Top 10 Best Practices in Contract Management

Top 10 Best Practices in Contract Management

We’ve developed these best practices below for you to explore so you can see exactly how to improve upon your current contracting approach. You’ll be able to pinpoint areas in your current process that you can optimize and streamline so you can increase productivity and contract management results.

Managing the contract lifecycle includes a wide variety of intricate steps and stages that require the oversight and expertise from multiple parties and departments. Contracts are more than simply receiving a signature and keeping tabs on what was promised in the agreement at hand. To successfully manage a contract’s lifecycle from start to finish takes a considerable amount of time, effort, and resources. With a dedicated contract management software solution, you can automate repeatable processes and tasks to systematize and standardize the contract lifecycle – and this supports you in reducing risk and increasing consistency within your processes. In addition, you’ll ensure your obligations are met appropriately and in a timely manner. Contract management software is an incredible tool that supports businesses in maximizing their return on investment while reducing risks.

Table of Content:-

 

Contract Management Defined 

Before we dive into our list of best practices, it’s crucial that we have a sufficient understanding of what contract management is. Contract management is somewhat simple – it refers to the process of overseeing the entirety of a contract’s lifecycle, from drafting, to reviews and approval, to negotiations, to signing and execution, and finally monitoring, reporting, and renewal/expiry. Each of these stages within the contract lifecycle can be optimized by contract lifecycle management (CLM) software to enhance the whole process and eliminate risks.  

Click here to learn more about each stage of contract lifecycle management.  

Effective contract lifecycle management is one of the foundations of business success. The legally binding nature of contracts outline the relationships created with your stakeholders, as well as the scope of work, pricing agreements, deadlines, and obligations. Understanding the value that contracts can contribute to your organization will support you in developing an improved strategy towards managing your contracts to improve overall business performance. With subpar contract lifecycle management, you’re only asking for increased bottlenecks, risks, and missed opportunities. 

Contract management is a process with numerous moving parts that has been revolutionized by modern technology. To manage a contract successfully, you must clearly understand every stage of the contract lifecycle to support you in gleaning key insights and synthesizing data that will assist you in improving your contract strategy over time. Businesses and organizations that invest in optimizing their contract lifecycle management practices proactively drive contract value and performance, which can result in the achievement of several business objectives while cutting down on contract lifecycle times. Contract lifecycle management (CLM) software has changed dramatically in recent years to offer companies the best possible resources to manage their company contracts seamlessly. From what was once a manual, disjointed records management system is now a software solution built for business of all needs and sizes that works to solve the issues of noncompliance, risk, cost, and security. 

Now, we will take a look at the top 10 best practices for contract lifecycle management.  

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Top 10 Best Practices in Contract Management 

 

#1 Standardize the contract creation process 

An optimized contract lifecycle management strategy can result in increased productivity and efficiency. This is especially true for your organization’s legal department, where you can free-up their valuable time by using standardized, preapproved contract language found in your library full of compliant contract templates and clauses. By using preapproved, standardized templates and clauses that include current, accurate, and compliant legal language, you greatly support your legal department. Applying consistent conditions, legalese, and vocabulary into your contracts helps cut down on time spent by general counsel when proofreading your contracts, which can help push them through the review phase faster. All of these factors lead to an efficient contract authoring phase. 

 

#2 Create vendor/supplier KPIs to monitor performance  

Developing contract management KPIs is key to gaining visibility and transparency into the success of your current practices and how they might be helping or hindering your achievement of business goals. When the leaders within a given department are equipped with detailed business objectives and ways to track them, then they can develop data-driven best practices to create results. Failure to meet KPIs might indicate missed opportunities to save or process inefficiencies that are difficult to pinpoint due to a lack of clarity regarding business expectations and objectives.  

 

#3 Define contract storage security and accessibility requirements 

Many of the leading contract lifecycle management (CLM) software solutions available today provide enhanced security and accessibility of confidential contract data in a streamlined, rapid manner.  

Secure contract management is made possible by the many advanced security measures and features that are found in modern CLM solutions. From single sign-on (SSO), to audit trails, to role-based access, you’ll ensure that only the right hands are given access to your contracts. Contract management software support your organization by verifying the identity of your employees, vendors, and stakeholders so you can have the confidence that only authorized users will review and edit your agreements and associated documents. A centralized contract repository and contract management platform fixes the issues of accessibility and visibility of your contract activities across your company. In addition, you can configure various accessibility controls to give access to various users based on role and other specifications unique to your organization.  

 

#4 Simplify approvals to reduce turnaround times 

simple contract approval phase provides major benefits to your company. For one, you’ll receive your contracted services and products faster, which is inherently time and cost efficient.  

You’ll also improve your business relationships by reducing the cycle time from the beginning conversation until the approval of your agreements.  

But how is this possible? By increasing the efficiency for both parties, you improve the experience for both the client and for your team. Businesses with fast response times and rapid approvals take hold of opportunities with short turnaround windows much easier.  

 

#5 Automate your contract collaboration and communication 

Gone are the days of emailing and snail-mailing your contracts between your clients and vendors. This is approach is not only outdated, but it’s incredibly time-consuming, risk-inducing, and expensive! 

With a cloud-secure, centralized contract repository, your whole team can access contracts at the same time at any place, any time, on any device. A cloud-based repository offers several advanced capabilities to support cross-department collaboration and communication in a single platform so that all users can view the same version of a contract at the same time. Furthermore, you can configure automated notifications and reminders to keep key parties in the loop of all upcoming deadlines, obligations, and time-sensitive responsibilities, assisting your company in reducing the risk of letting important activities slip through the cracks.  

Easy ways for companies to make contract management easy

 

#6 Monitor your financial data consistently  

Cutting costs is one of the most important (and common) goals of businesses who wish to improve their contract lifecycle management. Your company can save money by enhancing their negotiations, increasing visibility of contract performance, and eliminating unfavorable contracts that they accidentally auto renew. 

Contract managers can define key financial data points to monitor on a consistent basis during their contract management reviews. It’s also important to include your finance team regularly during these performance reviews so they can assess company spending and returns in light of your organization’s budget. 

 

#7 Regularly conduct compliance reviews 

It’s essential to regularly check your rate of compliance during your contract reviews. We suggest to review multiple compliance categories, including local, state, and federal regulations. We also recommend to closely monitor the compliance within any contract. Throughout the contract term, monitor and manage the included terms in your contracts to confirm that you are properly receiving the products and services promised by the contract.  

The majority of companies are required to follow industry and federal compliance regulations. And failing to adhere to them can lead to some pretty astounding repercussions and penalties. Don’t run the risk of losing your business license by breaching compliance, and instead, protect your business from risks by automating your contract management with audit trails that make assessing and tracking compliance incredibly easy. 

 

#8 Optimize the client experience by resolving disputes immediately 

How a company responds to conflict says a lot about how future clients might be treated, so be sure to solve any disputes in a professional and timely manner. Leverage a formal dispute procedure and treat all contract disputes proactively so you can save yourself from the trouble of increased costs and reputational damages.  

 

#9 Think ahead for future business needs 

Contracts will evolve and change with time. View your contract management processes with its many complexities, demands, and capacities through a lens for the long-term. We recommend that you make plans to address any changes in the demands placed on your organization and in any potential changes that could impact your ongoing business partnerships.  

If you are finding it increasingly more challenging to scale with your new requirements, then this means your finance department might have difficulty in knowing which costs to include in your upcoming budget. To address this issue, we recommend leveraging a contract lifecycle management (CLM) software solution so you can rapidly alleviate the issues pertaining to changing objectives, needs, and demands. CLM software allows the business owner to flexibly define and configure several rules within the platform according to business needs that are reflected in your templates and workflows. 

 

#10 Assess contract trends 

Contract management allows your company to increase favorable outcomes from negotiations. Today’s contract management solutions empower you to gain intelligence on the current market by monitoring competitive vendor pricing and technological advancements. This means that during the negotiation phase and prior to renewing a given contract, that you can review the contract and assess whether or not the terms hold a competitive edge in relation to the current market.  

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Simply Productive Contract Management with Dock 365 

Include these contract management best practices into your contract strategy to improve your results, productivity, and compliance while saving time and money. These best practices in combination with an intuitive, end-to-end contract lifecycle management (CLM) system can support your company is creating successful business relationships and in significantly cutting costs. In contrast, a subpar contract management approach will cost you time and money by increasing risk and bottlenecks, especially for your legal and procurement teams.  

Dock 365 offers a contract lifecycle management solution built on your Microsoft 365 tenant, meaning you won’t be giving access to your sensitive contract data to an outside vendor. In addition, our solution offers secure cloud storage, single-sign on (SSO), integrations with SharePoint, Teams, DocuSign, and Adobe Sign, and reminders of expiring and auto-renewing contracts.  

Learn more about our Dock 365 Contract Management System here. 

Learn more about Contract Lifecyle Management (CLM) Software here. 

For more information, we would like to welcome you to schedule a free demo with us today.

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