The typical contract lifecycle involves several back-and-forths between stakeholders, consuming up to 18% of a company's selling cycle. There's also the need to follow up on tasks, access data from past contracts, ensure compliance, and maintain all round accuracy. Yet, only 22% of legal teams are confident in their contract tracking and management capabilities.
If, like many others, you’re caught in the contract tracking chaos, this blog post will explore useful contract tracking tips, proven processes, and tools to help you stay efficient and productive.
Let’s dive in.
Why contract tracking is mission-critical for your business
Contracts are created with specific endpoints in mind, from employee onboarding to deal closing. Regardless of what your contract needs to achieve, keeping track of every aspect of its lifecycle is mission-critical for your business.
Let’s look at the major reasons below.
#1 Ensuring compliance
Legal teams must consistently monitor contracts to ensure that all parties meet contractual obligations, regulatory requirements, and internal policies. This helps them avoid breaches, fines, and reputational damages.
#2 Managing deadlines
Missing key dates such as renewal, termination, or negotiation deadlines can lead to undesirable consequences, like the automatic extension of unfavorable terms or loss of important contractual rights. However, by implementing a contract tracking methodology, organizations are able to identify timelines and act proactively.
#3 Maintaining accuracy
Through contract tracking, legal teams can maintain the latest version of every contract, with amendments and addendums accurately reflected. That way, stakeholders will only access correct and up-to-date data.
#4 Streamlining collaboration
Tracking input and feedback from various stakeholders, such as other members of the in-house counsel, external legal advisors, and business teams, helps to ensure proper coordination throughout the contracting process. The boosted visibility that comes with contract tracking ensures that everyone knows what's going on at every stage of the contract process and has the opportunity to contribute ideas that give the organization a negotiation advantage.
#5 Centralizing contract storage
An effective contract tracking strategy involves provisioning a central repository for an organization's contracts. This prevents the loss of crucial documents and offers fast access to contract data at any time. This is a significant relief for organizations, considering that 90% of contracting professionals struggle to locate stored contracts, and 49% don't even have a defined pattern for storing contracts after execution.
#6 Reducing risk
Contract tracking makes it easy to identify and mitigate risks, such as unfavorable terms or clauses that expose the company to liability. Also, because contracts are full of critical milestones and deadlines, it is important to closely monitor them and ensure that all parties are carried along.
The biggest blockers and pain points associated with contract tracking
It is safe to say that legal teams understand the importance of contract tracking. Yet, a 2021 study by Ernst & Young (EY) revealed that 71% of contracts are not monitored for standard term deviations, and 78% of organizations don't have systems for tracking contractual obligations.
So, why are in-house counsels struggling with contract tracking?
#1 Inefficient processes
Traditional contract management is a predominantly manual process, requiring a lot of time shuffling between systems and folders and making you waste precious time cluelessly searching for fragments of information. Alongside wasted time and difficulty locating contract files, the manual process is error-prone and comes with considerable risks.
#2 Lack of visibility
Limited access to contract information can make it difficult to monitor performance, identify trends, and make data-driven decisions. Without adequate visibility, it is difficult to determine where your contracts are in their lifecycle, track contractual obligations, and manage deadlines.
#3 Inconsistent contract language
A contract typically features inputs from different departments. Participants from these departments would usually send inputs based on their distinct contract formats, naming conventions, and file structures. Without a standardized way of handling cross-team inputs throughout the contract lifecycle, managing, comparing, and analyzing contracts will be tough for legal teams.
#4 Insufficient resources
Limited budget, staff, or technology can hinder the implementation of an effective contract tracking system. While budget and technology constraints don't rank very high as blockers for many organizations, the lack of qualified personnel is a major factor. According to EY, 34% of organizations struggle to hire contracting talent with proper technology and process management expertise.
Consequences of poor contract tracking
The repercussions of poor contract tracking can span from financial and reputational losses to decreased productivity and missed opportunities.
Let’s discuss them in detail.
#1 Financial losses
Inefficient contract tracking can lead to missed cost-saving opportunities, extension of unfavorable terms, or penalties due to non-compliance. According to World Commerce and Contracting, businesses lose an average of 9% of their bottom line to poor contract management.
#2 Legal disputes
A poorly tracked contract has several potential loopholes. You could unknowingly breach a clause, miss a deadline, or violate confidentiality terms. This puts your company at risk of internal disputes, litigation, and reputational damage.
#3 Missed opportunities
Poor tracking limits your ability to identify and leverage opportunities for growth, innovation, and collaboration. For instance, traditional contract management processes don't typically automate renewals, and when you inadvertently miss out on renewal opportunities for existing contracts, you lose revenue.
#4 Decreased productivity
Due to the long and drawn-out processes involved in manual contracting, legal teams, and other stakeholders spend the bulk of their time doing low-priority, repetitive tasks. According to EY, 47% of in-house counsels experience decreased morale and productivity due to an increase in the volume of low-priority workload.
Conquering the contract tracking chaos
Taking full control of your contract management should start with creating a central repository for all your contracts. This sounds simple, but as already established, nearly half of companies don't have a defined pattern for storing contracts, and most struggle to locate their contract files when needed.
Having a central repository ensures your contract data is easily accessible, making tracking a lot more efficient.
After this, you can define a process for tracking your contracts from end to end. If you're entirely new to automation or your contract volume isn't that crazy yet, you might want to start with a free contract tracking and management spreadsheet.
Also Read: Contract Lifecycle Management Process: All You Need to Know
Nail the basics with an automated contract tracking spreadsheet
SpotDraft’s free contract tracking spreadsheet is a Google Sheet-based contract management template designed to help lawyers and legal teams effectively track and manage their contract lifecycle.
It is fitted with basic automation to help you streamline important tasks like tracking expiry dates, monitoring every contract at every stage of its lifecycle, tracking contract changes, and more.
This contract management template aims to help you manage existing contracts more efficiently and get a glimpse of the vast world of possibilities you could explore with a fully-fledged contract management system.
Hit a home run with a Contract Lifecycle Management (CLM) system
If your company is beginning to experience a level of growth in contract volume, taking advantage of a fully-fledged, all-in-one CLM will ensure your productivity maintains an uptrend while your workload remains minimal.
Here are some of the major features you’d find extremely useful in a CLM tool:
A central repository
The best CLMs offer a central repository where you can send your entire contracts. This effectively sets up a single truth source for your contracts, making it easier to manage data, access insights, track changes, and ultimately optimize your company’s contracting experience.
Robust contract templates
CLMs come with robust templates for different types of contracts, with built-in guardrails, automated approval routing, and more to help you set up a winning contract in minutes. This empowers business teams to create contracts rapidly without worrying about errors and risks.
CLMs draw from your pool of contract data to deliver valuable insights into your contract's performance. That way, you will be able to identify bottlenecks and areas of improvement for even better results.
Automated stakeholder approval
Waiting for individual stakeholders to manually sign and approve tasks can take up a lot of valuable time and potentially result in missed opportunities. But with automated approvals, stakeholders don't need to do any manual approvals. You can easily set automatic approvals for contracts that meet specific criteria. That way, the entire contracting process will move fast, potentially resulting in more closed deals.
Integration with existing tools in your tech stack
Best-in-class CLMs foster cross-team alignment by allowing teams to share data and collaborate on contracts from existing business tools they're comfortable with. This could include CRMs, cloud storage platforms, eSignature tools, etc.
Also read: How to Master the Contracting Process
What can be automated with a CLM?
A CLM is designed to automate every phase of the contract lifecycle, from initiation and authoring to execution and renewal. It eliminates all the repetitive tasks in each stage, allowing you to focus on more impactful areas of the contract creation process.
Whether you're looking to finally take the plunge with a CLM or trying to switch to a more robust, result-driven system, there's always a wide range of options to choose from.
That said, SpotDraft ranks as one of the best CLMs in the industry, loaded with features tailored to eliminate your contract bottlenecks and help you close more business deals.
Want to see a demo? Send a request, and a member of our team will be with you shortly.