In Contract Management, 1 + 1 can equal 3
Contracts form the basis of all business relationships. Whether you’re buying or selling goods or services, entering into an employer-employee relationship, or forming a partnership, a contract outlines the roles, responsibilities, and expectations of all parties. For example, when buying or selling goods, the contract outlines the products or services purchased, the date of delivery of such products or services, the amount of money exchanged as well as many other important contract terms and conditions including warranty provisions, a dispute resolution process, and information on accessing support.
Contract templates or a blank form-based approach to producing contracts provides numerous benefits including removing the need to create a document from scratch and introducing various efficiencies in producing. Rather than authoring a completely new contract, contract templates allow for the completion of certain fields and the immediate creation of a contract. Contract templates also ensure that the contract contains consistent terms and conditions.
Unfortunately, the use of contract templates, alone, offers only limited benefits. While their initial introduction frequently marks an important milestone in a company’s contract management journey, ensuring that they are kept up to date and that everyone is using the most current version can quickly become problematic. They also don’t deliver on many of the efficiencies which can be realized by your organization.
Rather, coupling your contract template efforts with an automated contract management system allows your business quickly to recognize the benefits initially envisioned when creating these templates. The best contract management software systems also allow businesses to benefit in many other ways including the following:
- Increased Contract Compliance
- Introduction of Contract Creation Efficiencies
- Speeding Up Your Contract Approval Process
- Improve Your Contract Negotiation Process
- Readily Analyze Contract Risk
- Creates a Central Repository to Locate Old and New Contracts Quickly
- Arms Your Sales Team to Close Deals Faster
- Reduces Legal Costs
- Generates Reports Automatically
- Improves Your Brand
Benefits of Managing Contract Templates in Contract Management Systems
Contract Management Software Increases Contract Compliance
Historically, contract compliance has focused on fulfilling the contract obligations or deliverables associated with a contract. Example contract obligations include providing an annual insurance certificate, ensuring that certain reporting requirements are fulfilled, and providing specified deliverables within a specified timeframe.
With the introduction of GDPR, heightened security requirements, and a variety of other laws as well as industry-specific regulations, contract compliance has become a business-critical issue for many companies. The need to deliver on obligations has broadened to include compliance with a variety of complex requirements. And, with the increase in complexity has come an increase in the stakes for non-compliance. A company’s failure to comply with its contractual terms and conditions not only results in unnecessary risk and damage to a company’s reputation, but in many cases, substantial fines and penalties.
Managing contract templates within an automated contract management system helps immeasurably to ensure compliance. Not only are the terms and conditions of the contract template those which have been approved by your legal team, by managing them within a contract management tool, but you are also ensuring that everyone within your company is using the correct version of the agreement. No longer do you risk having an old template that an employee downloaded to a laptop in circulation. Additionally, changes made to certain provisions can be readily flagged for elevated review and categorized for risk assessment. When certain conditions are met, your automated contract management system can provide real-time reporting on contract deviations or obligations which pose risk to your organization.
Contract Lifecycle Management Systems Introduce Contract Creation Efficiencies within your Company
The amount of time that it takes to create a contract, route it for approval, and sign it is an important measure in the amount of time that it takes your company to realize the benefits of the contract, collect cash and recognize revenue. Unnecessary delays to this process result in a negative impact on your P&L and overall profitability.
By coupling your contract template with a contract lifecycle management solution, you are introducing a variety of efficiencies in the contract creation process. Not only can those who are buying and selling goods quickly complete the necessary information needed to create the contract, but the contract can also be automatically routed for review, approval, and signature. When spending thresholds are exceeded or nonstandard or risky provisions are introduced, the preconfigured workflow present within your contract management solution can automatically route these contracts to the appropriate resources for approval. And, when nonstandard provisions are required as part of the negotiation process, your contract lifecycle solution can readily source alternative provisions already approved by your legal team or management.
The Best Contract Management Software Speeds Up Your Contract Approval Process
Much like the benefits associated with contract creation efficiencies, speeding up your contract approval process allows your organization to recognize revenue faster, and to collect cash more quickly – as your internal processes and procedures allow for an optimized contract approval process.
The use of templates within an automated contract lifecycle management solution allows your organization to dictate a specific contract approval process. This process can be specific to contract type, departments, employees, amounts, and language deviations. The best contract management software tools will readily flag deviations through the use of redlining technology. Provisions that do not comply with corporate policy can be quickly identified, and their risks mitigated through the use of alternative language suggestions or simply additional negotiation with your vendor or customer.
By marrying your template with your contract management tool, you can remove human intervention which results not only in delays but also in errors. Contracts are approved in less time, deals close faster, and you and your staff can focus your efforts on higher value activities.
Leveraging CLM Software and Templates Improves Your Contract Negotiation Process
When contract templates are used, your organization has a prescribed approach to contract negotiations. By starting with your “form", you are more likely to negotiate terms and conditions most favorable to your organization as the basis of the negotiation starts with your paper.
When counterparty paper is required, or when changes to your template are necessary, your automated contract management solution can improve your contract negotiation process by readily identifying the deviations from your standard. Provisions that are inline with your corporate policy can be accepted, however, those which do not comply with policy can be readily identified. When preapproved alternative language provisions exist, these can be inserted into the template without the need for additional management approval. However, when such provisions do not exist, the coupling of your templates with an automated contract management tool allows for deviations to be directly forwarded to the appropriate resources for approval. Not only does your contract negotiation process proceed more quickly, it does so with less human intervention and less risk. By working from a template and a pre-approved process, it also ensures that you are more likely to close the agreement with the terms and conditions which are important to your organization. You are also more likely to so with high levels of customer or vendor satisfaction as the contract negotiation process is not only efficient, but transparent to all parties.
CLM Software Readily Analyzes Contract Risk
With heightened industry-specific regulations, the introduction of such compliance initiatives as GDPR, and the need to clearly understand the risk present in a contract, an organization’s ability to readily analyze contract risk is critically important to its overall management.
Contract risk exists when standard provisions within a contract are changed, when you are engaging with new or unknown vendors or customers, or when your ability to deliver on what has been agreed in a contract is suspect. Automated contract management solutions help to manage this risk in a variety of different ways, however, those specifically associated with managing your templates within a contract management tool include the ability to ensure that everyone is using only approved templates and that changes to the template are readily identified and approved. Additionally, many of the best contract management tools include a vetting and approval process for new vendors or customers – before the contract can even be requested or negotiated. The deliverables associated with a contract can also be categorized, assigned as tasks, and scheduled for completion. When tasks are not completed or dates are missed, your contract lifecycle management tool can send reminders as well as internal escalations to ensure that the task owner is reminded, and that management is made aware of your organization’s potentially missing agreed-upon deliverables.
Contract Management Software Creates a Central Repository to Locate Old and New Contracts Quickly
As mentioned, the use of templates and a form-based approach to creating new contracts adds efficiencies to your organization. However, if these templates or forms, and their final product are saved on an individual’s laptop or in an unorganized or siloed drive, they do little to provide your organization with information on its vendor or customer agreements. More important, they do not allow your organization to effectively manage and realize the benefits of such contracts.
When such templates or forms are part of an overall contract lifecycle strategy and are managed by a contract management tool, you can ensure that upon execution, they are saved into a specified central repository. This repository can be permissioned so that only those with the appropriate access levels can access these contracts. Once saved, the contracts can also be categorized, searched, reported on, and actively managed. Auto renewals can be avoided, volume discounts can be realized, and your organization can proactively manage its most important contract assets.
The Best Contract Management Software Arms Your Sales Team to Close Deals Faster
Including your templates as part of your overall automated contract management strategy is a critical element in ensuring that your organization is able to realize the benefits associated with the use of such templates. In addition to increasing your contract compliance, introducing contract creation efficiencies, and speeding up your contract approval process, presenting your contract templates from within your contract lifecycle management tool arms your Sales Team to close deals faster. Imagine if you will, it’s end of quarter, and your unattained quota is hanging over your head. You get lucky – a bluebird deal presents itself – and that once insurmountable quota goal is now within reach. However, you’re late to the game, and your legal team is backed up. There’s little chance – even with no changes to the contract – that you’ll get the necessary approvals to close your deal before end of quarter.
All hope is not lost. Your forward-thinking COO recently launched your automated contract management tool which not only allows your contract to be easily created by completing only a few form based fields, it also includes a predefined approval workflow with scheduled tasks, dates for completion, and escalations when dates slip. For the minor changes which your customer requested, pre-approved language provisions exist. You’re able to establish your new customer within your system, create the contract, have your discounts, and language deviations approved – all before end of quarter.
And, as forward thinking as she is, not only has she rolled your contract management application out to all departments, she is also launching an integration of your company’s contract management software with the Sales Team’s CRM system. For your next end of quarter crunch, you’ll be able to access your contract management functionality from directly within Salesforce.com or Microsoft Dynamics.
Reduce Legal Costs by Leveraging Contract Management Software
The best contract management software applications allow quick returns and high ROI. Key to quick returns and high ROI is not only the introduction of efficiencies by way of faster cash collection and revenue recognition, but also a reduction in costs – most notably for your contract management and legal teams. Given the fact that these employee populations are generally very well compensated, providing them with tools to become more efficient not only readily provides a return on investment, but also reduces the opportunity costs associated with their focusing on unnecessary activities.
By implementing contract templates, your organization will save on legal costs as each contract can be created more efficiently. By presenting and managing your contract templates from within a contract lifecycle management application your savings multiply. No longer does your legal team need to review each individual contract. Changes to contracts are redlined, alternative language provisions can be suggested, and high-risk terms or elevated spending requests can be automatically routed for approvals. Once approved, additional time can be saved through the use of e-signature technologies as well as the management and reporting capabilities present within CLM technologies. And, not to be forgotten, individuals requesting contracts and status updates can self-serve as they directly view the status and progression of their contracts from within the contract management application. Your contract management and legal teams are not only more efficient in their day to day activities, but they also now have the band-with to focus their efforts on higher value activities.
Generating Reports Automatically in Your CLM Software
One of our clients recently shared with us that prior to implementing our contract lifecycle management application, one of the best contract management software applications in the market (just saying!), she and her team spent days compiling reports requested by her Executive Management Team. While she was using contract templates and storing these within a dedicated repository, she was not collecting important information or metadata on her contracts. So, when her CFO asked how many contracts had a limitation of liability clause in excess of $1M, she and her legal team spent several days manually reviewed her organizations’ contracts so that they could provide a qualified response.
By adding her templates to an automated contract management application, she can now readily report on almost any data associated with a contract. Back end and customer facing data fields, or in the realm of contract management, meta data, allow for a variety of information to be automatically collected and categorized. A variety of additional information is also collected as the requestor completes the information necessary to request the contract. This information can then be used to schedule a variety of different events including renewal and termination notices, obligations that need to be delivered, and compliance requirements. They can also be used to produce an endless amount of reports – on any piece of data collected throughout the process. These reports can be produced on an hoc basis or they can be scheduled to be delivered to specified individuals on the basis most comfortable for your organization.
By managing her templates from within our contract lifecycle management application, our client can now produce those reports at the click of a button.
Improving Your Brand Through Your Contract Lifecycle Management Solution
At first blush, you may be asking yourself what contract templates and contract lifecycle management have to do with your brand. They have little to do with your look and feel, your marketing angle, or your company’s vision or mission. But, they have everything to do with how your customers, employees, and vendors view your organization. Are you an organization that is efficient, responsive, and timely? Can you buy and sell your goods and services within a reasonable time-frame, and can you do so with high levels of satisfaction? When your Sales Team forwards a proposal or contract, does it come across and professional and polished or does it seem ad hoc? And, are your contract management and legal teams a nightmare to work with, or are they efficient, fair, and can then adequately manage your organizations’ contracts?
By leveraging templates, you ensure that your contract creation process is both professional and efficient. By integrating your templates with an automated contract lifecycle management tool, you promote your organization to the next level. Not only do your customers and vendors experience a professional and pleasing process, they also benefit from the efficiencies that you’ve introduced. The contracting experience proceeds more quickly with less manual intervention and frustration, your vendors and customers receive the goods and services that they were promised, and those with whom you do business internally remark to themselves what a pleasure it is to do business with your organization.
In Contract Management, 1 + 1 can equal 3
The introduction of templates is an important milestone in introducing efficiencies and mitigating the risk associated with your contracting cycle. Coupling these templates with an automated contract lifecycle management solution allows your company to recognize numerous additional advances. Not only does your organization realize the advantage of using templates, themselves as well as those associated with a contract management solution, they quickly experience a multitude of other important benefits ranging from increased contract compliance to improvements in your brand.
In this instance, 1 + 1 does equal 3.
Find the Contract Lifecycle Management Application that Best Manages Your Contract Templates
Every business relies on contracts to do business. With this, a robust contract lifecycle management application has become a key initiative within many organizations. Not only do these systems support faster revenue recognition and cash collection, but they also reduce internal costs and risks. With the introduction of these efficiencies and mitigation of inefficiencies, your contracting cycle can proceed in a more timely fashion with higher levels of internal, customer, and vendor satisfaction. As your company grows, the best contract management software solutions have the depth and breadth to grow with you.
If you’re new to contract management or are replacing an existing system, we’d suggest checking out What Is Contract Management & Its 9 Stages. And, for a sense of our technology or how we do business, please check out two of our more recent case studies, Chelan Public Utility District or Tetra Technologies.