Contracts, the information they contain and the way they are managed, drive the financial and operational performance of an organization and play an integral role in its success. As your business grows and demands increase, streamlining your contract management practices can enable you to reduce risks to your organization and provide a boost to your bottom-line.
In this blog series, we’ll explore three contract management challenges commonly faced by organizations today. We will also discuss the three building blocks essential to high-performance contract management and outline a few of the steps to consider when streamlining your contract management system.
Let’s kick things off with the first challenge: Visibility.
Lack of visibility is one of the top business pain points and impediments to success. When contracts are in different formats or stored in separate systems and different locations, the simple task of locating them becomes complicated and time-consuming. Consider the time, money, and resources wasted when contracts are stored in paper format, on department-siloed drives or individual desktops or, even more challenging, stored as attachments to emails.
How much time does the average knowledge worker waste looking for information, such as contract data, in corporate systems? Download our white paper: Rethinking Contract Management to find out.
Your contracts contain valuable business intelligence. This intelligence, the raw data that drives your business, is essential in making informed business decisions, tracking performance and deadlines, and managing compliance.
Are you fully leveraging this intelligence? If you find yourself regularly putting out compliance fires because your contracts are not easily accessible or the contract data isn’t readily visible, then the answer to that question is most likely no.
The ability to mine contracts for key data points is a serious challenge when contracts are in different formats and stored in separate systems and different locations. The result? Delayed reports, missed deadlines, compliance penalties, and missed opportunities – all negatively impacting your bottom line.
What’s the solution? Centralize.
When you house contract documents in a single cloud-based repository, you create a single “source of truth” that gives stakeholders clear visibility and quick, easy access to the most current and relevant contract information. The benefits of centralization go far beyond easy access to documents. Visibility into contract data points throughout your contract portfolio enables your organization to take the first step in cultivating a high-performance contract management system.
When you migrate to a central repository, key data points, such as renewal dates, payment terms, and performance metrics, are readily identifiable for tracking and reporting — providing insight across the entire organization. And perhaps even more important, a centralized contract portfolio provides visibility to contract data that allows stakeholders to make more strategic business decisions.
Where do you start?
Properly identifying your portfolio of contracts is a critical piece of the puzzle and requires a comprehensive strategy and committed resources.
Assessing the complexity of your current systems, the scope of your contract environment, and the capabilities of your team before initiating this process is essential. If putting additional work on internal team members is a concern, consider outsourcing this process to experts that can help ensure efficiency and accuracy.
The steps below list the tasks and some considerations associated with centralizing contracts. You will find a more detailed checklist outlined in our eBook, 3 Building Blocks for Cultivating a High-Performance Contract Management System.
STEP 1: Identify the contracts to be centralized. How many active contracts do you have? Which contracts pose high risk? Which contracts include a compliance or service level element? Should you include both buy-side and sell-side contracts? Which contracts contain data that drives business performance? Deciding the scope of centralization will vary depending on the organization.
STEP 2: Locate and collect the contracts. What repositories are currently used to store contacts and where are they located? How do repositories differ among team members and how can you engage them to assist? How is version control handled and does that affect the number of copies and versions you need to collect? Is your contract portfolio filled with amendments and addendums that also need to be collected and stored with the initial contract?
Best Practice Tip:
Too many digital locations to search? You can use advanced technology to perform in-depth searches of drives, emails, and networks, and can analyze the data and identify all possible contracts, populating the results for quick review.
STEP 3: Review the contracts and mine them for data: Are there any duplicate contracts? Do you know which contract terms and data points need to be tracked so deadlines and performance metrics aren’t missed? Which contracts should serve as templates? Should some of the contracts be renegotiated?
Best Practice Tip:
Tracking too much data can complicate processes and desensitize the users to the importance of the tracked information. To simplify the list of data elements to mine, look to previous contract reports and track the relevant data listed. Be sure to include data that serves as the basis for decision making, forecasting, or compliance reporting.
When all of your contracts are visible in one central repository, the final step is executing a well thought out launch plan designed to ensure all contract stakeholders are fully informed and trained to use the system properly. Change management is crucial to the success of any new process or system, and it is usually the element that gets the least amount of attention in the planning process. When planning, think through a few important questions:
- Who needs to be aware of your new repository?
- How will you communicate this change to them?
- What do they need to know?
- How will it change the way stakeholders work with contracts?
- What information or training will they need?
- What standard processes or procedures do you want them to follow?
Centralizing your contracts will improve communication between all parties, reduce wasted time and redundant work, provide insight into business intelligence that can boost business performance, and provide more time to focus on negotiating better contracts and strategic business decisions.
Take the next step
Centralization is the first building block. High-performance contract management requires three essential building blocks: centralization, standardization, and optimization.
Download our complimentary eBook, 3 Building Blocks for Cultivating a High-Performance Contract Management System, to learn how streamlining and simplifying your contract management process can help you stay ahead of deadlines, proactively meet performance standards and contractual requirements, and use contract data to generate value across your enterprise.
In our next blog post in this series, High-Performance Contract Management: How Optimization Amplifies Results, we will discuss the power of designing and combining processes, workflows, and technology to organize contract management tasks and enable teams to use centrally-located contracts, templates, and standard clauses efficiently. An optimized contract management system improves coordination, collaboration, and communication among team members for improved results.