Closing contracts is the foundation of meeting sales goals. However, inefficient sales contract processes can make this a daunting task, leaving a lot of room for miscommunication, missed protocols, and costly mistakes. What’s more, long contract cycles also often result in lost deals for sales teams.
So how can you go about setting up an efficient process that not only helps you improve your bottom of the funnel conversion but also helps you close deals faster?
We spoke with legal and sales leaders to answer this question, and have created a guide on exactly how to set up an efficient sales contract management process for your organization — all within the CRM that you’re probably already using. By the end of this article, you will have the tools you need to establish a sales contract process that is tailored to your team's specific needs and a system that is optimized for performance.
8 stages of sales contract management
A sales contract management process typically involves the following stages:
- Identification: The sales team wins a deal and identifies the need for a contract.
- Contract creation: The sales team raises a request for a contract or drafts the agreement on their own via a template.
- Contract review: Stakeholders such as legal, compliance, or finance teams review the contract to ensure that it is accurate, compliant, and serves the business’s best interests.
- Negotiation: The sales team and the counterparty negotiate the terms of the contract and make any necessary revisions.
- Contract execution: Once both parties have agreed to the terms of the contract, it is executed and becomes legally binding.
- Fulfillment: Both parties must fulfill the terms of the contract, which typically involves an exchange of goods or services and payments.
- Renewal or termination: Once the term of the contract is over, it may be renewed for another term or terminated.
- Archiving: Lastly, the contract is digitally or physically archived for future reference.
Signs of a sales team struggling with contract management
Do you recognize your sales team in any of the instances outlined below?
- Legal requests often need multiple follow-ups and get lost between various communication channels.
- Deals often take weeks or even months to finalize due to inefficient contract collaboration processes.
- Getting approvals from stakeholders on contracts is an extremely time-consuming and inefficient process with limited visibility.
- The current process to raise requests is complex or is generally not followed by sales reps, who instead default to easier methods like messaging or email.
- There is a high rate of errors in contracts, such as incorrect pricing or terms.
- There is a lack of version control, which leads to sales reps often sending across older or discarded versions to counterparties and stakeholders.
- There is no differentiation between low-priority and high-priority contracts.
- Sales has no visibility on the status of contracts in the pipeline.
- Sales leaders have no insights into the bottlenecks in the current sales contract process.
- The sales team constantly misses deadlines for sending out contracts or getting them signed.
If your answer was yes, you probably already know that your sales contract process needs urgent overhaul. Let’s get into how you can begin building a more efficient process.
Auditing your current sales contract management process
“What happens today with sales teams that don’t have an efficient contract management process is that the entire system of dealing with contracts is a black box.
You reach that stage where you’re gonna close the deal, you need an agreement, and you put in a request to Legal in a very unstructured way — and then there’s no way for you to track what’s happening with that request or in the entire collaboration process.
And that’s what essentially increases time to closure.”
— Punit Batra, Strategic Accounts, SpotDraft
Sales teams often view the legal function as a blocker to closing contracts. However, a lot of times this is because of misalignment between sales and legal, and a contracting process that is working against enabling success for these functions.
The first step to creating a sales contract management process that works for you is to begin by auditing your current process, identifying the pitfalls and the blockers, and learning the pain points of all involved stakeholders to ensure your new process will be created thoughtfully with all of that in mind.
#1 Identify key stakeholders
Find out who is involved in your current sales contract management process, from sales representatives to legal teams, compliance teams, and any other relevant parties.
#2 Review current process
Review your current sales contract process, from how contracts are created, reviewed and negotiated to how they’re executed, fulfilled, and tracked continuously. Look for areas where the process may be inefficient or prone to errors.
#3 Gather data
Look at metrics such as contract turnaround times, error rates, and performance indicators. This data will help you identify blockers and areas for improvement.
#4 Take feedback
Ask for feedback from your sales team and other stakeholders on their experience with the current sales contract management process. This will help you understand their pain points and provide insight into potential improvements.
#5 Analyze the data
Analyze the data you’ve collected to identify patterns and bottlenecks. Look for opportunities to streamline the process, reduce errors, and improve efficiency.
3 steps to making your sales contract management process efficient
“One of the revenue leaders I worked with told me, ‘Time kills all deals; you gotta close deals fast,’ and I keep this in mind every time I’m pulled into a sales deal.”
— Sue So, Head of Legal, Hopin
An ongoing challenge that sales teams struggle with is closing deals quickly without getting stuck in the tedious process that is closing contracts. Thankfully, modern solutions exist that can help you remove this blocker from the sales cycle and streamline contract generation, negotiation, and closure. Here’s how.
#1 Automate workflows and equip sales teams with tools to work independently
The first step to setting up a sales contract management process that reduces TAT and improves closure time is to standardize workflows and minimize legal intervention. This majorly involves three aspects:
Most sales contracts can be easily templatized for faster contract creation, which allows sales reps to work independently without having to constantly follow up with Legal. Take a look at your high-volume contracts and try to identify ones that could be standardized by setting up templates that sales reps could easily personalize when closing deals.
Enabling efficient contract negotiation
Even standardized contracts need to leave some room for change and negotiation. Sales teams must be able to negotiate independently to a certain extent before involving the legal team. For this, legal teams can vet fallback language that sales reps can input themselves whenever counterparties negotiate changes within the contract.
“Before I joined, almost every single sales contract was getting negotiated because nothing was standardized, slowing down deals and leading to long, drawn-out sales cycles. But now, around 80% of contracts are going through without changes.
We identified the most common features customers wanted to override. So, instead of doing a custom MSA/contract for each one, we came up with fallback provisions that could be added to the sales order using our core tool. It's just like a dropdown menu. It reduced the time Legal had to work on contracts as it enabled salespeople to negotiate contracts on their own.”
— Sue So, Head of Legal, Hopin
Automated approval and signature workflows
Automation doesn’t stop at contract creation and negotiation. Sales teams should also be empowered to have complete visibility over contract status, and not have to worry over manually requesting approvals and reviews from every stakeholder. That’s why it’s important to establish workflows that can handle automatic routing of contracts when actions are taken and also enable reminders and follow-ups for pending tasks.
#2 Drive adoption by integrating processes within your CRM
“These days, everything is possible from the CRM that sales teams use. They don't need to learn a new system; they can just create contracts or tickets from within their CRM, and also get visibility on what's happening with those contracts, thanks to an integration with the CLM their legal team is using.”
— Punit Batra, Strategic Accounts, SpotDraft
Simply automating the sales contract process is not enough; you also need to get the sales team’s buy-in to ensure that this process is followed religiously within the organization. And the best way to do this is by integrating it with the tools they already use — their CRM.
Most sales teams use Salesforce or Hubspot to manage their sales cycle. Similarly, legal teams these days use CLMs to automate their contract lifecycle. However, the friction lies in the gap between these two systems — busy sales teams don’t want to have to learn a whole new software and switch between the two every time they need the whole picture on a deal.
That’s why you should ensure that your CLM can integrate well with the CRM your sales team uses. This helps your sales team:
- Quickly plug opportunity details within new contracts and generate them within their preferred software.
- Have complete visibility over the status of ongoing and completed deals.
- Focus on more important efforts like closing deals rather than chasing contracts.
“Our sellers live and die in Salesforce, so we built our legal ticketing system within Salesforce.”
— Sue So, Head of Legal, Hopin
#3 Monitor and analyze sales contract management for greater efficiency
As a sales leader, you are particularly invested in improving bottom of the funnel conversions and ensuring that the sales reps have all the tools they need to close contracts faster. That’s why it’s important for you to have proper visibility into the bottlenecks that might be getting in the way of your goals.
Once you’ve implemented a sales contract process, you must establish KPIs to track and measure its effectiveness. See if your CLM software offers insights into your contracting process to help you understand bottlenecks, team productivity, and areas of improvement. For example, SpotDraft offers an insights dashboard with critical data on metrics like:
- Number of contracts closed every month, divided by contract types and whether it’s templatized;
- Average time spent on various stages in a contract’s lifecycle, such as drafting, legal review, etc., alongside tips on resolving current bottlenecks;
- Average negotiation rounds by contract type;
- And heavily negotiated clauses, individual turnaround times, etc.
Easing sales contract management with SpotDraft
“With SpotDraft, our sales team feels empowered to get the deals through quickly without referring all contracts to the legal team.”
— Mercedes C.
The ideal sales contract process offers complete visibility over contract status to sales reps and stakeholders, allows for instant contract generation from within the systems your sales team is using, and enables all team members to perform efficiently while minimizing blockers.
SpotDraft enables organizations to achieve this ideal process by solving for common bottlenecks and automating manual contract tasks, providing both custom and out-of-the-box integrations between the various tools your organization uses, and providing actionable insights to continuously review and improve this process. Find out how we can help you optimize your sales contract management process today.