One of the most common misconceptions about contract management is that it is tremendously challenging. However, this could not be further from the truth. By leveraging a top-level contract lifecycle management (CLM) tool throughout the entire process, your organization can meet the needs of all employees, vendors, and recruiters.
Sidelining Contract Management – A Crucial Mistake
Within many organizations, contract management is often sidelined or put off till something goes wrong. This dismissal of agreement governance is generally because of archaic management processes and personnel issues. In most cases, this level of inefficient contract management often leads to lost revenue and non-compliance with the contract’s original terms.
Today, research shows that inefficient contract management could be causing companies to bleed as much as 9% off their bottom line. Meanwhile, a KPMG study also showed that companies are risking up to 40% of the value of each contract by not implementing high-level contract management principles.
Top Tips for Successful Contract Management
Identify The Different Types of Contracts You Have
Contracts are tremendously dynamic and can take several forms. In most organizations, the type of contract you have for a vendor will likely vary from the ones you have for your employees. To help streamline your contract governance strategy, you should take the steps to outline the different types of contracts you have.
With your organization taking note of what employees or vendors are engaged in fixed-term, cost-plus, and unit price contracts, you can improve compliance and preparation. This identification process will also help your company maximize the value of each agreement.
Think Carefully About Where You Store These Different Contract Types
How your company chooses to store its agreements will always play a crucial role in the effectiveness of the overall contract management structure. Unfortunately, most companies continue to opt for manual storage processes that involve heaps of files, tons of cabinets, and a digital system that is barely understandable. This storage method often makes it impossible to find the different contract types, keep them secure, and keep track of core milestones.
This level of disorganization is one of the core reasons we generally suggest maintaining a central repository for your contracts instead. This primary source of information will act as a dictionary for all agreements your company is under, allowing you quickly find information about a contract.
Set Up User Rights and Permissions
Accurate user access is one of the core aspects of a secure contract management organization. If anyone in your company can access your contracts, the risk of a bad actor changing the terms of an agreement after the final signature will always be present.
To help avoid this issue, we recommend setting up user rights as part of your contract management organization structure. In most cases, this permission-based system often means that only your contract admin staff will be able to make changes to your repository. However, you can always be flexible depending on the needs of your business.
Manage and Add Contract Reminders
Most companies today often depend on their contract admin to keep tabs on the core details of a contract. However, while this may be effective for small and medium-sized businesses, the cracks often begin to show as a company grows. One of the core reasons we always recommend using a Contract Lifecycle Management (CLM) tool is the ability to add time-based reminders to every contract.
These prompts and notifications will allow your business to stay on top of important dates such as renewals, bonus payments, and when a new term is triggered. Reminders will also help free your contract admin staff from the mental workload of having to remember everything, allowing them to focus on other areas of your organization.
Be Consistent in Your Contract Management Structure and Remain Flexible
One of our most successful contract management tips is that consistency is the key. Switching to a new contract management system is not easy, and it can take a while before you begin to see the benefits. However, if you keep heading in the right direction, you will quickly start to see the benefits of your new system.
However, you must also remember that remaining consistent is only half of the journey. To create a truly efficient contract management system, you must give yourself room to make slight changes. As an illustration, a member of your contract admin team may believe that they will be able to work faster if more of their team members had user rights and permissions. If you find that this will be beneficial to your contract management workflow, do not hesitate to make this change.
Switch to CounselLink CLM Today
Keeping your finger on the pulse of all your contracts is crucial to settling disputes, kickstarting renegotiations, and keeping up with compliance. However, it is impossible to understand your contracts without an effective contract management structure. By paying more attention to the way your team manages contracts, you can get the maximum value out of every contract and ensure that nothing goes unnoticed.
Olga Mack is VP at LexisNexis and CEO of CounselLink CLM.