Companies that neglect the value of contract parameters, fail to capture it properly, or fail to address major gaps will never realize the full potential of their contract portfolio.
In this article, we will discuss what contract parameters are, why they are important, and how they can help companies make informed decisions.
What Are Contract Parameters?
Contract parameters are the specific details and conditions set out in a contract that determine the rights and obligations of the parties involved. These parameters can include various elements such as the scope of the work or services to be performed, payment terms, deadlines, warranties, termination clauses, and other important details that define the expectations and responsibilities of each party.
Before signing a contract, the parties involved usually conduct negotiations to define and ratify the contract parameters. Contract parameters can therefore be considered the fundamental basis of clauses to ensure compliance with mutually agreed terms.
Examples of Contract Parameters
Since contracts serve as legally binding agreements between multiple parties, a high level of detail and specification is required. For this reason, there can be a wide range of different contract parameters. Here are a few common examples:
- Contract type (NDA, MSA, SLA, etc.): The terms of the contract, the details of the compensation, the conditions for legal enforceability, or the associated risks can all be referred to as a contract type.
- Customer and supplier contract information: A two-way agreement that legally obligates an organization and a supplier to perform specific tasks. Each of the parties to the contract is legally obligated to perform the tasks described in the contract.
- Delivery dates are all specified dates that the Contractor must meet in order to fulfill its obligations under the Contract.
- Product or service specifications are "statements of requirements or demands". They contain a precise breakdown of the products or services that a supplier must deliver during the contract term.
- Price or fee parameters indicate the cost of the products or services to be received under the contract.
- Contract expiration or renewal: The point in time during the term of a contract when it expires.
These are just a few examples of contract parameters; the list could go on. But note: All of this information is critical, especially with regard to renewals, disputes, and performance reporting. Therefore, it is important to note all numbers, dates, names, addresses, and specific parameters in each contract.
Why Are Contract Parameters Important?
Contracts are often a treasure trove of information. They provide a timeline and serve as a record of what is happening within the organization. Companies that analyze contract parameters can not only make better and more informed decisions, but also have the opportunity to identify inefficiencies in their contracting process.
Here are three things you can improve by starting to analyze and understand the parameters of your contracts:
1. Faster Decision Making
- When your contract parameters are properly managed and monitored, you are able to assess the performance of each contract and plan for future contracts that will perform even better.
2. More Efficient Contract Processes
- You will be able to identify the contracts that have taken a long time to negotiate and the reasons why as you better evaluate and understand your contract parameters. With the help of all these insights, your contract cycle times will be accelerated and simplified.
3. Improved Business Relations
- The information in the contract parameters is what you need to make your interactions with suppliers and other partners less stressful. By focusing on the parameters your counterparty values most, you can convey the most important priorities during the negotiation.
By analyzing the results of previous contract negotiations, you can anticipate potential points of contention and propose solutions that are likely to be acceptable to both parties.
How to Use Contract Parameters
More than ever, many companies are using contract information to drive their business by extracting, understanding and analyzing contract parameters using contract management software. Here are the various reasons why a dedicated contract management solution will help you better understand your contract parameters.
1. Access to Contract Information in Real Time
- With contract management software, key contract parameters are not only centrally located, but also easily accessible. You can perform a real-time search and retrieve the information you need in seconds, instead of spending hours or days searching through physical documents in filing cabinets.
2. Improved Workflows
- In a typical business environment, it's difficult to find out the status of a particular contract. To determine who has what and when the next steps are, you need to sift through emails, messages and conference calls. With contract management software, all the information can be collected, analyzed and visually displayed in a structured report or dashboard. This allows you to quickly determine where a contract is in the workflow process and what actions need to be taken next.
3. Reduce the Number of Missed Appointments
- There are many benefits to implementing contract management software, one of which is the ease of tracking updates and progress on contracts. Extracting contract parameters is essential to keep all parties informed of the steps that need to be taken to meet deadlines by recording important timelines for events, expiration dates and renewal dates.
4. Determine the Degree of Compliance
- Compliance is essential for several industries. Depending on the industry in which you operate, your contract suppliers must adhere to certain rules. For companies that manage a large number of contracts, it can be quite difficult to find out important parameters from numerous contracts. However, using contract management software makes this work much easier.