6 Tips For Smarter Contract Management
More often than not, a contract, once signed, gathers dust in the drawer of an office cabinet or lays unnoticed in someone’s computer. It gets talked about only when something goes wrong. Unfortunately, there can be terrible effects if a contract is not managed well. Sometimes, even a simple, unintentional oversight can result in millions lost in litigation. That’s the reason why most business leaders today are looking at smart contract management software to improve efficiency and solve their contract management challenges.
As per a World Commerce and Contracting (WorldCC) research, poor contract management continues to cost companies 9% of their bottom line. A contract is binding, and that’s what makes it powerful. It acts as a guide to all the parties involved, detailing in clear terms the roles, responsibilities, obligations, and deliverables involved.
While we would like to write a tome on the subject of digital contract management, here are a few useful tips that will help you manage the basics:
#1 Simplify the process with automated contract management
Managing contracts can take up a lot of time. Each contract has to be reviewed thoroughly before it gets approved. It has to meet all the business standards, the legal team has to ensure that it is compliant and that the contract can be enforced. Even for a mid-sized enterprise, this might be hundreds of hours of work and can be frustrating for the parties involved.
According to research, 90% of business people find contracts ‘hard or impossible’ to understand. Using a smart contract management software simplifies the process and makes it easier for people to make sense of complex contractual language and pull out useful information. Features such as automatic metadata extraction, managed workflows, and automated alerts help expedite contract authoring and management. Cloud collaborations in a digital contract management software can reduce the back-and-forth between the parties.
#2 Use an end-to-end contract management system to reduce risk
Poor contract management process usually puts at least one of the parties at a big risk. One of the most important contract management tips that we can offer you is to use an end-to-end contract management system.
When your contracts are spread across globally, managing risks becomes a priority since there are a group of regulators and third parties to be compliant with. By using an end-to-end contract management system, you will have deeper insights into any financial, reputational, or regulatory risk that might be present.
It is imperative that businesses, no matter how large or small, should treat contract management as an important business function. Ensure that you have all the arrangements necessary for contract management, even before the project begins. A robust contract management system like Revnue helps you manage and control your risks through the entire contract lifecycle.
#3 Monitor and review through the entire lifecycle
It is easy to assume that once the contract is signed, everything will happen according to what is outlined in it. Unfortunately, that is never the case. You have to make sure that the performance is monitored and reviewed at regular intervals so that all the parties involved do what is agreed upon.
Research shows that leakage – which affects both the buyers as well as the sellers – occurs during the post-award phase of contract management. Therefore, managing and monitoring contracts after they are signed is equally important.
Heard of Murphy’s law? It says-” Anything that can go wrong, will go wrong.” Contracts are something like that. The stakeholders in the contract might not end up doing everything that was promised in it. You should be prepared for things to go wrong and ensure that there is a mechanism in place to address issues.
#4 Have a robust contract storage and sharing facility
Ensure that there is a shared facility for storing your contracts. If there is no proper way to access and analyze contracts, there is no way it can be utilized properly. Maintain versions and track every change made to the document to ensure full traceability.
Make sure that the contracts which have sensitive documents are protected, even though you should take steps to share relevant information with the other parties. By maintaining a central repository, you can be sure that important information is never lost and all the relevant people have access to the information whenever they need it. Revenue’s Smart Repository can help you maintain all your contracts in a central location and track all changes.
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#5 Set up a mechanism for collaboration with other parties
For any business to be successful, there must be a trusting relationship between the parties. Before the contract is written, you have to make specific arrangements and define how everyone will work around the contract. Another aspect of the relationship that you should consider is how you want to collaborate during the contract lifecycle. Each party involved in the contractual process should be able to track the contract terms and their responsibilities, including the contract value, timelines for each payment, mode of payment, expiry dates, renewal terms, etc.
By providing access to your digital contract management platform to all parties, you can ensure that everyone is aware of their obligations and takes the necessary steps to meet them. Any changes or deviations made after the contract is signed should be well-documented and agreed upon. There may be times when the other party might informally ask you to let a thing or two slide. If there is a request like that, make a formal record of it and outline the reasons behind doing so. Doing something like this regularly can get in the way of getting the benefits that you are entitled to. Let the other party also know that the contractual obligations will return to the previous status quo after this adjustment. Having an automated system in place that everyone can access reduces your workload, while ensuring that everyone is on the same page.
#6 Form a good contract management team and maintain your timelines
Maintain a calendar for tasks that are to be done routinely, it could include management meetings, progress reports, measuring KPIs, sending payments, etc. By doing so, you will be able to allocate the resources and manage the contract in the right way. If there are on-demand activities, then include them as well in your documentation. Gather relevant information about contract governance structures, roles and responsibilities, stakeholders, etc., and ensure that you update them as and when something changes.
There are times when those who were involved in the original contracting process might have moved on, and some of these processes will not get invoked because of their moving on. You need to be on top of everything by carefully documenting every step and process so that you do not lose out on anything mentioned in the contract.
Contracts are not a placeholder to get business done, nor are they to be used only as a reference when things don’t turn out the way you expect them to. It is crucial that you monitor, update, and maintain your contracts to ensure that the obligations are met. Using an intelligent contract management software will be advantageous to both parties involved as it streamlines the process and helps get things faster.
If you are looking for an AI-based contract management system, you can check out Revnue. Get on a call with us to understand how we can help you manage your contracts.
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