Contracts are vital for running a business. Taking the correct approach to contract management will help you to get the most from each agreement. Building a strategy around centralisation and collaboration will vastly improve your outcomes. But a new strategy also needs to be based on a digital-first approach.
Put automation at the centre of your contract management strategy. It gives teams time and space to focus on high-value tasks that occur post-signature."
Unfortunately, some stakeholders ignore this part of the contractual process. Contract management is sometimes perceived as a formality. Some may think a business deal is complete once the contract is signed. But this is rarely the case.
A contract management strategy begins at the point of signature. Ongoing processes are needed to maintain control and compliance for an agreement's duration. To help you achieve this, we’ve created a list of dos and don’ts for you to follow.
But First, Why is it Important to Have a Contract Management Strategy?
A contract management strategy keeps your business in control of its portfolio. It encourages proactivity from everyone in the organisation when handling agreements. A strategy built around a digital approach streamlines processes. It increases efficiencies while minimising contract risk.
As the number of contracts increases, traditional ways of working can become convoluted. Using manual methods requires more time and resources than ever before. Digital transformation remains urgent as automation and remote working become competitive advantages.
The days of storing contracts under lock and key in an office or offline in a spreadsheet are over. The ability to manage contracts securely from any location, on any device is non-negotiable."
The more efficient the contract management process is, the more time and money a business can save. With that being said, let’s get into the dos and don’ts your business should follow when considering technology, your people and their processes.
Best Practices For Managing Your Contracts: The Top 5 Dos
Do 1: Automate Your Contract Management Process
Depending on the size of your business, it may have hundreds to thousands of contracts. Manually managing this volume can be a long and resource-heavy task.
Automated contract management processes can include:
- Search functionality within a centralised repository, saving hours locating contracts
- Metadata that’s extracted through the power of AI, eliminating human error
- Notifications triggered by key dates, such as renewals, to drive stakeholder action
- Visual Kanban-style workflows to progress contracts through their lifecycles
Contract management software saves stakeholders valuable time. It reduces friction within internal processes, allowing teams to collaborate more effectively. Automation is a powerful tool for staying in control of your portfolio and ahead of any key events.
Do 2: Choose a solution that works for all teams
Has your business locked its contracts away with the Legal team? Contract administration and management will create an unsustainable balancing act. Add in unexpected requests from other teams and the scales tip over, leaving Legal with unmanageable workloads. This prevents them from adding strategic value to outcomes.
Legal, Procurement, Vendor Management and Sales teams are all responsible for contract outcomes. So a CLM solution should work for every team. They need relevant access to contracts and should be encouraged to self-serve where possible."
This collaboration alleviates pressure on the Legal team and allows them to focus on what matters the most. It also boosts levels of productivity as each team department is given the level of control required to carry out their duties.
The technology you choose to support your strategy should give everyone visibility. It should also hold all stakeholders accountable.
Do 3: Centralise your contracts and related documentation
Manually managing contracts often lends itself to many storage methods. Whatever combination your business uses, it hampers visibility.
Without a single source of truth, your business can’t know what’s occurring within the portfolio. This includes auto-renewals, outdated compliance information and duplicate contracts. These could all be damaging your business's reputation and bottom line.
A CLM solution offers you a central repository for storing contracts. The repository should be searchable, secure and accessible from any location."
Centralising your business's contracts will increase visibility. A searchable repository will save internal teams hours usually spent on administration. A secure repository will help you to protect sensitive data. Your business can keep compliant with relevant legislation such as GDPR.
Recording important dates, obligations and clauses in a repository will help your business to plan for the future. Those plans could be for risk mitigation or contract consolidation.
Do 4: Set alerts for important dates
It’s important to track and act on key dates - especially ahead of time. If you miss auto-renewals, allow compliance-related information to expire or fail to fulfil an obligation by the agreed date, your business could face a variety of consequences. These range from a damaged reputation to financial penalties.
Don’t just capture and store key dates. Strategise the information by making these dates actionable."
Give internal teams foresight of important events. Allow them to plan for timely reviews. Provide them with enough notice to chase stakeholders when third-party certificates need to be updated.
With contract management software, this can be done automatically. Key dates can trigger notifications that go directly to a contract owner’s inbox. You can also see if the required actions have been completed, and when, with a time-stamped audit. A complete and transparent history will help you to understand progress and prepare for audits.
Do 5: Monitor contract compliance
The best contract management strategies put proactivity at their core. Contracts aren’t designed to sign and store. They are active agreements that are always changing and so they require ongoing monitoring. Obligations can be missed, force majeure clauses could be triggered and documents can expire.
If any of these scenarios occur within your portfolio, compliance needs to be questioned. If your business and its suppliers can’t prove compliance with regulation or local law, it could be penalised. Contracts that are buried away or manually managed won’t give you the instant visibility required to protect the business.
Contract management software allows you to track obligations, review performance and generate reports. Track key dates, assign a RAG status and take action well before any item or potential risk turns Red. Get ahead of compliance with contract tracking.
Things To Avoid While Managing Your Contracts: Top 5 Don'ts.
Applying best practices can often feel like an overwhelming task. This is especially true if you’re starting out with no process and no technology in place at all. Yet even the most versed businesses can be guilty of falling into contract management pitfalls.
When to-do lists are too long or using old and using tested methods feels easier, contract management strategies can begin to fail. Below, we take a look at some of the most common mistakes - the top 5 don’ts that your business should avoid.
Don't 1: Use other storage systems outside of the CLM software
This isn't uncommon. People defer to the systems they know best. Learning a new system can feel off-putting, especially if users need to learn new ways of working. CLM software should be easy to use, with an intuitive user interface. Seek extra guidance from your provider if needed, rather than going back to the old ways of doing things.
Storing contracts elsewhere augments fragmentation issues."
Agreements that aren’t stored in the central repository are more likely to be forgotten. This increases contract risk and keeps it hidden. One way to avoid this mishap is to get buy-in from every team on your strategy and technology. Then monitor their feedback and act accordingly.
Don't 2: Implement just any contract management system
Your people and processes need to be aligned before you implement any type of contract management system. And with so many CLM players in the market, you need to make sure you’re making the right choice for everyone involved.
We advised you earlier to think beyond the Legal team. That means avoiding dedicated LegalTech CLM solutions.
Meet with every stakeholder to understand their requirements. Know how many contracts you currently handle and how that volume may increase in the future. Look for a provider that offers unlimited users and unlimited contracts.
The right contract management software will scale alongside your business. Effective strategies shouldn’t create ongoing overheads.
Don't 3: Ignore the need for contract reviews
Contract management is ongoing, even when the temptation is to de-prioritise certain parts of the lifecycle. Your business should always consider how it can maximise the outcomes of its agreements.
Contract reviews allow you to see what’s performing, what’s creating more risk and where internal action is most needed."
It’s important that all stakeholders feed into this review process. When all teams come together to share transparent feedback, your business can make better decisions. Regular contract reviews can keep third-parties, compliance and revenues in check.
Don't 4: Forget to meet your obligations
Every party in a contract has obligations. So once the contract is signed, ensure that you follow up and keep your side of the bargain. While checking the performance of the other party, ensure internal teams are reviewing their own performance. Teams should keep each other accountable.
Put measures in place to ensure that teams do not neglect obligations. Inform all team members of the part they have to play. These can be done through automatic notifications when an action is required. Reminders can also be sent if the activity hasn’t been completed within a certain amount of time.
Don't 5: Rely solely on contract management software
Contract management software is designed to streamline processes, enhance productivity and boost visibility. But relying on technology alone is a poor strategy. If internal teams aren’t working together with agreed processes, it’ll be hard to take back control of your contracts.
Contract owners and stakeholders are still the heart of effective strategies. They should be bought into the technology and agree on the best processes for contract management. People, processes and teams to be aligned to get your strategy off the ground.
Conclusion
We have given you a list of do's and don'ts, and even though they are not exhaustive, following them will greatly improve your contract management process. The contract process doesn't stop after you have signed the documents, so implementing a strategy for managing your contracts for the entire duration will greatly improve outcomes.
If you’re ready to discuss how contract management software can support your strategy, get in touch with us today.
