What is Vendor Contract Management and How Can It Help You?

Third-party vendors are an essential part of keeping projects moving on schedule. Without vendors, companies could only rely on the expertise and abilities of their own employees to complete projects. 

Vendors enable you to extend a project’s scope to achieve more impactful results. The tradeoff is more time spent managing the vendors, more money spent for their time and expertise, and more contract management between your organizations. 

It’s true that working with outside vendors adds additional complexity to any project, but with the use of contract management software you can simplify and streamline your vendor contract management processes to optimize your return on investment (ROI).

What is vendor contract management?

Vendor contract management is the process of receiving, negotiating, and executing contracts between your company and outside vendors. It continues throughout the entire lifecycle of a contract. 

What are the stages of vendor contract management?

Vendor contracts go through multiple stages during their lifecycle. Depending on the size of the company, as well as the vendor, a contract’s lifetime can be as short as a few weeks up to several years. Regardless of the terms, a typical contract lifecycle might look something like this:

Receive the contract.

You receive a contract from a vendor. This can either be a paper contract or a digital copy.

Share the contract internally for review.

If you have a digital copy, you’ll send out a Word doc or PDF for review and approval. Any notes or changes will be made separately by each individual and sent back. If it’s a paper contract, each version will be marked up with any changes and sent back to you to look over..

Edit and track changes to the contract.

Since any edits to the document will be in separate copies, you’ll need to look through them to see what needs to change.

Send emails/messages back and forth internally.

To avoid any inconsistencies, you’ll need to follow up internally for clarification on changes to be made. 

Negotiate terms with the vendor.

Once any changes have been made, you’ll need to follow up with the vendor to ensure the changes will be satisfactory for them as well.

Finalize and send to all parties who need to sign.

Now that all necessary changes have been made, the contract can go out for signatures. If this is a digital copy, they’ll likely be e-signed. If it’s a paper copy, it may need to be mailed then signed with a wet signature.

Receive contract back and file appropriately.

Once you’ve received the signed contract back from all parties, you’ll need to either file the digital copy or the paper copy somewhere secure and easy to locate for future needs.

Remember to follow up with the vendor when the contract comes up for renewal.

You’ll want to check in with the vendor when the contract is about to expire to get signatures for a renewal. You may want to review the terms and make sure everyone is still satisfied with the agreement. If you miss the deadline and let the contract expire, that can mean a lot more time and energy spent duplicating work you’ve already done.

That’s a lot of steps and a lot of labor hours just for a single document! Despite the time and labor, contract management is essential to make sure the contracts reflect your interests as well as help you maintain mutually satisfying vendor relationships. 

Effective vendor contract management is non-negotiable in business. What is negotiable is how much time you spend on vendor contract management.  

How does contract management software make vendor contract management faster and easier?

If your company is a larger one, you might have multiple teams touching the same contract before it ever goes out for signatures. If it’s a smaller one, you may only have a single person reviewing each contract before it’s signed. No matter the size, contract management software can help make this time-consuming process more efficient. Here’s how:

When receiving documents — immediately store a digital document in a secure location rather than a paper document in a potentially insecure location.

When sending out for review internally — control who has access to the file and who doesn’t with automated approval workflows.

Edit and track changes to the contract — track what changes or suggestions are being made to the document in real time.

Send emails/messages back and forth internally — minimize this step as all the notes and suggestions are visible in the document.

Negotiate terms with the vendor — use a single document with all suggestions to approach the vendor with any changes, as opposed to organizing multiple copies of the document beforehand.

Finalize and send out for signatures — send out the document for e-signatures to multiple people at once. Set up an automated signing workflow if the document needs to be signed in a specific order. 

Receive contract back and file appropriately — immediately store your digital document in a secure location to make it easy to find and search later.

Remember when the contract comes up for renewal to follow up with the vendor — use contract automation to set a reminder for the renewal to make sure everyone signs before the contract expires. Or set up a reminder to review the contract before deciding if you want to renew.

What are the benefits of vendor contract management software?

Being able to effectively manage each stage of a contract’s lifecycle is a huge asset for any business that’s working with an outside vendor. Here are some of the benefits:

Save time

By having a digital document that’s edited in real time, you save much of the time-consuming process of having different people reviewing and approving separate stagnant documents. Plus with e-signing there’s even less turnaround between signing and execution!

Save money

With fewer people spending less time looking at documents, that means that fewer labor hours are being spent on approving those documents. 

Streamline processes

When you have less back and forth between departments, you can keep the momentum going on projects and allow them to move forward more smoothly. Automated approval workflows mean that the people who need to see the document are seeing it in the correct order.

Improve compliance

By using automated approvals and automated signing you can control who’s allowed to access the document. And because only one document is being updated in real time, you can also see everything that’s being done to the document in real time.

Effective vendor contract management is a crucial part of any vendor agreement. When you use contract management software you can save time and money, use e-signing for faster turnaround, and stay on top of your contract renewals with automated reminders.  

Streamline your vendor contract management processes with Concord.

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