Every quarter, businesses generate thousands of contracts that formalize their operations, determine monetary exchanges, and activate the relationships between them and their customers.
This guide on contract management, is meant to help businesses boost efficiency of their contracting process and leverage contracts as a means to realize their organizational goals.
Here are the topics that we’ll cover in this introduction to contract management:
Contract management is the process of end-to-end contract administration – from understanding negotiable terms and contract details, analyzing contract deliverables, managing bi-partite expectations, drafting and executing contracts, and following through on contractual commitments.
On a simpler note, contract management is the practice of optimizing every step of a contract-lifecycle and in turn helping the organization derive maximum value from business contracts.
Contract management as a skill is highly overlooked. Across many organizations – information around contracts are hidden within emails, document-based logbooks, interspersed across a wide range of CRM brackets, or are registered in a homogenized spreadsheet.
This makes tracking data-points, accessing contracts retroactively, or generating a fresh business contract an inefficient, time-consuming and high-involvement process. Loss of information may directly translate into loss of actionable insights and a chance to form a deeper engagement funnel with external stakeholders.
An efficient contract management system helps you work efficiently and with granular control over each step in the negotiation, contracting, and post-contracting process. This, in turn, helps you align your team (or organization) to your contractual obligations and go from customer satisfaction to customer delight.
Contract management has multiple benefits but it can largely help:
From resource procurement, to onboarding, to customer engagement – every step of a business process is preceded by a contract 📄 . Since contract management covers the breadth of your contracting workflows from creation to inventorization, it has bearings across every step in your business operations.
An efficient contract management process integrates your contracting process with business execution, and can usually be fragmented into two distinct phases:
This focuses on the steps in the contracting and business process that lead up to the creation or the award of a contract. This usually depends on a coherent application of contract management principles by your internal teams (including legal) to make information discovery and predicting contract outcomes better.
✅ Focus: Coherent operability between legal and other business teams within your organization.
💡 Few tips to optimize your upstream contracting process:
All processes from contract creation, drafting, execution, and post-execution inventorization is a part of the downstream contract management process. This phase has direct bearings on your negotiations with the counter-party, and administers the execution or the award of a contract.
✅ Focus: Making contract-related operations between your internal teams and teams outside your organization smoother.
💡 Few tips to make your optimize your downstream contracting process:
❗ Point to note: But more importantly, contract management is a continuous process – efficient upstream contract management acts as the foundation for the downstream process, while a powerful and granular downstream process will enrich the upstream process for the next contract event.
Contracting has traditionally been considered an ad-hoc process. Contracts are generated in the event of a sale or a business negotiation, and then shelved until renewal dates or crises, when teams haphazardly scour through their contract dump to fetch that one particular contract that needs to be renewed or a clause that needs to be activated.
This process is both inefficient and hazardous. At the least they may cause delays in resolutions, and at their worst they can cause real dollar-leakage for an organization.
So we created a FREE Google Sheet to help you manage and track your contracts better 🎁 —>
What it helps you with ✨
Since all business teams eventually deal with contracts, managing them isn’t exclusive to your legal team.
Efficient contract management can help make your business teams more self-sufficient, make business cycles faster for individual teams, and free up time for your in-house legal team to bypass administrative tasks and provide active business counsel.
For the sales team, following up with Legal on sales contracts while managing tight deadlines and multiple customer calls becomes difficult to manage.
Once a sales contract requirement is flagged to Legal, your sales team needs to follow a prolonged feedback and follow-up loop until the final contract is generated. This in turn, ends up making the customer have to wait.
By streamlining your sales contract management process – contract lifecycles can be shortened into minutes, in turn making sales cycles faster and more autonomous, while providing your customers a fast experience right from the start.
Offloading the task of creating a contract to your Legal Team can result in longer wait-hours, more follow-up sessions, and unnecessarily prolonged sales cycles. Instead, having fill-in-the-blank contract templates can help you onboard customers faster.
💡 Pro-Tip: Work with your legal team to create plug-n-play sales contract templates and use them for every new contract instance. Reduce dependency and increase TAT.
Recurring customers are your strongest brand advocators and are more important to your business than any other. But what happens when a recurring customer slips through the cracks because you didn’t notice their contract expired?
Efficient contract tracking can help you stay abreast of key details like deal value, expiry date, and retainer clauses. This helps sales team provide recurring value on one closed deal.
💡 Pro-Tip: Set up recurring reminders every time you close a sales contract. Or automate insight-hunting and contract reminders with SpotDraft’s intuitive tool. Remember, it is important to not miss any detail.
A great deal of business information is nested within contracts. Often they can be the differentiator for a successful sales cycle.
Access to contract information becomes difficult if they work in isolation from your sales process. Digital contract management tools provide the ability to integrate your contract workflows with your CRMs. That means, all your sales and business information is nested in one place for better clarity.
Here’s an example👇
Contract management systems can support finance, HR, and growth professionals with a wealth of information that helps them avoid loopholes from the past, track purchases, and reduce wait times by enabling them to generate contracts whenever they need.
Here's a breakdown on the most common use-cases:
Every purchase, employment, or sales agreement contains data on monetary exchanges and the contextual breakdown of every incoming or outgoing dollar data for businesses.
Finance teams can, therefore, use contract management to drive profitability. Here's how-
Identify lost revenue or saving opportunities
Unpaid revenues bleed business bottom-lines like none other. Which is why setting up automatic payment reminders on contracts, can go miles into procuring value.
On the other hand, maintaining an active database on due-dates can help finance teams plan for expenses better while avoiding penalties or unwanted automatic deductions in case of unrestricted rollovers.
Align financial goals with compliance standards
Auditing your legacy contracts can go a long way in planning ahead for Q1 based on previous trend-lines. But spending time on manually reviewing them, or waiting for your legal-team to send updates can come at a huge time and opportunity cost.
Modern cloud contract management systems can uphold key details on every contract, intuitively and within an instant. This reduces dependency, helps identify compliance issues, and potentially save a lot of money.
💡 Pro-Tip: If you buy a contract management tool, check for auto-extraction and analysis features
Culture and people are at the heart of the success for companies of every size. And the onus of people management is therefore a critical function bestowed upon the HR team. And because the terms of engagement between employees and the organization and cultural precedents are formalized through contracts, tracking them also becomes a responsibility of the HR professionals.
Here's how contract management can help make the process simpler-
Easier performance auditing
Details on an employee's roles and responsibilities, their primary KRAs and focus-points are more often than not, included in employment agreements.
During the quarterly or annual performance reviews, insights about an employee's responsibilities and terms of engagement will help the HR team generate better correlations between their performance and goals.
Building a formidable contract management process can, therefore, help HR team provide objective analysis, reduce guesstimation, and also shorted the time required for due diligence.
Smoother transitions during realignment
Changing terms of onboarding or employment are inevitable when an organization grows both in size and demography. Contract management can help the HR team prepare for impending upgrades or alterations.
A smart contract repository can only unify all legacy contracts in one place, or actively tag them based on preconditions. This makes tracking executed agreements and pre-empting changes to future contracts easier.
In case of realignments especially, insights about employee responsibilities can help set the path for alteration processes or contribute to better hiring decisions.
Since legal processes operate at the interaction of every business unit, contract management is no longer the onus of legal teams only. To see the real-time implications of a contract management system on your business check out our ROI Calculator —>
For any organization, the contracting process can be broken down to the following stages:
💡 Contract generation —> Contract Drafting —> Contract Review —> Approval & Execution —> Contract Storage
With many stakeholders (beyond legal teams) involved in each step of the process, information and context across each stage is fragmented and diversified across many communication channels or threads. Often, that may lead to loss of information or errors.
Contract management is the process to avoid data loss, and align all your contracting processes into one unified workflow. When integrated with the operations and tools of all your business teams, it can provide an integrated space for all contract-related discussion and generate greater accountability.
Let's explore a few simple hacks to ensure a homogenous contract management process across contracting stages 👇
💡 Pro-tip: Contracts are where all the money is. It is best to invest in specialized solutions that can help you unlock hidden revenue opportunities or prevent dollar leakage.
Investing in the right cloud contract management system can in turn help generate greater revenue and restrict missed opportunities.
Using basic documents or templates might lead to hazardous irreversible errors, that can come back and impact businesses in a later stage. Free tools and templates must therefore be used judiciously, and with much due diligence.
Here are the multiple ways how investing in digital contract management can help you save even more:
A contract management tool provides organizations with complete visibility over their contracts by digitizing and centralizing them. In turn, it is easier to evaluate them by specific deliverables and milestones.
It helps businesses renegotiate on legacy contracts, consolidate the number of vendors, or identify opportunities for cost savings.
As a business grows, keeping track of its equally growing contract volume and the specific renewal dates or clauses on each contract becomes increasingly difficult. A contract management system enables businesses to understand the state of a current contract, its value to the business, and the shared history of issues and disputes.
These insights supercharge your renewal conversations and can lead to higher savings or earnings from the same customers. It also uncloaks data on who your most engaged recurring customers are, to identify opportunities to up-sell.
Instead of having business-critical information spread in an unstructured manner across all your conversation channels, a digital contract management system helps businesses track conversations better.
This ensures that data and contract clauses are available precisely the moment they are needed in, thus, making it easier to find delayed deliveries and late payments that can incur financial penalties.
For more information on how contract management systems can help save money for organizations click here.