Poor contract management can make your contracting process inefficient and negatively impact: -Loss of
revenue Inefficient
contracts such as slow negotiations, delayed approvals and missing milestones are costly. Without a way to automatically track deadlines and get notified to perform time-sensitive actions, there is a risk of missing deadlines.
- Collaboration and communication inefficiencies
Effective contract management requires a high level of cooperation between internal and external stakeholders. Using email as your primary method of communication can quickly lead to multiple confusing threads. Before you know it, you might run into a situation where people are using different contract versions.
6 Contract Management Best Practices
Using the following 6 contract management best practices will help your team manage your contracts:
1. Centralize and standardize agreements
Drafting contracts from scratch slows down contract creation. Legal departments can save a lot of time by standardizing and pre-approving contract language and clauses. That way, contracts are created faster, and other departments can create some contracts without legal involvement. When contracts follow a template, they are easier to edit and review because you will only focus on the terms unique to each transaction.
Store your contracts in a central, searchable repository so contracts are secure and easy to find. The importance of secure storage contracts is even more apparent when there is litigation.
2. Set reasonable key performance indicators (KPIs).
The legal department is under pressure to do more with less and needs to prove its value to the enterprise. To achieve this goal, legal departments must move from reactive (threats to the law) to proactive (strategies to impact revenue and mitigate risk). This will require setting key performance indicators.
The KPIs that should be set and the metrics that should be tracked depend on the goals. For example, your goal is to send contracts faster. You can then break that down into specific KPIs, such as creating contracts faster and reducing approval times.
A good contract management solution will help you track performance metrics, giving you insight into your contracting process and where you can improve to increase efficiency.
3. Obligation to Track
Many people sign a contract and forget about it until something goes wrong. However, the contract becomes even more important after it is signed. Businesses require you to have an obligation to keep track of contracts, and in a large business there may be thousands of active contracts.
Relying on individual employees to keep track of obligations is risky because mistakes are inevitable. Good contract management software can help keep your obligations in check by sending you timely email reminders before they are due.
4. Team collaboration and visibility
In most businesses, contract management is primarily the responsibility of the legal department. However, to ensure compliance and reduce risk across the enterprise, Legal needs to collaborate effectively with other departments.
Delegating to other departments with standard templates and workflows reduces your involvement in everything. You can use 8Manage contract management software to ensure contracts are approved by the legal department before they are issued.
Legal also needs to make contracts visible without sacrificing data security. The right contract management software will allow you to balance visibility and control, helping you define who has access to each workflow and record.
5. Communication automation
There are many loopholes in the use of email in contract communication because email is not centralized enough. When passing on information, you may forget to include the addresses of the parties involved, or important information may be hidden in email threads.
The best practice is to use professional contract management software that tracks every activity and sends real-time notifications to relevant stakeholders. Automation of communication ensures that no stakeholder is left out at all contract stages.
6. Electronic Signature (or Click to Go)
Signing contracts without delay remains a challenge for many legal departments. Besides the traditional wet ink signature, there are other ways to sign a contract. Electronic signatures and click-to-validate have been widely adopted as effective ways to sign contracts online.
Electronic signatures (or click-to-validate) provide a seamless signing experience. Electronic signatures make signing contracts as easy as a click, and it's ideal for high-volume contracts like website terms and conditions.
A good contract management solution allows you to embed contracts into your users' transactional flow, reducing the friction inherent in PDF or paper contracts.
Contract Management Best Practices with 8Manage
Adherence to contract management best practices is critical to contracting efficiency that matches your business growth.
8Manage Contract Management provides businesses with contract automation, an auditable single source of truth and a real-time view of business progress and contract activity.
● Centralized file storage, authorized personnel can access and manage contracts from one place;
● Automatically send reminders for important dates to ensure that deadlines are not missed;
● Create customized templates for various types of contracts to ensure consistency and compliance;
● Allows multiple users to collaborate on one contract, ensuring a smooth workflow;
● Easy to quickly search and retrieve contracts, eliminating time-consuming manual searches
● Provides insight into contract performance, tracking contract costs, risks, etc. index.
In conclusion, the use of contract management software ensures a professional approach to contract management, better facilitates risk management, improves profitability, and provides a clear return on investment (ROI) in terms of the costs and benefits of contract management activities.