How sound are your contract management practices? Are you totally confident in your pre- and post-award processes, or are you dropping everything right now to calculate whether you’ve got sufficient funds left to cover expenses from your last round of change orders?
Wait! Before you run off, take a few minutes to read through these contract management tips. They’re based on years of working alongside project executives and project managers to improve their decisions and process management needs.
Off to a Risky Start
Let’s start with some context. Tight margins and increased competition lead to riskier contracts—or even worse, no contracts. Are you one of those firms who is willing to work without a contract, particularly when it comes to extensions? Or does your firm fail to realize when contracts expire or exceed the contract amounts? When “the contract or supplement is coming soon,” the inclination is to take those client assurances at face value. But choosing expediency over control could come back to haunt you.
The Wrong Tools for the Job
You’ve heard the phrase “measure twice, cut once.” A similar principle applies to invoicing. If you’re exclusively relying on accounting software, you might fall into the trap of blindly sending invoices without an accurate cost summary of your projects. The implications are far-ranging. You might find yourself:
churning through milestones, only to come up short with funds when the project scope expands
extending resources beyond contract limits, which means you might not get paid
leaving money on the table because you’re not up to speed on what can be invoiced
Here’s another impact that often sneaks up on people. Without frequently reviewing project cost summaries, your labor forecasting could fall into disarray.
Costly Talent Gaps
If your estimated completion date doesn’t align with remaining contract values, you now have a staffing issue. Inaccurate tracking and data latency may affect your ability to retain and redeploy workers, so that you risk losing them to a competitor.
By knowing where your contracts are standing at all times (in terms of both time and money), managers can determine where and when personnel will need to be assigned to under-resourced projects. Contract changes are inevitable, but you owe it to your employees to keep them in the loop on completion timelines and availability of work.
A System of Record
Your resident expert on contracts may be a fountain of knowledge, but it’s dangerous when institutional information is not documented and centrally available. A single system of record enables you to link contract information with other functions within your project ecosystem like scheduling, cost control, deliverables, status reports, and invoices.
We’ve designed Maginox to address all these potential roadblocks head on. With detailed work order tracking and cost summary reports, you can step away from the spreadsheets and manage all your contract information in one place.
Accurate Cost Summaries = Better Contract Oversight
Maginox cost summary reports track contract values, including supplements and change orders, and calculate the percentage completed based on the total amount invoiced. This informs the proper parties how much money, if any, remains on the contract. The summary reports also link back to the last reporting financial period so that invoicing is not inadvertently missed for a particular contract.
Contract management success factors rely on both parties to know their obligations under the contract, at any given moment. You should always strive for no surprises, and certainly for no disputes. I love helping clients get organized and take control of their contract strategy. Business process mapping—before, during, and after engagements—is a great place to start.
Let’s connect and keep the discussion going.