Contracts are the lifeblood of business. Irrespective of the industry, signed agreements are essential for properly defining relations and collaborations with customers, suppliers of goods, service companies, users, and employees – to say the very least.
Indeed, the effectiveness and ineffectiveness of your contract management workflow or processes can make or mar your business operations and profitability, either in the short or long term.
That’s why we bring you some top contract lifecycle management tips that help enterprises around the world meet their contract management and company-wide growth objectives.
Just as well, these top CLM tips come in handy as a guide of what to look out for in a contract lifecycle management solution when contemplating a switch to digital contract transformation in 2021.
Let’s now take a look at these tips that, if implemented, aid in investigating and uncovering contractual risks and opportunities, shortening contract cycles, and competing optimally in buy-side and sell-side contract negotiation and governance.
Use Cloud-based Central Database
Businesses typically store and manage contracts in shared-access folders and spreadsheets available on local servers. This physical-storage option poses a challenge to the gathering and tracking of contract information from anywhere and at any time.
What happens when you desire to search all contracts for their Force Majeure (or frustration) clause to know your risk exposure in light of the Coronavirus-induced business frustrations? Or want to access and proofread company agreements while working virtually from home?
Aggregating your contracts in a central cloud database provided by CLM solutions not only gives ready access to your contract, but also keeps them secured, organized, and searchable according to metrics such as dates, names, figures, specific clauses, or terms.
Set Automated Alerts for Deadlines & Obligation Cycles
Missing deadlines and contractual obligations often lead to consequences that can cripple growth – or in extreme cases, take some businesses out of operation. Imagine missing a service or goods delivery deadline by a few days, the consequence of which is the automatic contract renewal with a company you no longer want to work with. Or missing a critical milestone obligation that would make you eligible for a whopping discount. Enabling or setting up automated alerts on CLM software prevents these scenarios, especially when you’ve got several contracts under your belt. You get to stay on top of all contract deadlines and never again have to manually track hundreds of agreements with tags and spreadsheet filters.
Set Up a Simple, Standard Contract Request and Data Gathering Process
Requesting for and capturing data necessary to prepare a contract through email, voicemail, or hallway conversations is a less-optimum way of doing things due to repeated instances of incomplete or incorrect data. This manual approach is remedied with the introduction and adoption of lifecycle management software that establishes easy-to-use and streamlined contract data intake. This reduces the risk of inaccuracies as your team submits the existing contract, requests new versions, and even creates a contract for themselves – should they have the permissions.
Adopt Version Control to Prevent Document Duplication, Inaccurate Entries, and Wrong Version Implementation
When done manually, contract version tracking can be incredibly herculean and chaotic, especially when there are several contributors. Versions can be mismatched, key suggestions can be missed, among several other things that could go wrong in the back-and-forth. The key to efficient contract version control and revision collation is the adoption of top-of-the-line digital contract transformation systems or frameworks that ensure no cracks surface in the process These systems help track contributors’ revisions, such as suggestions that were accepted and rejected to save you from having to figure out missing, duplicated, or inaccurate data entries. Just as well, they keep the most recent versions in focus to prevent wrong version implementation.
Simplify Contract Approvals with E-signatures and Real-time Notification
Enterprise contract approval typically moves at a snail’s speed due mostly to the separate hierarchies involved that fool-proof and approve it. That’s why most digital contract transformation initiatives focus very much on automating and digitizing the approval process. Or what profit is there to check all contract digitization boxes and not have a timeously approved contract? Digitizing approval speeds up the process significantly in that it helps to set up and track turnaround time. There’s also the benefit of being able to nudge people to approve in a timely manner by setting up automated email alerts that notify approvers of the pending approvals. Just as well, E-signature helps ensure such signature and approval can be done electronically from anywhere, at anytime, and with whatsoever device, carrying with it a digital record of who, where, and when the contract is signed
Double-down on Role and Feature-based Permission System for Increased Security
Say you’ve got an external consultancy arrangement in the offing but want to keep the remuneration involved under wraps, what do you do? Chances are that if the contract is printed in black and white and is being reviewed in that form – as it would be if you operate a manual or physical-based CLM process – there’s no guarantee that unauthorized parties won’t access it. But you can set up a role and permission-based permission on your CLM software to ensure that designates have access to contract details only to the extent authorized and nothing more or less. Top-level management executives could, for instance, be authorized to access sensitive sections of your business contract, while lower-level employees would be restricted to the non-sensitive parts related to their department.
Leverage Reports and Data Analytics to Get Real-time Insights
Data analytics and the insights it gives is a key element in the successful implementation of your contract and optimization of processes for future sake. But when you manually manage your contract, data analytics automatically goes out of the equation because it simply is impossible to gather data from contracts in non-electronic storage formats such as sheets of paper. CLM solutions, on the other hand, have what it takes to generate data-backed reports that provide a detailed but easy-to-understand insight about your contract – including execution or compliance rates, potential risks, and flags, among other things. This actionable insight lets you make calculated business decisions, efficiently track KPIs, establish benchmarks, and more.
The risks associated with manual contract management are often too significant for businesses to trivialize and ignore. Only by digitizing contracts and implementing these best practices can companies position themselves for optimal risk assessment, reduction, and assured growth.