To get the most value from your existing agreements, a consistent and thorough contract management process should always be followed. A study from World Commerce and Contracting indicated that 9.2% of gross revenue is lost due to poor contract processes.
Making improvements requires understanding your current ways of working, identifying gaps and understanding what teams need to improve their day-to-day handling of agreements.
In this article, we take a look at how you can assess your current process, improve what you already have in place and how you can develop your contract management process even further into the year ahead.
1. Assess your current contract management process
End-to-end contract management processes should be built around the lifecycle of your agreements. Each step includes its own body of work but by addressing every stage of the lifecycle, businesses can start to standardise processes and allow teams to collaborate seamlessly together.
When assessing your current contract management methods, all stakeholders should come together to investigate, challenge and communicate about how each stage of the lifecycle is addressed."
These stakeholders will typically include the in-house counsel, dedicated Procurement team members if the business has them, representatives from Finance and then management from across the various other business teams.
Below are some key questions you can raise about each stage of the contract lifecycle:
- Inception: How easily can you capture requirements for a new contract or provider and who needs to sign them off?
- Negotiation: How long on average does it take for involved parties to reach an agreement?
- Execution: Once agreements are finalised, where are they stored and how easily are they shared with key stakeholders?
- Start-up: How much time is dedicated to capturing and recording key contract metadata?
- Monitoring: Are you able to ensure obligations are being fulfilled by all involved parties?
- Renewals: Has your business missed any renewals in the past six months? What renewals are coming up?
- Close-out: Is an auditable record of any changes, KPIs met and missed, and gaps In information created at the end of every relationship?
If you are unable to answer the above questions, or find any of your answers unsatisfactory, there is room for improvement in your contract management process.
If a single stage of the lifecycle doesn't have a defined contract management process that's completed to a consistent high standard, the level of risk within your portfolio will start to creep. Even the best-planned and negotiated agreements can break down without careful management.
2. Identify the gaps and align teams to problem solve
Contract management processes can only lead to meaningful results and improved outcomes if each team takes a proactive approach. Once the assessment above has been completed, stakeholders should work together to resolve any gaps in knowledge or processes. In-house teams should also provide input into the resolution process.
If, for example, your assessment reveals that not enough time is being dedicated to capturing key contract metadata and renewals are being missed as a result, all involved teams should consider the following questions:
- Who has ownership of the activity?
- Why is the activity not being prioritised or completed?
- Which teams are impacted by the lack of information?
- How long does the process take and how can it be made more efficient?
- What impact does this issue have on achieving business goals?
The answers provided will provide clarity over why some processes are not working optimally and what needs to be done to improve them.
3. Standardise your improved processes
If you have followed the steps above, you will be in a great position to improve your contract management process. However, the key to ongoing success is the consistent execution of these new processes.
Teams can’t just align on a single agreement, capturing metadata can’t be a one-off and the choice to automate steps shouldn’t be sporadic.
Using technology to standardise your contract management process will keep teams aligned and their actions consistent. This creates accuracy at every stage of a contract’s lifecycle."
Whatever the maturity level of your business, workflows should be mapped out, standardised and adhered to. In a perfect world, these processes will be automated - with an auditable history of all actions taken. However, if you have multiple teams using disparate systems, this will certainly be a challenge.
Whether you create a contract management checklist for teams to follow, or build automated workflows via contract management software, there needs to be a system in place to determine what actions are taken and when.
Standardising processes and recording activity will help to keep everyone on track - especially as the business and its portfolio continues to grow.
4. Give time and control back to specialist teams through automation
Businesses that are looking to improve their contract management process often share the same symptoms throughout the lifecycle of their agreements. These include contracts being stored disparately, information taking too long to find and time-to-contract being delayed due to manual ways of working.
Teams are frustrated, in-house specialists such as General Counsels are overburdened with low-value work and, in some scenarios, individuals have lost sight of how many contracts they need to manage."
Improvements to your contract management process can be measured in different ways and are likely to be based on the maturity of your organisation. For many, earning back valuable time that can be spent on high-value activities is a huge measure of success.
In the Legal department, for example, the less time spent on searching for specific clauses and the more time spent on resolving disputes, the better.
Automating processes such as data extraction and input, sending for signatures and searching for information will improve your contract management processes. This eliminates bottlenecks, helps teams to complete tasks more easily and efficiently, and frees up time to focus on their specialist areas.
To make these improvements, you need to invest in contract management software.
5. Invest in contract management software
Once your people and processes are aligned, technology should be your next step for improvement. With the right contract management software, you can easily automate workflows, standardise your working practices and give your teams a central system where they can store contracts, find the information they need and easily collaborate.
ContractNow helps businesses to overcome common contract management challenges and improves their processes by:
- Centralising contracts and all related documents in a secure contract repository
- Increasing visibility and searchability of key dates, clauses and other information
- Streamlining processes to create contracting efficiencies via automated workflows
- Providing tools such as unlimited eSignature licences to speed up time-to-contract
Contract management software underpins effective processes - but only when those processes have been clearly defined, agreed and ironed out."
Your organisation’s people, priorities and practices should always be worked on first. Technology alone can’t fix sub-optimal processes - but it can enhance processes that are being proactively improved.
If you’re ready to get ahead of 2022 and improve your contract management processes, or want to know more about how ContractNow can support your business, get in touch today.