates whether a customer is as profitable as others.
Store and search all contract information, making it easy to access and inherit new content and terms for future contracts.

The process from contract initiation, contributions, editing, and terms agreement between both parties is clearly and transparently presented. The ability to sign and manage contracts entirely online ensures transparency and avoids many legal risks, a feature only achievable with VT Business Contract.

Why Should Businesses Focus on Building a Contract Management Process?

Although it directly impacts business efficiency, contract management has not traditionally received as much attention from leadership as supply chain or operational management processes.

In reality, loose or inadequate contract management can harbor many risks such as:

Failure to detect contract compliance issues
Incomplete payment tracking, leading to delayed disbursements and prolonged debts
Disputes and litigations during contract execution
Loss of reputation, time, and costs during disputes

Thus, establishing a strict and efficient contract management process is crucial for enhancing business performance and building strong relationships with partners and customers.

Role of Contract Management in Business Operations

An optimal contract management solution can help businesses by:

Providing a standardized step-by-step process, avoiding unnecessary mistakes during preparation, drafting, negotiation, execution, compliance, termination, and renewal.
Optimizing the entire contract process to reduce costs and increase revenue.
Offering real-time reports and charts for leadership to analyze, pursue, and capitalize on mutually beneficial opportunities with partners, suppliers, and potential customers.
Creating transparent and unified data storage, fostering strong relationships with partners and customers.
Ensuring all parties fulfill their contractual obligations.
Preventing legal risks and providing tools to create tailored policies and foresee, minimize, or eliminate potential future risks.
Creating a centralized digital contract repository linked with essential workflows, facilitating procurement data analysis, forecasting, reporting, and audits, ensuring the best prices and terms from suppliers.
Reducing the legal department's workload in contract creation thanks to pre-approved templates.

In summary, finding a tailored and optimized contract management process can significantly improve overall business process efficiency, productivity, and competitive performance.

Building a "Be Spoke" Contract Management Process for Your Business with VT Business Contract

Designed specifically for managing and tracking sales contracts, VT Business Contract focuses on features that maximize business benefits in contract management.

VT Business Contract addresses the two biggest challenges in current contract management:

Contract Performance Tracking:
- Managing the status of ongoing contracts.
- Managing receivables from each customer.
- Managing contract payment status.
Sales Effectiveness Evaluation for Each Customer Group:
- Evaluating the effectiveness of each contract and customer.
- Identifying which customers are most profitable, optimizing resource allocation for maximum revenue.

Pareto's 80/20 Principle: 20% of Customers Bring 80% of Revenue

Correctly identifying and adequately caring for this 20% can significantly improve company performance.

Built on Vũ Thảo Technology's DPM Platform, VT Business Contract Offers:

Flexible customization to fit the culture and working style of each business.
Integration with other intelligent solutions within the DPM Platform ecosystem, such as VT CRM and Dsign Online Signature Portal.
Ready-to-use: Quick deployment in businesses with a comprehensive package of standard processes successfully applied in large corporations.

Therefore, VT Business Contract is regarded as one of the most robust sales contract management solutions on the market. It not only offers essential contract management features but also provides businesses with the key to a comprehensive, unlimited digital transformation journey, featuring standardized processes from Vietnam's top 200 companies.

Vũ Thảo Technology's AI-Driven Business Management Platform and Ecosystem

Vũ Thảo Technology, with over 20 years of experience in providing the best digital transformation solutions in Vietnam, serves top 200 large-scale clients such as Hòa Phát Group, Vietnam Airlines, Petrolimex, and EVN.

Digital transformation aims for optimal management and revenue growth, a never-ending journey. Vũ Thảo will be a reliable partner, supporting your organization in fostering innovation and sustainable development through technology. Contact us for free consultation.