Practices You Should Adopt for an Effective Contract Management Process
Practices You Should Adopt for an Effective Contract Management Process
Looking for advice on how to improve your business operations? One aspect of it that almost no one talks about is contract management. Effectively drafted contracts are vital for a productive, healthy, and forward-moving business. The problem is that drafting contracts from scratch is a time-consuming process that involves a lot of different people.
For a thriving business, you need effective contract management practices.
Organised, managed, and software-powered contract practices boost business-wide efficiency by saving everyone’s time and resources. They also mitigate the financial and legal risks of running your business – and let’s not forget that reliable contract management builds long-lasting relationships by showing your customers they can trust you.
Here’s how to make your contract management process efficient, fast, and reliable.
Determine and set your key performance indicators
As if balancing transparency and sensitive data wasn’t enough of a task, legal departments are under growing pressure to directly contribute to their companies’ bottom lines. When you have the right set of tools, this isn’t a problem, but to contribute, you need to know what needs to be improved.
How does contract management improve your company’s overall performance?
What can you do to turn potential productivity issues into strong points? To answer these questions, you need to determine and set key performance indicators (KPIs). Speed, for instance. Can your contract lifecycle be faster? A reliable tracking system would help you figure out that. Measuring KPIs is always a good practice when you feel like you’re stagnating instead of going forward.
Perform compliance and performance audits regularly
Legal, healthcare, banking, education, transport. If you need to fortify how you manage your contracts, you probably belong to one of these industries. As luck would have it, these industries are also the absolute leaders regarding the number of contract compliance categories they must adhere to.
In addition to federal, state, and local regulations, there is also compliance within the contract. Poor practices in both categories can result in tremendous financial loss, not to mention the loss of license. In most cases, the only thing you need to do is remember to renew compliance in due time.
With most contract management tools, you can set up automatic reminders.
If you must review and sign off a few documents, you can automate that too.
Centralise your agreements
No matter what you manage, management is all about order and visibility.
Whether you’re setting up an entirely new contract management system or are adding a few good practices to help you streamline the process, try not to skip the first step – a centralised dashboard. Whatever you need, whenever you need it, centralisation will help you achieve full order and visibility.
Ideally, all your contracts should be stored in the same database, together with their different versions and additional information. Upcoming tasks, renewals, and deadlines should be easy to access from the same place. Should you choose a cloud-based management solution, you’d enable remote access too.
One of the key benefits of centralisation is 24/7 accessibility wherever you are.
Standardise contract creation
In management, centralisation comes hand in hand with standardisation.
Together, they ensure unity, efficiency, and control.
When it comes to contracts, standardisation is ensured with templates and language. The best contract management solutions offer extensive libraries of forms that your legal department (or whoever you’ve tasked with contract management) can customise to fit your specific requirements and long-term clients.
However, standardising contract language is just as important.
Whether you use ready-made templates or not, having a clear set of guidelines for your legal language and vocabulary is a huge time-saver. Depending on the industry and specific conditions, many legal contracts follow the same or similar pattern that can be copy-pasted with blanks to be filled in.
Drafting contracts from scratch is incredibly time-consuming, and time is a valuable resource. In addition to saving time and resources, having standards and templates guarantees a more efficient workflow for everyone involved. Pre-approved templates are endlessly easier and faster to edit, review, and renew.
Set up a collaborative environment
When we talk about business contracts, we often mention the ease of use and speed.
That’s because bureaucracy in business must be silent and flawless, as if fully automated. The rest of the departments that rely on contracts must not experience bottlenecks caused by contractual complexities. Everyone in this long, intricate chain of dependencies expects a smooth process they can depend on.
Contract management can be challenging and thankless. Legal must not only collaborate with all other departments but also create a collaborative environment in which contracts are accessible and secure at the same time. They must establish business-wide controls but also set role-base limits and permissions.
It’s almost impossible without a reliable software solution.
To help legal overcome these challenges, the best software offers collaboration platforms where access limitations are easy to define and control. Stakeholders get visibility of the entire process across all contracts, while other departments get 24/7 accessibility depending on their role-based permissions.
Automate the process
Automation is another way contract management solutions help businesses streamline the process and mitigate risk. We’ve already mentioned a few examples of automation-based contract management when discussing standardised contract creation, but possible applications don’t end there.
The following automation features are just as valuable:
Is the contract approved and up for renewal? There’s a compliance review that you’ve forgotten about? We’ve mentioned this earlier, but there’s no harm in underlining its importance again. They might be simple, but automatic alerts are one of the most useful tools in software-based contract management.
Like automatic alerts, real-time updates are automated notifications designed to keep relevant stakeholders in the loop. That’s when your contract management tool tracks the contract lifecycle and reports progress to everyone involved – at the stage of the contract when they need to be involved.
E-signatures in digital contracts? That should be a given, right? You’d be surprised how many legal departments still don’t use digital signatures. Whether or not you need them should not be up for debate. E-signatures save an incredible amount of time, making the contract process frictionless.
The AI-assisted review is a perk provided only by more sophisticated contract management solutions. These tools rely on cutting-edge AI technology to help you review contracts, find key clauses, and identify risks, making your legal team’s job easier. No need to say, AI makes everything faster and more accurate.
Automated data entry
In addition to AI-assisted reviews, some contract management solutions also offer AI-powered data entry. That’s when artificial intelligence extracts the most critical details from contacts, such as contact or pricing info, and automatically adds them to your database, once more boosting speed and accuracy.
From requests to renewals, a typical contract lifecycle lasts for several weeks. Depending on the value and complexity of a specific contract, this can sometimes turn into months. In business terms, this feels like an eternity – especially if you’re waiting to get paid and move forward to the next order of business.
In most contract lifecycles, approval alone takes 4 to 6 weeks.
There are ways to streamline this, most of which we’ve already discussed. Contract templates, electronic signatures, and AI-assisted review are only a few practices that make approvals more efficient. Whether this is an old client or not, having a detailed audit history at your fingertips is of enormous help too.
There’s a lot to gain by adopting a more streamlined approach to contract audits and approvals. On top of the obvious benefits for you, which are getting paid or receiving your contracted goods and services earlier, the other side also enjoys the convenience of a faster contract resolution or renewal.
In a word, efficient approvals help build profitable and long-lasting relationships.
Time-saving contract management practices are not so difficult to set up, and the benefits of committing to this task and investing in the best tools are fantastic. Depending on your sector and the size of your business, there are many helpful solutions to choose from. The more powerful, the better.
Excellence begins with minor, systematic improvements.
When it comes to contract management, it’s all about efficiency.
Efficient contract management is the result of visibility, standardisation, and automation. Using the right tool, you should automate as much of this process as possible. The idea is to save time every step of the way without sacrificing the quality and accuracy of contracts. Maximise performance, but minimise risks.
Check out Contract Eagle to see how we can help you with all the stages of your contract management process.