At their core, contracts are simple things. But managing them is where the work of legal teams gets complex. From initiation and drafting through to implementation and renewal, contracts demand constant attention. As such, contract management is often one of the most time-consuming aspects of legal work.
That said, better contract management can equate to better company performance across the board. For this reason, finding ways to reduce inefficiencies is worth the effort. Reducing contract cycle time is one such area ripe for optimization. For many legal teams, their contract management software makes the process easier.
What is contract cycle time?
Contract cycle time is the period needed to turn a contract request into a signed agreement. For the most part, cycle times vary from a few hours to several months, but complex deals can take years.
Why reduce contract cycle time?
Every contract manager, general counsel and attorney knows that reducing contract cycle time has its benefits. Reducing cycle time certainly makes a lot of sense in theory, but it also makes a real difference in practice.
For sales teams, reducing contract cycle times often allows for more sales to be closed in month, quarter or year.
In a broad sense, reducing cycle times means attorneys have more time to spend on the company's legal strategy. Planning for the next week, let alone the next few years, is difficult in legal terms. Not only do macro trends in politics and the economy have an impact on the company, but so do micro trends within it. Mitigating risk surrounding these trends is an overarching goal of most legal departments.
Mitigating that risk, though, is difficult. It demands attention to current affairs as well as an ear to the ground in the break room. Attorneys must predict trouble before it happens and resolve conflict before it arises. As a result, attorneys need to commit as much time as possible to these high impact activities.
Achieving a reduction in contract cycle times is one way of freeing up time for that high value work. In spending less time on contracts, legal teams can be more attentive to the company's wider needs. In the end, increased strategic input means the company is better positioned to achieve its goals and objectives.
But it is not only the big picture that is improved by reducing contract cycle times.
Whether a new contract is in draft or an existing one is in review, attorneys maintain high levels of focus and attention to detail. Dealing with such contractual matters throughout the day is tiring. In reducing contract cycle times, some of the strenuous activities of legal teams are removed. As such, legal teams are able to better balance workloads and be more productive.
Reducing contract cycle times is easier than many people think, especially when good contract management software is available. There are three main ways that contract management software can reduce contract cycle times:
Many attorneys take technology for granted nowadays. Gone are the days when teams had to return to their offices to check documents because it was impossible to carry everything to meetings. Contract management software plays a big part in that.
Contract management software acts as a document repository. Thus, attorneys may retrieve digital copies from any computer with the company's Contract management software installed. This allows general counsels and their legal teams to work in real time from any location. This in and of itself reduces contract cycle times, but contract templates are the real star in the ‘race to reduce’.
Contract management software facilitates the creation of contract templates. Legal teams can create one master contract and use it for different purposes. Or they can create several templates and deploy them in different situations. In not having to draft new contracts every time a request arises, attorneys can save time and resources.
Contract templates are especially helpful in reducing contract cycle times in the early stages of a deal. Clients agree to work with a company because they believe that the company can deliver value. Companies that reduce the time between agreement and implementation deliver that value faster. In the end, this improves client satisfaction and retention. In turn, this improves the company's bottom line.
A further benefit in using contract templates is the avoidance of repetitive proofreading. Using bespoke paper contracts, legal teams still need to proofread every word. This is imperative, as the slightest mistake can invalidate an agreement.
Digital contracts do not need as much oversight. Instead of getting approval for every word, teams can create a library of pre-approved language. This allows legal teams to select appropriate language and use it without a further review process.
Like contract templates, attorneys can also create templates for standard clauses. With contract management software, it is simple to create, format, change, and delete those clauses as needed. Having contracts and clauses available in the same system reduces the need for one-off drafting and cross-referencing. This in turn makes the entire drafting process more straightforward.
Clause templates can relate to common situations as contract templates do. Legal teams can insert these clauses into a form within the contract management software to create an agreement for each client. Linking approved clauses together reduces the drafting time, revision period, and error rates.
Clause libraries also streamline contract creation between stakeholders. It is common for a junior lawyer to draft the frame of the contract, leaving a senior lawyer to edit and review it. But using a clause library eliminates this second half of the process. Senior attorneys can approve clauses and procedures in advance. This enables junior attorneys to use clauses without obtaining approval every time. Centralizing a clause library and sharing it among many users further reduces contract cycle times.
Fast turnaround times and airtight contracts do wonders for the company's reputation. And while reputation management is not always the legal team's job, it pays dividends if they are attentive to it. In reducing the back-and-forth that frustrates potential clients, attorneys nurture trust. In time, this trust encourages long-term stable client relationships.
Metrics and Analytics
Contracts are not only searchable with good contract management software; they are also much easier to report on.
Most information needed to report on compliance already exists within the contract management application. The necessary data, in a literal sense, is at the attorneys' fingertips. To analyze that information, attorneys set parameters and the software generates the report.
Teams could, for example, create a report showing how long it took to negotiate contracts in a given month. The report could include the number of changes and help to identify which changes occur the most. Not only does this locate bottlenecks, but it also inspires new clause library entries.
With there being so much flexibility in data records, teams can generate almost any report within a contract management application. As long the metadata is accurate, the system can use keywords to pull information and analyze it. This in turn gives legal teams insight into historical performance and allows them to predict current cycle times. Armed with that information, attorneys can find ways to reduce the cycle time further.
Legal departments that reduce contract cycle times improve productivity by as much as 50%. In doing so, they optimize for both strategic and lower level tactical work. This not only serves clients and partners better, but it also serves the company better.