5 ways to take back your contract management process
Over the past several years, we have shined an increasingly bright spotlight on contract management as an effective way to manage the ever-increasing emphasis organizations need to place on performance management, reputational risk, and regulatory compliance.
Contract management touches the entire organization, from sales and marketing to procurement and human resources. But many companies don’t realize just how critical contract management is to the business itself. The International Association for Contract & Commercial Management (IACCM) finds that poor contract management can impact an organization’s bottom line by up to nine percent.
What can lead to ineffective contract processes? Many things. Manual processes, insufficient visibility into workloads and process steps, a deficiency of checks and balances, and lack of standardization all complicate an already complex process.
So how can legal departments and contract administrators effectively manage all these moving pieces, parts and players? In a recent webinar with IACCM and Sherry Odle, senior manager of contracting at Hyland, creator of OnBase, we discussed just that.
Here, then, are five ways to take control of your contract management process.
1. Establish a central repository.
Information silos and disconnected data are a recurring and common problem when it comes to contract management, leading to mismanaged negotiations, reviews and approvals. Too often, contracts and supporting documents are stored in separate network folders, file cabinets, and individual inboxes, blocking managers from a complete view across contracts and related content.
Storing contract information in a central repository improves the transparency, security and searchability of your contract management process. The best solutions feature flexible security options to customize who can access contract information and the ability to create unique contract identifiers to support easy search and retrieval.
In fact, research by the Aberdeen Group recently found that best-in-class companies are 75 percent more likely to have a searchable contract repository, keeping more than 75 percent of their contracts inside.
2. Create contract controls.
Many companies’ processes lack standardization and controls to effectively manage contract creation and negotiation. With a lack of checks and balances, ensuring that employees are leveraging the correct versions of contracts at any given time can be a challenge. It can also put an organization at risk. When processes aren’t formalized, the legal department may have trouble meeting the expectations of business units involved.
By putting controls in place, you ensure that employees create contracts consistently and that you track and manage negotiations. Look for solutions that allow you to create standard contract templates for contract authoring and restrict access to only members of certain departments (e.g. legal).
Standardized term sheets are another feature that helps track and manage concessions after a contract is signed. By storing extra terms and conditions alongside the contract record itself, no information is lost.
With an automated contract management solution, negotiated terms can even automatically kick off any post-signing processes in other areas of the organization. For example: if a non-solicitation or no-hire provision is agreed to, after the contract is signed, the Contract Administrator receives a notification to contact Human Resources.
3. Automate. Automate. Automate.
Manual tasks, time spent waiting for signatures, and changing approval rules frequently create contracting bottlenecks and extend cycle times. Inefficient processes can clog up the legal department with unqualified requests, requiring skilled employees to spend time searching for information instead of handling more value-added tasks.
Best-in-class companies are more than two times as likely to have automated every step of the contract lifecycle, according to The Aberdeen Group. Automating key aspects of the contract management process helps you escape what’s often seen as the “contracting black hole,” where internal partners have limited to no insight into contract process requirements and timelines.
Case management-based solutions are an ideal solution, as they support standardized requests, approval processes, proactive notifications and task assignments based on contract data. Successful solutions support collaboration and include benefits like the ability to ask, address and keep track of employee questions and conversations related to individual contracts.
4. Execute electronically.
Waiting for contract approvals and signatures presents challenges for both cycle times and security. In many cases, legal departments spend hours comparing mailed, e-mailed or faxed copies to the original contracts word by word, with no easy way of validating the signatures. This is especially painful at month end, when sales or accounting must wait for the completion of lengthy reviews in order to kick off orders.
You can improve the efficiency and security of contract execution by integrating your contract management solution with electronic signatures and cloud-based signature solutions. These applications allow parties to process contracts securely and seamlessly, via the cloud if you choose, enabling busy executives to sign in via their mobile devices. Contracts requiring a signature are locked down, eliminating the need for manual reviews, and automatically routed to the appropriate person once signed, reducing or eliminating bottlenecks all together.
5. Proactively track renewals and expirations.
Best-in-class companies renew 56 percent of contracts and renegotiate 49 percent of contracts annually, more than twice the amount of others, according to Aberdeen Group. Unfortunately, many legal departments manually track expiration and renewal dates in inefficient spreadsheets, which may not reflect the most recent information and must be checked manually for upcoming deadlines.
Overall, limited visibility into contract requests, workload and assigned tasks leads to missed deadlines and missed opportunities for renegotiation.
A successful contract management solution helps improve visibility and drives contract savings by automatically tracking renewal and expiration dates and prompting administrators with timely notifications. These solutions also provide actionable reporting so managers are always aware of what contracts are in the queue and at what stage.
Case management-based solutions help legal departments improve the efficiency, transparency and control of their processes by managing the entire contract lifecycle like a project or “case.”
In fact, we take that approach here at Hyland. We have reduced our average signing time for all parties and have delivered more than 98 percent of all contracts in 2015 by their committed delivery date.
We’re taking back our contract management process. You can too!