Having an effective contract management process should be the goal of every organization—but far too many fall short of this ideal. 64 percent of companies say that their contract approval processes are causing deals to stall, and just 32 percent are using a dedicated contract management tool.
So many articles and blog posts stress the importance of having an effective contract management process in place, but what does that actually look like?
Here are five indications that your organization has achieved an effective contract management process.
1. Your contracts are in a centralized location
Whether it’s an old-school filing cabinet or a software application, effective contract management requires you to store all of your contracts in a single, centralized location. Doing so helps employees know how and where to find the documents they need at any step of the process.
Storing contracts in a centralized location makes the search process dramatically easier, saving everyone time and effort. There’s no need to waste time trying to track down a specific contract, section, or version, for example.
2. You know the most efficient ways to get contracts signed
The contract signing process can be an unexpected bottleneck for contract management. Critical documents may languish on someone’s desk for days or weeks, without any visibility into where they are or why they’re taking so long.
Having an effective contract management process means that you’ve identified and implemented the best and most efficient ways to get contracts signed. Whether the people involved prefer electronic signatures or wet signatures, find out what works best and allows you to execute contracts the quickest. The less time it takes to sign a contract, the faster you can start realizing its value.
3. You can track contract deadlines and milestones
As your business grows and scales, there’s simply no way to manually keep track of all the relevant contract deadlines and milestones yourself. However, meeting these deadlines and reaching these milestones is extremely important. Not only is your business reputation at stake, but you can also face financial and legal penalties if certain deadlines are missed.
With an effective contract management process, you need a system in place to track all important contract deadlines and milestones. Although a small contract portfolio can be tracked manually, contract management software will be a necessity after your portfolio reaches a certain size.
Dedicated contract management software makes it easy to view all the relevant contract deadlines your business is facing, including milestones and expirations, so that you can take the appropriate actions well in advance.
4. You can assess contract performance
Identifying the most relevant metrics and key performance indicators (KPIs) will help you accurately assess the performance of your business over time—including your contract management process.
An effective contract management process requires tools and KPIs to report on the performance of your contracts, so that you can always work to improve them. Having this infrastructure in place will give key stakeholders insights into the contract information they care about and that is most relevant to the operation of your business.
Some of the most important KPIs for contract management include:
- The length of your contracting cycles
- The quality of your relationships with contract partners
- The ability to adhere to deadlines and milestones
- The cost-effectiveness of your contract management process
Assessing your contract management performance also enables you to learn from your previous failures and successes, so that you can optimize the language and clauses of future agreements. By doing this, you’ll be able to execute contract phases as quickly as possible, so that you can focus on work that’s truly important to the business.
5. Your contracts are safe and secure
With cyberattacks and data breaches constantly in the news, effective contract management also means that your contracts are protected from malicious actors. Contract security should be a critical issue to safeguard the confidential information that these documents contain.
Preserving the security of your contracts, and regulating proper access to them, is much simpler with a cloud-based contract management solution. These software applications allow you to set clearly defined user roles and groups, so that only the relevant people can view the appropriate files and documents. Cloud-based contract management software should also provide backups and recovery, so that your business is protected in the event of disaster or data loss
To read more on best practices for a successful contract management process, download The Master Checklist for Contract Review and Management.
Some of this content was previously published on the ContractWorks blog.