Contracts govern almost every interaction between businesses.
Let that one sit.
Think of all the different ways that your business interacts with other people and organizations. The people who buy your solution, the employees that work for you, and the company that provides your business with office supplies.
Every single one of those relationships is initiated with the execution of a contract.
That’s a heck of a lot of contracts, and keeping track of every single one is crucial when avoiding legal trouble. Basically, if you are running any type of organization, you’re going to need some sort of an effective contract management system.
Contract management refers to the process of creating, executing, tracking, and managing the legal agreements for an organization. The purpose of contract management is to maximize a business’ performance, reduce spending, and decrease the risk of non-compliance.
Companies rely heavily on the terms and conditions within contracts to conduct normal business activities – a big one being generating and collecting revenue from customers.
When a contract is created, executed, or managed poorly, an organization can miss out on expected benefits due to technicalities and poor compliance. Needless to say, keeping a close eye on your business’ contractual obligations is necessary for growth.
Having a separate legal department within your organization is definitely a plus, but all of your employees need to be familiar with the life cycle of all contracts running through the veins of your business.
If you’re starting a new contract management system for your business from scratch, good for you. Clean slates are good for the soul. If not, you might have a lot more work ahead of you. Either way, below are the six stages of contract management that every business must undergo at one point or another.
Remember, the law is one thing you do not want to mess with, so it’s worth putting in the time.
Any new business process requires planning before implementation. The management of contracts is no different. So if this makes sense, the first step in the contract management process is to plan the process itself.
The contract management planning phase is all about thinking ahead so you don’t have to backtrack later on. Brainstorm any and all on-hand resources, other things you need to be successful, and key stakeholders. Determine a way to keep everything streamlined and organized throughout the entire contract process.
Because your business will end up dealing with a variety of agreements, your contract management strategy is going to have to be flexible. You might have to implement processes for each different kind of contract. If you think that will be the case, plan ahead.
Here are some questions contract managers should ask themselves before they dive into creating a contract management strategy:
Before building a path to the future, you’re going to have to revisit the past.
Part of determining your current problems with managing your contracts lies in examining your current situation with an audit. Investigate every detail of how your business handles contracts, agreements, and other legal documents from creation to execution to management.
If you find some issues with how you are complying with the requirements of the terms and conditions within the contract, make note of what the problem is, why your business might be experiencing it, and possible solutions you can implement to avoid it in the future.
At this point in the process, you’ll be conducting this audit at a macro-level, meaning you’ll examine a large quantity of contracts. However, as you move forward with your contract management process, you’ll have to do it at a micro-level.
Don’t let the audit stop once you’ve finished creating your contract management process. Keep it going by investigating every contract you execute from that point forward.
After your planning and audit, you’ll have a better understanding of what your business’ particular contract management process will need to look like to be successful.
Now is the time to build a structured framework for your business to use as they handle existing and future contracts. This plan should lay out every element of managing a contract, as well as associated actions and requirements for each stage it reaches. Make it clear which department handles which stages in the process, resources that’ll be used, and metrics for measuring success.
Even if this isn’t your first time building a contract management process, expect feedback. Don’t only receive it, but take it seriously. If your strategy isn’t working for everyone within your organization, it’s worth the extra effort to find a way to fix that.
Let’s clear one thing up before moving on. Jamming a bunch of paper contracts into an old filing cabinet is not contract management. It’s a mess.
To properly manage your contracts, you need the right technology to do so. No matter how organized your team is, it’s always best to make everything electronic where you can. This way, everything is in the same place and accessible wherever you can connect to your server.
There are a few different tools your business’ contract management plan can benefit from:
Now that you have your new process in place, you can implement it for new contracts. Besides their management, the actual agreements can get a bit complicated as well.
Let’s quickly go over what the process can look like for each individual contract your business enters.
The process begins with a request for a contract after closing a deal with a customer, vendor, employee, or whoever you are creating an agreement with.
During this phase, make sure you understand the business relationship, the needs of each party, and the goal of the agreement. Get contract approval from every key stakeholder before moving forward.
Then you will have to draft the actual contract. Make sure to include all key elements that a contract must include to be legally binding.
As a starting point, include all of the information that came from the request for a contract and keep in mind that it’s subject to change during negotiations. When writing the contract, make sure to use consistent language and have a section describing the included terms.
Once you give the other party the deliverable, there will likely be some negotiations. During the negotiation, make sure every stakeholder has a draft of the contract, gather feedback, and renegotiate the terms and conditions until you reach a final agreement between both parties.
With the new draft of the negotiated contract, you need to get final approvals on the terms and conditions. Get the OK from all stakeholders, and remember that them viewing the contract might bring up some more changes that you’ll need to make.
If this is the case, run it by the other party. Establish a formal, streamlined, and repeatable approval process to ensure efficiency and consistency for contract management across the whole organization.
Executing the contract often refers to signing it. At that point, the terms, conditions, and obligations officially become legal and go into effect. This is why it’s so important to have a thorough approval process. Once a contract is executed, make sure to update your contract management solution with the details.
At this point, you are legally obligated to hold up your end of the deal. To avoid breaching the contract, ensure you remain compliant with all of the terms and conditions listed.
This might include making a payment or completing an action by a certain time. Make sure every person involved knows what compliance looks like and keep an eye out for any misaligned behavior.
At the time of expiration, determine if your business should renew or terminate the contract by evaluating whether or not you got your desired results. If not, consider another renegotiation or let it terminate as scheduled.
All of the actions listed above are a part of not only creating and executing contracts, but managing them as well. Throughout each stage, make sure that every piece of contract information is organized, streamlined, and kept secure. Once you sign a contract, you are bound to its expectations, so proper management techniques always need to be at top of mind.
Contracts are the lifeblood of your sales team. A closed deal isn’t officially set in stone until someone signs on the dotted line. Consequently, contract management has become an integral part of the sales cycle.
If a business can properly manage its contracts, it can help them further streamline their sales processes. This is especially the case when it comes to managing customer relationships.
While the relationship might have started long before, the second they agree to your deal is when that connection shifts from them being an opportunity to a customer whose loyalty you should be pining to earn.
If you have an efficient and repeatable contracting process that includes pre-approved templates, holding up your end of the deal with the customer should be made a bit easier. That way, sales reps can focus more on nurturing that customer relationship instead of drawing up draft after draft of essentially the same contract.
If you take it a step further and digitize all of your contracts, there can be an easily accessible, single source of truth for anyone within your organization.
Accurately going through each stage of the contract management process is only half the battle. To make all of that hard work worth it, there are some additional contract management best practices you should implement to ensure full efficiency and effectiveness.
If you can’t comply with your contracts, none of your management stages were worth it. The theme of your contract management strategy should be compliance. The beauty of contract management is that its structure makes it easy to improve your compliance with legal agreements.
On top of that, monitor all federal and state regulations that can affect your business to avoid any penalties for non-compliance. If something of note happens, review all of your contracts and take action where necessary.
The secondary theme of your contract management strategy should be organization. One of the most important practices here is to make sure you are keeping all of your contracts in the same place. Tracking, updating, and reviewing are all a part of effective management, and being consistent with placement is necessary for that to happen efficiently.
On that note, while people who need to access contracts should be able to do so, there also needs to be a balance of security. Only give access to those who truly need it. Contracts can include some sensitive information, and the more people that can see it, the riskier it gets.
All of your agreements should be offering your business some sort of value, but you won’t be able to reap those benefits before the contract gets approved and signed.
To ensure you’re accessing that value, set and monitor some contract management key performance indicators (KPIs). Monitor how long it takes for a contract to reach the approval stage so you can identify ways to optimize the contract management process as a whole. The best way to ensure efficiency in your process is by learning from your mistakes.
Legal teams and sales reps no longer have to take care of every single detail regarding contracts. There are plenty of mundane tasks throughout the process that you can leave to automation, especially when it comes to communication between the parties. Contract management software enables users to schedule and send alerts and notifications when action is needed on their behalf.
While your business will likely end up relying on reusable contract templates for your standard legal needs, don’t let yourself get too comfortable.
As your business changes, whether it be with a new solution, target audience, or employee standards, your contracts will have to adapt as well. Do your best to be proactive and anticipate your changing business needs so you can adjust your contracts accordingly.
There are a few different tools you can use to oversee and automate your contract processes, but the best place to start is with contract management software.
* Below are the top five leading contract management software solutions from G2’s Summer 2020 Grid® Report. Some reviews may be edited for clarity.
PandaDoc is a tool used by sales teams to improve the workflows associated with the contract side of closing deals. This software focuses on document automation and streamlining the process of creating, approving, signing, and executing contracts.
“PandaDoc is useful for sales reps if you first create templates that will be used over and over. I like that we are able to use existing PDF files that have been created by our marketing team.”- PandaDoc Review, Layne L.
“Sometimes it is a bit choppy and I need to reload to get it to work properly. If the app hasn't been reloaded in a while the doc settings can be moved around in the document view.”- PandaDoc Review, Kidder S.
Icertis is a contract management software geared toward enterprise businesses. This tool focuses on helping businesses unlock the most value from their contracts to reduce costs, minimize risk, and increase revenue and productivity.
“The contract authoring features and the search features really allow the various stakeholders to fully take advantage of the tool suite. The software is very helpful in finding and reporting on key attributes in the legacy contracts. Once the information is in the system, you will no longer have to do large "contract review" sessions to find out what was agreed to previously. You can just run a report on the areas that are concerning.”- Icertis Review, Michael Z.
“Weak e-signature integration in comparison to the strength of the overall tool. Almost everything can be done on the fly except contract types. Would like bulk uploading to be easier.”- Icertis Review, Admin
GetAccept can be used by a variety of departments, including sales, human resources, customer success, and sales enablement. This platform provides video messaging, document tracking and analytics, and e-signature capabilities.
“The team at GetAccept is great and helpful with getting you setup on the platform. The flexibility of the program is incredible and allows you to develop a custom platform specific to your company needs. GetAccept was also great with adapting the platform to fit our specific workflow and helping us build the best possible solution for us.”- GetAccept Review, Alex D.
“Sometimes it's a bit messy to recreate or change a proposal if you need to send a new one. It works, but it could be easier. We often have to change the PDF file we send over to our customers, since we don’t use the built in templates.”- GetAccept Review, Jesper J.
Accelo is a contract management tool meant for service businesses. It makes it simple to manage all of your client’s stages in the sales process, from being a prospect to becoming a customer.
“Accelo gives us the ability to bring intelligence and flexibility to our workflows. The customization and automation is what brings this product to life. You can automate workflows, emails, and triggers for reminders on just about anything. The capacity inside of each module to fit your process, your language and your requirements really brings this product to the top of our list for projects, tickets and retainer. The integration to G Suite and Xero are like magic. Easy, fast and flexible.”- Accelo Review, Kris F.
“This certainly needs more security to access your account, such as authentication factors or SMS entry codes. Any of those security tools that provide more confidence in backing up our data. Also needs more email tracking options, like the sender's IP tracker.”- Accelo Review, Zaire N
Oneflow focuses on sales contracts, and helps reps automate the last stage of the selling process. It focuses on accelerating the end of the sales cycle, helping businesses close deals and increase revenue.
“The layout is really easy on the eye. When you want to work quickly and efficiently, you really want to avoid any kind of sensory overload and get distracted by a messy dashboard where you'll struggle to find features. In Oneflow, the placement of every feature makes sense.”- Oneflow Review, Samantha B.
“I would like to have the ability to set a reminder and connect it to my Outlook account. For example, I would love to get a reminder X days before a document is closing in on it's final date.”- Oneflow Review, Patrick R.
Building a contract management system is going to look different from business to business. However, at the end of the day, no team can be truly successful in managing their contracts without the right solution.
Contract management software removes harmful inefficiencies that burden those keeping track of your legal documents manually. Bottom line, no matter which specific product you choose, here are some of the associated benefits of implementing a contract management solution.
Because all of your legal documents will be stored in the tool you choose, contract management software acts as a single source of truth for your organization. Every authenticated user will know exactly where to look for the details, life cycle, and requirements of each contract.
This central location of your contracts also avoids users looking at outdated versions of current documents.
Keeping all of your contracts within a software can also help you gather valuable insights into how well, or poorly, your business handles its legal documents and their associated obligations. Contract management software can give you a bird’s eye view of all your deals and help extrapolate helpful data that will open avenues for process optimization.
Letting a software tool handle all of your contract management tasks is a huge time saver. The automation that contract management software provides opens up time for team members to focus on more important tasks that require their attention.
The fact that everything is online makes contracts easy to find and search within, removing the need to skim contracts and files for specifics. Most tools even let you set up alerts so you know when action needs to be taken on your end. And with electronic signature integrations, sealing the deal is easier and faster than ever.
Arguably the most important benefit of contract management software, which stems from the others listed above, is that it reduces the risk of non-compliance, losing money, and soiling important relationships.
Getting into legal trouble is nothing to mess with, and contract management software is the best way to combat that. It makes it almost impossible to miss a deadline, provides all stakeholders with valuable insight, and analyzes contract cycles to pick out weak spots.
Letting technology manage your contracts isn’t lazy. It’s smart, and at this point, it’s almost necessary. There are too many day-to-day worries of operating a business, and dealing with legal documents shouldn’t be one of them. While there are some parts of contract management that require a human touch (in-person or online), taking advantage of software will bring it all together.
Managing contracts online opens up the world of e-signatures, which is surprisingly secure. Learn more about the difference e-signatures can make for your business.
Mary Clare Novak is a Content Marketing Specialist at G2 in Chicago, where she is currently exploring topics related to sales and customer relationship management. In her free time, you can find her doing a crossword puzzle, listening to cover bands, or eating fish tacos. (she/her/hers)
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