Can you imagine not knowing where your business stands with its contracts, or worse, not realizing the risk of non-compliance until it's too late?
That's the reality for many businesses that don’t have a system in place to track contract statuses. Poor contract visibility can lead to duplicate agreements, inaccurate data, and frustrated teams.
And not just that.
Have you ever been drowned in paperwork to review with nobody in the organization having absolutely no visibility into your workload?
Yeah, that’s right. Proper contract visibility could give them insight into how loaded you are. But more on that later. First, let's see what essentially contract visibility is.
What is contract visibility?
Contract visibility refers to the ability to access, understand, and manage all the contracts that an organization has in place. In today's business landscape, companies need to have complete visibility over their contracts to ensure compliance, mitigate risks, and optimize performance.
Contract visibility involves having a centralized and organized repository of all contracts, including contracts with suppliers, customers, and other business partners. This repository should provide easy access to all the relevant details of each contract, such as key dates, obligations, and terms and conditions.
Visibility of contracts is crucial for organizations to effectively manage their contracts and optimize their operations. But there's more. Let's see the benefits of contract visibility in detail.
5 Reasons why contract visibility is important
Contract visibility goes beyond simply knowing where your contracts are stored, and delves into providing valuable insights into performance, risk, and spend.
With complete contract visibility, your business gains the foresight necessary to make informed decisions down the line. By answering strategic questions such as what agreements are in place, which are due for renewal, and if obligations are being fulfilled, your organization can consolidate agreements, optimize spare time, and take immediate action if outcomes aren't being met.
In essence, contract visibility creates a pathway for businesses to be more proactive, productive, and resilient in the face of any obstacle.
#1 Risk management
Having clear visibility into contracts allows you to identify and assess potential risks associated with those contracts. You can quickly identify contracts that have expired, those that are no longer needed, and those that need to be renegotiated or amended to mitigate risks.
#2 Contract compliance
You can use contract visibility to ensure that the organization is complying with the terms of all its contracts. You can monitor the performance of vendors and service providers, ensuring that they are delivering on their obligations, and take action when necessary to enforce the terms of the contract.
#3 Cost saving
You can identify areas where the organization is overspending—contracts that are no longer needed or that can be renegotiated to obtain more favorable terms—leading to cost savings for the organization.
#4 Time savings
You can also quickly locate and access relevant contract information, without having to spend hours searching through multiple documents or systems.
#5 Improved decision-making
When you have a clear understanding of the organization's contractual obligations, you are better equipped to provide informed legal advice and make sound business decisions. You can also use contract visibility to identify trends and patterns, which can inform future contract negotiations.
Moreover, proper contract visibility not only benefits in-house legal counsel but also improves transparency and expectations across other business teams.
Despite these benefits, there are various reasons in-house legal teams find it difficult to make contract visible. Let's see what those challenges are.
What makes contract visibility difficult to achieve?
Multiple contract repositories, lack of standardization, limited access, poor data quality, manual processes, and increasing contract volumes are just a few of the factors that can make it difficult to achieve contract visibility.
Let's see them in detail.
- Multiple contract repositories: Contracts are often stored in multiple repositories, such as physical files, shared drives, email inboxes, and cloud-based storage systems. This can make it challenging to keep track of all contracts and ensure they are up-to-date
- Lack of standardization: Contracts can vary widely in terms of their format, language, and content. This lack of standardization can make it difficult to extract useful insights from contracts, and can make it harder to compare and analyze contracts across the organization
- Limited access: In many organizations, only a few people have access to contract information, which can limit visibility and make it difficult to collaborate on contract-related tasks
- Poor data quality: Contract data can be incomplete, inaccurate, or outdated, which can lead to errors and make it difficult to extract meaningful insights from contracts
- Manual processes: Many contract management tasks, such as contract review, approval, and renewal, are still done manually, which can be time-consuming and prone to errors.
- Increasing volume: As organizations grow, the volume of contracts they manage can increase significantly, making it harder to keep track of all contracts and ensure they are being managed effectively.
Bridging the gap: How contract visibility improves collaboration across business teams
Who should have contract visibility though?
Just as contract visibility is a necessity of legal teams, it is as important for other business teams to have visibility into the organization's contractual obligations, so that they can better understand what legal is doing and what is required to ensure agreements are processed quickly.
Here are a few examples of how contract visibility helps different teams in the organization.
Contract visibility for sales teams: Making informed decisions
- With proper contract visibility, the sales team will have access to important information such as the terms and conditions of the contract, pricing details, and service level agreements.
- They can better understand the commitments they can make to customers, what products or services are covered under contracts, and what restrictions may exist.
- Having access to contracts in a centralized location can also help sales teams to be more efficient and effective in their work, enabling them to close deals faster and more accurately.
Contract visibility for finance teams: Ensuring compliance and forecasting
- By having access to contracts and the associated financial data, finance teams can identify upcoming payment obligations and ensure that they have sufficient funds to cover those payments.
- Contract visibility can also help finance teams to identify potential areas of savings and negotiate better terms with vendors and suppliers.
Contract visibility for procurement: Mitigating risk and driving savings
- By tracking vendor performance and having access to contract data, procurement teams can identify areas where they can negotiate better terms or reduce costs.
- Contract visibility also allows procurement teams to ensure compliance with vendor agreements and manage risk by monitoring performance against contract obligations.
- Having access to contract data in a centralized location can also make it easier for procurement teams to quickly respond to inquiries and make informed decisions about purchasing.
In addition, improved contract visibility can enhance collaboration between teams. When everyone has access to the same contract data and information, it becomes easier to work together and make informed decisions. This can lead to increased productivity, fewer errors, and a better overall experience for all involved.
Ultimately, proper contract visibility can promote transparency and open communication across the organization, helping to set and maintain expectations for all stakeholders. When everyone is on the same page, it becomes easier to work towards shared goals and achieve business success.
But how do you ensure that everyone has access to what you’re doing? Here are a few best practices for improving contract visibility in your organization.
6 Steps to ensure contract visibility across your organization
With additional transparency and accessibility, your team will have a clearer understanding of the process and timeframes, leading to quicker agreement processing and better decision-making.
Here are six steps to improve contract visibility.
#1 Establish clear communication channels for added visibility into what legal is doing
“The only way to drive empathy towards the legal function is to create visibility into what you’re doing. A simple way to do this (even before you invest in a tool) is to create a public spreadsheet and ban review requests via private channels like email or Slack messages.”
~ Shashank Bijapur, CEO, SpotDraft
Set up a process where teams other than legal should send a review request via email to a consolidated email address for your team [legal@companyname(dot)com] and have them also put in this request in the public spreadsheet. This would instantly provide transparency into what the legal team is up to and what your priorities are. As a bonus, this would also help the entire sales function prioritize amongst themselves better.
You can download this Spreadsheet Template for contract tracking.
Without this visibility, business teams will continue to wonder why reviewing a paragraph took so many business days, and legal teams will continue to work in silos.
Establishing clear communication channels is critical for maintaining contract visibility. Remember to set up regular meetings between stakeholders involved in contract management as well as ensure that all stakeholders are informed and up-to-date on contract-related information.
#2 Assign ownership of contract management for consistent contract management
Assigning ownership of contract management is an essential step for maintaining contract visibility. This involves designating a person from your team responsible for managing contracts and ensuring that all stakeholders are following the same process. This person should be responsible for monitoring contract-related obligations and milestones, as well as ensuring that contracts are renewed or terminated as needed.
When one person or team is responsible for overseeing contracts, they can track key dates, deadlines, and obligations, and ensure that contracts are being executed and managed in accordance with organizational policies and procedures.
Ultimately, your team is able to minimize risk by ensuring that contracts are reviewed and approved by the appropriate parties, and that any issues or concerns are promptly addressed, thereby enabling contract management in a consistent and effective manner.
#3 Standardize contract language to reduce confusion and miscommunication
Standardizing contract language is another best practice for maintaining contract visibility. Using standardized language in contracts helps ensure that all stakeholders are using the same terminology and that key information is consistently tracked and monitored. This can also help reduce confusion and miscommunication between stakeholders.
For example, if a contract includes a payment schedule, using standardized language to outline the specific dates and amounts due can help prevent confusion or misinterpretation. This can help ensure that payments are made on time and as expected, building and maintaining positive relationships between the parties involved.
Additionally, using standardized language can help ensure that important legal terms and conditions, such as indemnification clauses or limitations of liability, are clearly defined and consistently applied across all contracts, minimizing legal risks for the organization.
#4 Create a centralized contract repository to easily locate and access contracts
A centralized contract repository is an essential tool for maintaining contract visibility. This centralized location should store all contract-related documents and information, including the contract itself, any amendments, and key data points. Just ensure that this repository is also easily accessible by all stakeholders involved in contract management.
“Think about how many contracts sit on someone’s laptop or in multiple databases and then think about the value of contract management. The importance of simply being able to locate all of the company’s contracts and relevant amendments in one place without significant effort cannot be minimized.”
~ Sterling Miller, CEO and Senior Counsel, Hilgers Graben PLLC
To create a centralized repository, you should also develop a consistent filing structure and naming conventions, as well as a system for organizing and searching for contracts.
A naming convention provides a consistent and structured way to name and organize contract documents, making it easier to locate and access them when needed. It can be in the form of Google Drive or Dropbox, if you may, depending upon which channel you are most comfortable with. It’s best to move away from folders to store your contracts.
Here is an example of a naming convention.
Also read: Contract Storage: Tips to Store Your Contracts Effectively
#5 Schedule regular contract reviews to identify potential issues
Scheduling regular contract reviews is one aspect of improving contract visibility that is often overlooked. Regularly reviewing and updating contracts helps ensure that they remain relevant and valid. It also provides an opportunity to identify areas for improvement or potential issues before they become more significant problems. You can use this contract review checklist to streamline the process of auditing contracts.
You can also follow these tips for scheduling regular contract reviews:
- Set a review schedule: Decide how often contracts should be reviewed, taking into consideration factors such as the length of the contract, the nature of the agreement, and the frequency of transactions. For example, contracts that involve ongoing services or payments may require more frequent reviews than one-time agreements
- Identify contracts for review: Create a list of all contracts that are due for review, and prioritize them based on their level of importance or risk
- Assign responsibility: Assign responsibility for conducting the review to a specific individual or team, and ensure that they have the necessary resources and time to complete the review
- Review and update contract terms: During the review process, check that all terms are still accurate and relevant, and make any necessary updates or changes. This can include updating contact information, payment terms, or the scope of work
- Document the review process: Keep a record of the review process, including who conducted the review, when it was completed, and any updates or changes made to the contract terms. This documentation can be useful for future reference and can help demonstrate compliance with legal or regulatory requirements
By implementing a process for scheduling regular contract reviews, your team can help ensure that contracts remain up-to-date and relevant, and can identify and address potential legal or financial risks before they become major issues.
#6 Use technology tools to manage and store contracts more effectively
“By adopting a CLM tool, your contracts fall in place and then it becomes pretty easy to manage your procurement process, professional services, and NDAs. Once you have that system in place, people realize there is a process involved and work in an optimized manner.”
~ Nadia Louis Hermez, Legal Ops Manager, Next Insurance, Inc.
There are several tools that can help you improve contract visibility. Document management systems (DMS) are one example of a tool that can help businesses store and manage contracts more effectively. DMSs provide a centralized location for storing all contract-related documents and information, and they often include features such as version control and document search capabilities. Spreadsheets can also be useful for tracking key contract data points, such as contract start and end dates, pricing information, and obligations.
However, hands-down, the best way to gain better visibility into contracts is via contract management software. Let’s find out how.
How does CLM software help improve contract visibility?
Contract Lifecycle Management software can significantly improve contract visibility by providing a centralized location to store and manage contracts. With CLM software, legal teams can easily access important contract information, including key dates, obligations, and performance data. This helps legal teams to stay on top of contracts, identify potential issues, and take proactive steps to mitigate risks.
SpotDraft is a CLM software designed by lawyers for lawyers. It enables legal teams to streamline the contract management process by automating tasks such as contract creation, approval workflows, and document storage. This saves time and resources while also reducing the risk of errors or oversights.
Here are some features of SpotDraft that will ensure 100% improved contract visibility and help you add transparency to your contract management process.
#1 Centralized repository
SpotDraft makes search incredibly easy by helping you categorize and organize contracts according to department, type, counterparty, status, date, value, etc. Any contract on SpotDraft can be retrieved quickly from the repository using our universal search, which allows you to search by a wide range of filters and contract-related metadata.
#2 Set renewal or expiry reminders
Failure to keep up with contract dates prevents you from renegotiating new terms and values, resulting in lost opportunities, revenue leakages, and unwanted auto-renewals. With SpotDraft, you can stay on top of your contracts by enabling reminders and notifications to track important contract events automatically and efficiently.
#3 Improve cross-team collaboration
“If you’re in an advisory role like Legal, it is natural for you to have friction with business stakeholders. My advice is to understand which stakeholders you’ll have maximum friction with and then adjust and lean in. Try to align the legal roadmap with their goals. In case of conflicts, make sure you’re both seeing it as a partnership. Help them understand and navigate legal risks. Also, make sure they feel educated and comfortable in making decisions (or, if they’re not the decision maker, help them resolve and get to YES).”
~ Ryan Nier, General Counsel, Pinwheel
SpotDraft automates contract collaboration, review, and approvals and allows for greater efficiency for all stakeholders — enabling faster closure of contracts, consistency in deal terms, reduction in risks and costs, and freeing up legal bandwidth.
This way, other business teams also get to see what’s on your plate, improving contract visibility across the organization.
In today's fast-paced business environment, legal teams cannot afford to ignore the importance of contract visibility. With the right tools and strategies in place, you can effectively manage contracts and drive business success. And with SpotDraft, you have a powerful ally in their quest for improved contract visibility and efficient contract management. Try a demo!