FAQs for Contract Management Outsourcing
Thanks to contract management outsourcing, clients can rest easy about most processes and red tape before acquiring of the outsourced services.
What is Contract Management Outsourcing?
Contract management outsourcing (CMO) is having all the paperwork regarding contracts outsourced through a service provider. One common misconception is that CMO is strictly just for sending, receiving, and holding contracts themselves. In fact, CMO can be highly complex since it involves a lot of processes.
1 CMO Involves Making Contracts
CMO begins with the creation of a contract itself. Sure, there are a lot of contract templates available in the internet. However, not every contract will fit a client’s needs immediately. It may need adjustments here and there to make it fair for both entities signing a contract.
A better solution is having the outsourcing team draft a new contract from scratch with all the terms in mind. This way, the contract is customized to fit the needs of the parties that are involved in a negotiation.
Every term and clause will be examined first before being added to the contract. CMO providers will ensure that it will be fair for everyone involved in the transactions.
Outsourcing companies that handle CMO usually have their own lawyers that draft and examine contracts carefully for the clients. Lawyers are expensive which is why contract management is usually outsourced.
2 CMO Helps Save Money
Most clients neglect their contract management processes which can lead to the loss of thousands and even millions of dollars. They can be liable for damages that may arise from loopholes in the contract.
By helping secure the contract terms in the first place and making sure that parties abide by the terms, CMO essentially helps save the company from losing tons of money in the long run. Law can be interpreted in many ways and can drastically change when crossing borders, but having an airtight contract will make sure that all will be covered. Risks are minimized through proper contract management.
3 CMO Involves Contract Lifecycle Management
Besides drafting contracts, CMO also involves contract lifecycle management (CLM). CLM refers to the management of contracts at the various stages of its life.
The process also involves assessing the risk of a contract with regards to the company’s liability to the terms. Different contracts have varying life cycles which makes them tricky to manage. It protects the company from any damage even after a contract has been ended or voided.
CLM also involves the outsourced team having to make sure that everyone is compliant. They ensure that everyone is using the same terms and definitions so that there will be no confusion with interpretations of the contract.
4 CMO is Augmented by a Contract Management System
Outsourced contract management teams usually have a system already in place. The contract management system (CMS) may vary from each outsourcing company to another. However, all of them have the goal of making the process easier for everyone.
Some companies also purchase a CMS for internal use. Those who want to use it for internal teams often just buy the CMS instead of having to outsource the whole contract management process. This is true for some companies that already have a well-functioning human resources and legal team.
5 CMO Involves More Processes
CMO also involves negotiation, renewal, auditing, and more. Negotiation on behalf of the company is usually done for clients that want to enter a contract with a third party.
Since the CMO provider knows what the client wants and needs, they can be authorized to make negotiations on their behalf. Before any terms are finalized, the negotiation demands are reported to the client themselves for review.
CMO also involves the revisions and amendments for contracts. Since they manage the contracts, they are also the ones fit to make any changes to them. Changes are transparent and are reported to all of the concerned parties.
Renewals are also part of the CMO package. They help process anyone that wants to renew a contract with the client.
Ultimately, outsourcing the contract management process helps the client take the burden of legal matters and paperwork off their shoulders. It can also be cheaper than having to directly hire more HR and legal assistants for the office.