Table of Contents
What is Contract Administration?
Contract administration is the process of managing and executing sales contracts. It involves a wide range of activities from the initial planning stages to the delivery of goods or services.
The planning process — the first step of contract administration — involves looking for contracting partners (e.g., by sending out RFPs), drafting and finalizing details of the agreement, and setting up terms (payment schedules, performance expectations, etc.) with prospective partners.
Execution commences after planning. It requires companies to ensure compliance with contractual obligations, monitor performance against each contract’s terms and conditions, manage changes in scope or pricing, and handle disputes (if any).
Essentially, contract administration covers anything that would be considered “administrative” in nature.
- Contract lifecycle management
- Contract management
What is a Contract Administrator?
A contract administrator is a team member responsible for preparing, negotiating, reviewing, and executing sales and partnership contracts.
It’s tough to imagine such broad functions rolled into one. But — due to the nature of contracting — sales, legal, and operations professionals play a role in the contract administration process. So, unless it’s a large company with well-defined processes, multiple people are involved in the contract administration process.
Contract administrators handle a wide range of tasks, including:
- Drafting and finalizing contractual language
- Ensuring compliance with contract terms and conditions
- Tracking performance against milestones or deadlines
- Resolving disputes between contracting partners, if any.
Contract administrators have to know a lot about their respective companies — processes, legal requirements, customer segments — to excel in their roles. Since they’ll frequently collaborate with the legal team and sales reps (in addition to buyers/partners), they also need strong interpersonal skills.
Importance of a Contract Administration Plan
Contract administration is like a project. It has seemingly infinite variables that can be difficult to manage and track. That’s exactly why every company needs a plan.
A contract administration plan centralizes all the details of a contract and ensures that each member of the team is on the same page. It helps to:
- Ensure compliance with contractual obligations
- Identify areas of improvement in performance or customer service
- Monitor changes in scope or pricing
- Mitigate contract risk associated with underperformance or failure to comply with conditions
- Speed up the process of dispute resolution
- Reconcile financial records
- Hold each contributor accountable for their respective requirements
Every contract has its own unique requirements and expectations. Standardizing the contracting process with a blueprint makes each contract easier to manage and comply with, but there will always be nuances that require special consideration.
Briefly, a plan should outline:
- Goals, objectives, and desired outcomes
- The roles and responsibilities of those involved in the process
- Timelines to track progress against milestones, deadlines, or delivery schedules
- Performance metrics used to measure success
- Budgeting and cost tracking
- Quality assurance measures, including audits
The plan should be detailed yet flexible enough to accommodate changes in scope or pricing (which is common with contractual agreements). It must also hold contracting partners accountable for their respective obligations.
Contract Administration Responsibilities
Send Out RFPs
During the planning phase of contract administration, companies often use requests for proposals (RFPs) to find the right partners. Contract administrators are the ones responsible for drafting and delivering RFPs.
They’re also responsible for finding them — RFPs don’t just appear in someone’s inbox. Contract administrators use a variety of sources to locate potential partners, including industry-specific websites, job boards, events and conferences, and social media.
Contracts are complex documents that often require multiple revisions. They all start with a draft.
Depending on how complex the sales process is, drafting a contract could be a collaborative effort or an individual task. Contract administrators usually take the lead here — they know their company’s processes and requirements better than anyone else.
Most organizations templatize certain elements of their contracts. Terms and conditions, for example, are usually decided upon ahead of time. The client/partner-specific details, however, require internal agreement and customization.
Contract negotiation starts as soon as the recipient responds. It’s a back-and-forth process that involves multiple decision-makers on both sides.
- Reviewing and responding to each other’s proposals
- Discussing areas of disagreement
- Reaching an agreement on terms, conditions, pricing, delivery dates, and completion
- Drafting a final version of the contract with agreed-upon changes highlighted/emphasized.
Contract administrators need to have an in-depth knowledge of the company’s processes, legal requirements, customer segments, etc., to be successful negotiators. They also need strong interpersonal and negotiation skills to get the best deals for their companies.
Establish Contract Timeline
Although a timeline is usually proposed in an RFP or contract draft, it doesn’t always end up being reasonable. After negotiation, the contract administrator or prospect usually changes some contract deliverables in an effort to reach an equitable agreement (i.e., contract redlining).
Reasonable timelines should include:
- Deadlines for delivering/accepting certain tasks
- Milestones that mark significant progress in the contracting process
- Timeframes during which each party can review and accept/reject proposed changes
- Delivery dates
Usually, a contract timeline will also identify areas of responsibility — what each party is responsible for, when, and how.
Before setting contract requirements in stone, everyone needs to be on board. At this point in the contract administration process, the administrator will first secure approval from internal stakeholders (e.g., management, legal team, execs). Then, they’ll centralize communication with their external partners to involve them in the approval process.
Getting approval from a potential partner or client could involve:
- Setting up conference calls or in-person meetings
- Sending out relevant documents for review
- Keeping the lines of communication open
- Receiving confirmation from each concerned member
Approval is both an internal process and an exchange between contracting parties. Keeping everyone on the same page is the biggest challenge at this step of contract administration.
When it’s time to ink the deal, the contract administrator has to obtain signatures from all parties involved. Usually, this process happens electronically using e-signature software.
E-sign is the easiest and most secure way to get approval from multiple stakeholders in a short amount of time. It reduces the risk of contract fraud and makes it easier to track changes, updates and approvals. Plus, it leaves everyone with a copy of the signed document for their records.
Internally, contract administrators keep a central repository with every signed document. This includes active contracts and past ones (which the organization should always keep in the event of a dispute).
Storage desn’t happen in filing cabinets anymore. It usually takes place cloud or an internal document management system. That way, administrators (and anyone else) can easily access and share it throughout the company.
An added benefit to cloud storage is multi-layer security. This protects the contracts from outside (unauthorized access) and inside threats (accidental deletions or shares outside the company).
Contract Change Orders
A change order is a change to an existing contract. It could involve changes in scope, pricing, delivery dates, or anything else that comes up during the execution of contracts.
Usually, change orders are advantageous to the company (who would rather change contract requirements than handle a dispute) and the contracting party (who probably doesn’t want to file one).
Change orders are common for contract managers — it’s rare for something to go completely according to plan. If anything, they’re a sign of well-executed contract administration tasks. When both sides are willing to make changes, it’s usually because each does their part in communicating.
Contract Compliance Monitoring
Everything from legal issues to company policy is handled in contract compliance. It’s the job of the contract administrator to stay on top of compliance-related tasks and ensure that all parties involved in a contract are following its terms.
A few key elements in contract compliance include:
- Regularly auditing internal processes for any mistakes or discrepancies related to contracts
- Making sure the contracting party has met all deadlines, deliverables, payment schedules and other contract requirements
- Ensuring that each contracting party is abiding by the company’s policies and procedures
- Tracking communication between parties to make sure they’re on the same page
- Providing support to both internal and external stakeholders in case of disputes or misunderstandings.
Of course, the contract administrator themselves can’t watch all company contracts at once. Typically, something unusual surrounding a contract (e.g., a seemingly long project cycle or repeatedly low-quality metrics from a channel partner) will raise red flags and trigger a compliance audit.
- Looking at performance metrics for both parties (e.g., sales numbers, customer satisfaction)
- Addressing feedback from both sides on services/products provided
- Negotiating terms for renewal (e.g., pricing, delivery times)
- Updating contract language as needed to reflect any changes in the agreement
- Obtaining signatures from all parties involved in the renewal process
To an extent, companies can automate renewal management. Email reminders, automated alerts in contract management software, and self-service portals for clients can help take care of this process. Still, the adminstrator will usually play a role in negotiating new terms for renewal (such as rate increases, discounts, changes in scope).
Not every business contract renews. And some don’t make it through the whole contracting period. In the event that a contract needs to be terminated, it’s the job of the contract administrator to manage this process.
Aside from communication, it’s important to centralize documentation so everything related to the terminated contract is easily accessible (e.g., invoices, past performance metrics). This makes it easier to track post-termination obligations (such as returns or refunds).
If the administrator handles contract termination properly, it builds trust between the contracting parties and potentially facilitates more collaboration opportunities in the future.
That isn’t always the case, though. For example, a customer may default on their payment obligations, leading to a continuous cycle of reminders and threats. Or a partner might breach a contract.
To ensure termination goes as smoothly as possible every time, the contract administrator should have an exit strategy that includes a process for filing and tracking disputes and recovering funds. Proactive communication throughout the contract lifecycle is key to avoiding such situations.
What is Contract Administration Software?
Contract administration software is exactly what it sounds like: software that helps contract administrators manage and monitor contracts. It provides a centralized hub of information for all contracts in the system, making it easier to store, access and share documents with authorized users.
Most contract administration software comes with the following features:
- Pre-built templates for faster drafting, including language for key legal terms
- Automated approval workflows to secure buy-in from stakeholders on both sides
- E-signature to expedite and secure the signing process
- Extension and renewal options
- Notifications for upcoming expiration dates
- Payment tracking
- Real-time visibility into contract status at all times (including updates and notifications)
- Robust search features and document repository
- Integrations with other software (CRM, ERP, CPQ, billing)
- Reporting capabilities
Contract administration software puts the entire contract lifecycle management (CLM) process in one centralized platform. It’s the best way to ensure the administrator is always on top of their contract administration tasks.
Benefits of Contract Administration Software
Cost-Effective Contract Administration
Given the complexity of contract administration and its many moving parts, it may be more cost-effective to use software than endeavor to manage everything manually.
Contract administration software can automate tasks like contract drafting, signature tracking, data entry and document storage. This can save time (and money) over manual processes. By this token, automation also means fewer mistakes are made.
Improved Visibility and Security
By relying on software, contracts are automatically tracked and stored in a secure environment. This makes it easier to access critical documents when needed as well as review every step of the contracting process.
Being able to monitor each contract’s performance also helps the administrator spot potential risks before they become an issue that could lead to a dispute. Increased visibility and better security make it easier for the administrator to stay on top of their duties.
Contract administration software also improves collaboration between contracting parties, particularly if the platform includes features like automated team sharing. This makes it easier for everyone involved in the process (including the sales team and legal counsel) to access anything they need. Improved collaboration reduces friction between teams and verifies timely completion for contract requirements.
Companies using contract administration software can preset parameters for terms and conditions, such as payment deadlines. This helps ensure that all contracts comply with the company’s policies.
For contracts with sensitive or confidential information, it’s easy to configure contract administration software to restrict access. Rules-based permissions and user authentication further enhance its security.
When it comes to contracts, efficiency is key. The biggest problem with contracting is lead time. Waiting on approval from one team member who forgot, taking days to make updates to a document, and searching for a specific contract significantly slow down the process.
Contract administration software eliminates inefficient processes by streamlining every step of CLM. Automating tasks reduces manual steps, and it gives everyone involved in contracting visibility into what’s happening with a particular contract at any given time.
People Also Ask
What is the difference between contract administration and contract management?
Contract administration is a process that focuses on managing the lifecycle of a contract from beginning to end. It includes activities like drafting, negotiating, and executing contracts. Contract administration is a part of contract management, which also includes non-administrative tasks like managing teams, analyzing data, and measuring performance.
What is an example of contract administration?
Suppose a company is drafting an agreement with a new vendor. The contract administrator would take the lead on drafting, negotiating, and signing the contract. They would make clarify all the terms and conditions to the contracting party, secure internal approval from higher-ups, and lead contract redlining after negotiations. Once it’s signed, they would then monitor the contract to ensure that both sides are meeting their obligations (and manage disputes if not).
What are three important functions of contract administration?
The three most important parts of contract administration are drafting and negotiating contracts, managing the document repository, and monitoring compliance.