Contracts are the lifeblood of every business transaction in today's world. This is true of every business relationship. It is irrelevant whether it involves an employer and their employees, multinational corporations and their clients, or a mere product or service vendor.
Every one of these business relations is anchored on contracts. The way contracts are managed is critical to your business’s success.
It also has a direct impact on the relationships between all involved parties. If you don’t actively manage a contract, obligations can be missed. Contract risk can increase. Misunderstanding and delays between all parties can occur. Having the right contract management strategies in place can help you to avoid these issues.
What is Contract Management?
Contract management is the procedure for managing contracts from start to finish. It is a critical tool for achieving the best possible contract outcomes. Proper contract management improves time-to-contract, decreases levels of risk and builds healthier relationships among business parties.
Irrespective of the industry you are operating in, keeping proper tabs on your contracts is essential. Having an accurate view of your portfolio will help you to protect your business. It allows you to identify issues and proactively resolve them. You can make informed, accurate decisions about your agreements such as whether to renew them or terminate them.
Below, we examine effective contract management strategies. From automating processes to tracking obligations, there is a lot you can learn from each strategy.
1) Automate your contract management processes
While many companies are still conservative in their contract management methods, successful organisations know that automated systems are the best way to go. Automating contract management means:
- Allowing teams to retrieve needed information any time, anywhere, effortlessly
- Minimising manual tasks such as extracting contract data while improving accuracy
- Streamlining processes to save hours usually spent on contract administration
- Giving teams better visibility and searchability of their contracts
Contract management software allows you to automate several parts of a contract’s lifecycle. You can send for signatures electronically, alert stakeholders to risk and capture performance feedback with surveys. By removing the manual aspect of contract management, teams have more time to focus on strategic matters.
2) Seek an experienced CLM software provider
Replacing manual processes with a CLM solution can be daunting. When you choose a solution, don’t just look at features. Assess the provider and the support they can offer your business during the transition. Look for a CLM software provider that:
- Understands your business’s pains such as a lack of visibility and control
- Can put you in touch with like-minded customers who benefit from the software
- Provide a dedicated implementation and customer success team
- Is open to your feedback to help shape the product roadmap for your needs
- Prioritises security by being ISO 9001 and 27001 certified
- Offers unlimited users so their solution scales alongside your business
An experienced CLM software provider will work with you to ensure your business receives ongoing value from the platform. Look for a partnership rather than a purchase.
3) Ensure that contracts don’t belong to only Legal
Traditionally, the legal department retains control of contracts. This requires in-house counsel to study every contract, complete all the administration work and still find time to be strategic. Businesses often lock contracts away in the Legal team due to their expertise. But, making Legal teams the gatekeeper of contracts prevents them from adding value in their day-to-day roles.
The strongest contract management strategies are built on the belief that contracts belong to the entire organisation.
All teams that are involved in handling the contract need to collaborate effectively. Procurement, Finance and Vendor teams need access to, and visibility of, contracts and their progress. And they need this without interrupting Legal. This can be achieved with:
- Visual Kanban-style workflows so all teams can see and track agreements
- A dedicated Employee Portal where all new requests can be centrally submitted
- Self-serve options including the generation of low-volume contracts
Your contract management strategy should include everyone. If it only focuses on one team, you’ll be unable to break away from existing silos that prevent contract visibility.
4) Track obligation fulfillment
Every organisation’s success is based on its suppliers complying with contract terms. When obligations aren’t fulfilled, operations can be easily disrupted.
As part of your contract management strategy, ensure that contracts aren’t left to run unattended in the background. Dedicate time to monitoring, reporting, and evaluating each contract periodically."
A contract is a success when all terms agreed during the negotiations processes are met. You could track:
- Forecasted vs actual spend with your suppliers to ascertain a contract’s true value
- Whether goods and services were delivered on time, to the expected standard
- Compliance with your internal directives and processes outlined in the agreements
Manually obtaining this information takes up time. So instead, use a CLM solution that gives you this information in visual dashboards for reporting purposes.
Being able to see the progress of your contract, and what obligations are yet to be fulfilled, allows you to prompt stakeholders and third-parties to take action.
5) Prioritise contract reviews
The periodic review of contracts goes hand-in-hand with tracking obligation fulfillment. These reviews should include all stakeholders that are responsible for any outcomes.
Contract reviews offer opportunity to assess spend, risk and general performance. By keeping these areas top of mind, you can determine if a contract is contributing meaningfully to your business.
The review process isn’t a tick-box activity. It is a strategic opportunity to identify areas for improvement. Perhaps you can negotiate better terms within the contract. Perhaps you would benefit from a different relationship altogether."
Contract reviews are essential if you want to minimise risk, save on cost and improve the quality of outcomes. Contracts aren’t static and so your approach shouldn’t be either. Always look for the next best opportunity for your business.
If you want to see how ContractNow can help you to put the right contract management strategies in place, get in touch today.