Essential Contract Management Skills You Need as a Pro
Essential Contract Management Skills You Need as a Pro
Modern companies are growing – medium-sized companies often have around 20,000 active contracts, which means that there is an apparent demand for a robust process and having people to manage all these contracts. That’s why many companies have given these tasks to people who don’t specialize in managing contracts.
However, most of these roles have evolved into full-time contract manager positions that have complete responsibilities for the process. This role is vital to carrying out the contract lifecycle and maintaining it, and the people in these roles need the right skills to do the job properly and achieve a positive outcome.
Planning and negotiation skills
Account management often requires professionals to estimate future outcomes, create estimates, organize systems, and identify important resources. In other words, the positions constantly require effective planning.
Professionals must be able to organize their work time and carry out all their responsibilities effectively. Furthermore, account management includes scheduling meetings and preparing for deadlines. During these meetings, professionals have to negotiate the terms of the contract.
Of course, the better someone is at negotiating, the more likely they will get better value from the contract. However, planning and negotiation don’t come naturally to everyone, and some individuals need to work hard to improve these skills.
Negotiations come down to every detail, and CMs need to consider every possibility, option, and permutation. They must negotiate these conditions with external and internal parties to satisfy everyone.
Anyone who wants to be a CM must have fundamental knowledge in the field. CMs need legal knowledge, allowing them to guide the whole contract management process. That’s why many contract managers have a law degree, but it isn’t mandatory.
More and more projects include contracts with suppliers and providers of services and goods. Contracts can be very simple or highly complex, with many clauses, products, and high value. Having comprehensive contract knowledge allows professionals to deal with all contracts equally.
As a CM, you need all the knowledge related to the job. That means understanding contracts, legal issues, clauses, special regulations, commercial circumstances, etc. A professional must understand the contract management process while maintaining great relationships with everyone involved.
Risk management skills
All managers need risk management skills, regardless of the industry they’re working in, and that includes contract managers. Risk management allows experts to understand all the potential downsides of a contract, how to manage them if they happen, and which actions to take to avoid them.
It’s important to have analytical skills to collect and analyze relevant data and use it to make important but difficult decisions. Another way managers can use this data is to recognize potential gaps in contracts before going further with evaluating deals.
It’s all about having strategic thinking – you must look at all the areas of a business and its contracts to determine the potential outcomes. With this approach, professionals can see the big picture and manage contracts more effectively throughout their lifecycles.
Contract law knowledge
We’ve mentioned earlier that legal knowledge is essential in contract management. Many contract managers were previously contract attorneys or had this educational background. That is especially true for contracting professionals in the US, as they need to understand the Federal Acquisition Regulations System that sets guidelines for leasing or purchasing goods and services.
Furthermore, contract managers act as business advisors and must look for the most beneficial terms for their clients while drafting contracts suitable for both parties involved. It also means creating contracts that don’t present legal liabilities.
Contracting professionals must understand the legal implications and how they might affect the business. It’s about protecting their organization while ensuring a satisfying outcome for both sides. Understanding all contract language requires legal knowledge and seeing how different clauses correlate.
Financial analysis skills
Contracts are often deeply connected to finance and revenue. All companies enter contracts with a dose of financial risk, and worst-case scenarios can sometimes cost a lot. That’s why managers need to be able to identify all the important financial aspects and understand them.
It’s similar to legal knowledge as finance also includes technical language and different circumstances that dictate profits and costs. Good managers can use their knowledge to implement the best possible strategies and minimize financial risk while focusing on profits.
Knowing which risks are manageable versus unmanageable ones allows you to set up the right contingency plans and prepare for worst-case scenarios. Having financial and legal knowledge also makes it easier for professionals to negotiate as they understand where their leverage is.
Attention to detail
There is no denying this is a valuable skill for professionals in this role. CMs handle various tasks on a day-to-day basis, all of which require punctuality and attention to detail. It incorporates everything from the simplest things, like missing punctuation in the middle of a sentence, to seeing a hidden clause at the bottom of the contract.
On the other hand, imprecise phrasing can make it difficult for anyone to understand the conditions of the contract. Poorly phrased sentences can also change the meaning of the whole contract and lead to adverse outcomes. Attention to detail is one of the most critical skills since every word is important.
You can never treat contracts as “templates”, and if you want to be a true professional, you must understand all the details. Contract management is a critical role that affects various aspects of the business, so you must learn to do your due diligence.
A professional contract manager knows how to communicate, and it’s closely tied to collaboration skills. As a contract manager, you need to know how to present the deal you’ve made to all the key stakeholders internally and externally.
The whole organization needs to know about compliance issues, key performance metrics, obligations, and expectations the contract sets. For contract professionals, this means doing constant performance auditing, continuous monitoring, and the necessary follow-ups to ensure everything is in order.
It is an essential part of project management as it requires coordinating and collaborating with different teams to assess deliverables. Simply put, professionals need to communicate with various players throughout the contract lifecycle, which is why this is an essential skill.
Good organizational skills are quite handy for contract management, as managers usually work on multiple significant contracts. In other words, tracking and monitoring your progress can sometimes be chaotic, but not if you have the right organizational skills.
How you store, organize, track, and manage contracts affects efficiency and overall results. At the same time, it reduces the number of mistakes and extended deadlines. That’s why all professional CMs use contract management software to control their contracts effectively.
Furthermore, a typical workday involves shifting between tasks and staying focused. It’s all much easier when you can organize your materials and time correctly, so you must stay on top of your priorities and ensure everything goes smoothly.
Data analysis skills
For most people, data isn’t the first thing that comes to mind when discussing contract management. However, data analysis has become a required skill for the job. Modern companies gather large volumes of data they want to analyze and get valuable insights to support their decision-making.
With data analysis, you can understand your contracts and their actual performance. Contract data provides your organization with rich information through key metrics such as the duration of the contract or its value.
Data use also provides insights into contract volumes, workflow efficiency, satisfying outcomes, etc. Not only is this skill essential on a micro level, but it can also help the organization recognize important patterns and adjust its approach in the future for better outcomes.
The contract management role is constantly evolving, and professionals need to adjust. Today we’ve shared some of the most vital skills contract managers need to keep up with the constantly changing and demanding role of managing contract lifecycles.
Of course, some of the best experts are always looking to add additional skills to their toolboxes. This allows them to get an even better overview of different contracts, giving their organizations an “edge” over the competition.