Did you know that nearly 32% of a company’s workforce is involved in managing contracts?

But here’s the catch - close to 40% of organizations aren’t clear about who’s responsible for what stage of the process. And to make matters worse, 89% of companies admit their contracting process isn’t as effective as it could be.

Sound familiar? That’s where contract administration comes in. While it’s often confused with contract management, contract administration is all about the early stages - planning, preparing, and organizing contracts.

In this guide, we’ll walk you through everything you need to know about contract administration: what it is, why it’s important, the challenges you might face, and how the right tools can help you streamline the process.

What Is Contract Administration?

Contract administration refers to the process of preparing a contract between the organization and the vendor or contractor. It begins when a contract is awarded and culminates once all parties have shared their electronic signature or wet signature for the contractual agreement.

This process is undertaken by a contract administrator whose duties can vary depending on the type of contract. You see, each contract type has its own set of unique requirements, demands, and obligations that must be met. For SaaS and procurement contracts, this often includes ensuring compliance with service-level agreements (SLAs), data security requirements, and renewal terms.

Why is Contract Administration Important?

Now that you know what contract administration is, let’s discuss why it should matter to you. Let’s say you’re considering entering into a contract with a SaaS vendor for a new tool. This contract is meant to be the foundation of your commercial relationship with the vendor and lays down the expectations and obligations of both parties.

Now, unfortunately, it's not as simple as drafting a contract and signing.   It instead entails significant back-and-forth on pricing, clauses, terms of use, termination, and other terms until all parties are satisfied and ready to shake hands. Your legal team may draft the contract, but coordinating between you and your vendor? That’s not in their job description.

This is where a contract administrator becomes indispensable. By acting as the middleman, these individuals are key players that help facilitate smooth talks between both parties and streamline negotiation. They ensure that both parties’ interests are addressed to create a mutually beneficial contract. Without a contract administrator, you run the risk of signing a contract with less-than-favorable terms, compromising your business relationship with the vendor, and wasting everyone’s time.

‍

Contract Management Vs. Contract Administration

Contract administration and contract management are often used interchangeably, but they are distinct processes. The biggest difference is that contract administration is a stage within contract management.

• Contract management responsibilities involve overseeing the entire lifecycle of a contract—from preparation and negotiation to the execution of contracts, performance monitoring, contract performance and renewal or termination.
• Contract administration focuses solely on the initial stages: contract creation, planning, preparing, and negotiating the contract until all parties have signed.

While small organizations might combine these roles under one individual, scaling businesses often separate them due to the complexities involved. Tools like Spendflo’s Vendor Management Platform automate these tasks, reducing errors and freeing up resources for strategic decision-making.

‍

Examples of Contract Administration Tasks

What does a contract administrator do? Here are key tasks:

• Share Requests for Proposals (RFP)

An RFP outlines the project’s requirements, evaluation criteria, and specifications to invite vendors to submit proposals aligned with the organization’s goals. Once floated, vendors respond with proposals, and the organization selects the one that best meets its objectives.

• Negotiate Contract Terms

As part of the contract administration plans, contract administrators also collaborate with legal teams and key stakeholders to ascertain contract requirements and negotiate terms that protect the organization’s interests while ensuring a win-win agreement.

• Establish Contract Milestones and Timelines

Defining milestones, timelines, and deadlines is crucial for tracking progress. Administrators ensure any delays are flagged early to avoid project disruptions.

• Specify Contract Deliverables

Administrators define precise deliverables to ensure clarity on each party’s expectations, minimizing ambiguity and potential disputes.

• Create Detailed Contract Playbooks

Contract playbooks serve as guides with standard processes, templates, and best practices, helping you pave the way for successful contract administration tasks and promoting consistency.

‍

Common Contract Administration Challenges

Here's a look at some common contract administration challenges:

1. Managing Multiple Contracts with Tight Deadlines

Contract administrators are often working on executing multiple contracts at the same time while meeting tight deadlines. This makes it difficult to allocate sufficient resources and time to every contract. As a result, contract administrators can miss details, rush decision-making, and compromise accuracy. These, in turn, can lead to contract disputes and potential legal risks.

2. Ambiguous Contract Language

Preparing contracts calls for attention to detail as even the most minute error can, at times, have significant consequences. For this reason, contract administrators must review and validate every word in the contract carefully to ensure it reflects the meaning intended by the parties and aligns with all interests. This can get complicated when you add complex legal jargon to the mix.

3. Lack of Effective Cross-Functional Collaboration

Lack of collaboration and effective communication between key stakeholders can compromise the contract administration process and lead to misaligned expectations, misunderstandings, and delays in decision-making, jeopardizing the entire contract process.

4. Difficulty Tracking Contract Amendments

Keeping track of contract amendments can feel like navigating a maze. Without clear contract visibility, managing multiple versions and consolidating them into one accurate document can quickly spiral into chaos. This often results in errors, inconsistencies, and delays in execution, making compliance with terms a challenge.

5. Delays in Approval Process

Delayed contracts disrupt project schedules, hamper business operations, and compromise relationships with clients as well as vendors. Such delays are often a result of bottlenecks in the approval hierarchy, manual processes, etc. 

The above-mentioned challenges significant ones that hold the potential to dismantle the entire project. So, how do you safeguard your contract from these? Easy—Onboard a Vendor Management Solution.

‍

Overcome Challenges with Spendflo’s Vendor Management Platform

Spendflo’s Vendor Management Platform offers businesses an efficient way to manage their vendor relationships, ensuring seamless operations and optimal performance. By tackling vendor-related challenges head-on, Spendflo equips organizations with the tools needed to build better vendor partnerships. Here’s how Spendflo can transform your vendor management processes:

1. Centralized Vendor Database

Spendflo consolidates vendor information into a single, cloud-based repository. This ensures quick access to vendor details, contracts and agreements, enhancing organization-wide visibility.

2. Streamlined Onboarding and Offboarding

Automated workflows make onboarding new vendors and offboarding those no longer needed a breeze. This reduces manual effort and ensures all necessary steps are followed consistently.

3. Enhanced Vendor Performance Tracking

Monitor vendor performance in real-time with customizable dashboards and KPIs. Spendflo provides actionable insights to ensure vendors meet contractual obligations and service levels.

4. Efficient Contract Risk Management

Identify and mitigate risks proactively with Spendflo’s advanced analytics and reporting tools and ensure contract compliance. This ensures compliance with legal and regulatory requirements, safeguarding your organization from potential liabilities.

5. Transparent Cost Management

Spendflo simplifies vendor-related cost tracking with effective spend monitoring. This enables organizations to stay within contract budgets while maximizing vendor value.

6. Seamless Collaboration and Communication

With built-in communication tools, Spendflo fosters better collaboration between internal teams internal departments, and vendors. Features like real-time updates and document sharing reduce delays and improve decision-making.

7. Simplified Renewal Management

Never miss a contract renewal with automated alerts and reminders. Spendflo helps you stay ahead of critical deadlines, ensuring continuity of services and renegotiation opportunities.

By leveraging Spendflo’s Vendor Management Platform, businesses can improve vendor relationships, reduce inefficiencies, and achieve greater operational success. Make vendor management simpler, smarter, and more effective with Spendflo.

‍

Conclusion

Here’s a quick recap of what we discussed:

• Contract administration focuses on the early stages of contract management: planning, preparation, and negotiation.
• It is distinct from contract management, which spans the entire contract lifecycle.
• Effective contract administration ensures clear communication, favorable terms, and successful execution.
• Challenges like tight deadlines, ambiguous language, and approval delays can disrupt the process.

A vendor management platform like Spendflo offers the tools you need to overcome these hurdles. By automating workflows, simplifying language, and enhancing collaboration, Spendflo empowers businesses to manage contracts with efficiency and confidence. Ready to revolutionize your contract administration? Book a demo today.

‍

FAQs

1. What does a contract administrator do?

A contract administrator oversees contract planning, preparation, and negotiation before relevant parties sign off. This role is distinct from contract management, which covers the entire contract lifecycle.

2. What is contract administration? 

Contract administration is a stage within contract management. It focuses on the planning, preparation, and organization of contracts before they are signed.

3. What are the four keys of contract administration?

The four keys of effective contract administration are:

1. Clear goals and objectives
2. Efficient processes and procedures
3. Effective collaboration and communication
4. Integration of advanced technology

‍