Contracts are one of the most important tools in your company’s possession for driving business results. Whether you’re talking about employee agreements, vendor and supplier contracts, or deals with customers, contracts provide a legally-enforceable framework. A framework for navigating your most important business relationships detailing everything from specifics about deliverables to important terms, conditions and backup clauses should anything go wrong.
But just because all parties sign on and are required to adhere to the terms of an agreement doesn’t mean that contracts magically deliver simply by virtue of their existence alone. Contracts require careful, detail-oriented handling throughout their lifecycle to ensure that all parties reap the intended benefits and minimize their risks. This practice is known as contract management and having (and sticking to) an effective contract management plan provides key benefits, from a reduced risk of compliance infractions to more favorable outcomes for future contract negotiations.
An effective contract management plan addresses common needs and challenges that exist throughout the contract lifecycle, with defined best practices that should be adhered to throughout. As you develop a strategy geared towards your organization’s needs, don’t forget to consider these three proven ways for making your contract management plan more successful.
Centralize Your Contracts
You can’t even begin to implement a contract management plan if you can’t readily access your contracts. But while keeping your contract portfolio organized and accessible to stakeholders might seem obvious, most businesses haven’t followed through on implementing this fundamental best practice: the vast majority of companies can’t even locate at least 10 percent of their agreements.
The implications of not being able to find your contracts are huge: without these crucial documents, you have no reference for ensuring that performance is on track and that all parties are taking the prescribed actions for reducing contractual risks. Furthermore, without access to key information such as contract renewal dates and termination deadlines, you might end up making an important business decision by default, rather than applying the thoughtful, proactive approach that is required.
As such, centralizing your contracts into an organized, secure, repository is one of the most effective, and important steps you can take to promote contract management success. What does an organized, secure repository look like? For starters, more than just an itemized list of documents (which can still make actually finding said contracts a challenge), it is a fully-searchable container for all of your agreements. How you choose to organize your contract repository will depend on the preferences of those who are using it. The important thing is that you employ consistent standards, labeling, naming conventions, and that your organization method (and the technology that supports it) makes sense to everyone involved.
Ensuring that your contract storage method strikes the right balance between security and ease of access is also crucial. In some industries, a high level of security is mandated by compliance regulations, with fines and penalties if you do not employ the required measures. Even if your agreements are not subject to explicit security rules, it’s important to consider that your contracts likely contain sensitive business information and to make sure they are protected accordingly. Many contracts include client details, pricing, and intellectual property. To protect them accordingly it may be necessary to employ technology such as encryption and ensuring that any third-party cloud software providers also utilize state-of-the-art protective measures.
At the same time, you can prevent backlogs and other inefficiencies in your process by also ensuring that those who do require access to specific contracts can do so – securely. Granular user-based permissions can help you to achieve this important balance by allowing an administrator to assign individuals access only to relevant documents, with additional controls to ensure that only those who are authorized can get in.
Make Sure Your Contracts Have a Follow-Through Plan
It’s not uncommon for businesses to focus most of their energy on winning the deal. But without proactively implementing a plan to ensure that executed contracts perform as expected, you’re only part way there. Contract management success means effectively navigating the contract stage too, and this requires handover and execution plans.
It’s not uncommon for the individuals who are responsible for the successful execution of a contract to be a separate group from those who negotiated the agreement in the first place. As such, it’s vital that anyone who will play a role in fulfilling an agreement understand exactly what their responsibilities are and be aware of all key dates and milestones related to successfully executing the contract. To ensure everything stays on track, it’s also crucial to have a plan for measuring performance during the contract term, as well as a clearly defined scorecard to help identify any performance issues.
Automate As Much As Possible
Even with the best of intentions, the sheer volume of agreements that contract managers have to deal with can make adhering to a contract management plan a challenge. But technology can help to improve some of the challenges that can lead to bottlenecks, forgotten milestone dates, and other problems that derail contract success. Though features vary across contract management software solutions, a platform that allows you to automate key tasks can improve efficiency and prevent important actions from falling by the wayside. For example, auto-tagging reduces the toil of on-boarding new contracts to your repository. Automated notification and reminder tools also allow you to input key dates at the outset so that you don’t need to worry about remembering to perform important tasks through the contract period.