Contract management efficiency and consistency problems can be solved, in part, by standardizing your contract medium, templates, clauses, and processes. Doing so creates efficiency and generates greater returns on your investment of time, effort, and resources. Further, standardization plays a key role in ensuring compliance with business rules and regulatory requirements, minimizing financial penalties, and reducing reputational risks.

In our previous blog post, High-Performance Contract Management: Standardizing to Save Time, Money, and Sanity, we established that standardization is the second building block to high-performance contract management. Duplicate efforts, often a result of a lack of standardization in contract management, can result in serious consequences for a business:

  • Takes time and focus away from other mission-critical responsibilities
  • Delays the stream of commerce for your business
  • Breeds inconsistency in terms between similar contracts, and
  • Leads to missing elements and disparate treatment among parties in similar positions

Below, we’ve outlined five important steps to standardizing your contract management documents and content. You can find a more detailed checklist in our eBook, 3 Building Blocks for Cultivating a High-Performance Contract Management System.

Step 1. Convert contracts to text-searchable digital files

To use key data contained in your contracts to manage and improve performance, you must be able to easily find and track that data. Printed paper documents and contracts stored in image formats make that impractical.

By scanning typed, printed, or image-based contract documents using optical character recognition (OCR), contracts are converted into a digital format. This format can be “read” by data mining software that automates the process of identifying and collecting data points for tracking, so that you don’t have to perform that task manually. Using an efficient, advanced data-mining tool can simplify the conversion process.

Converting a portfolio of legacy contracts can seem daunting. There are many scanning services available that use optical character recognition (OCR) software to convert paper contracts and scanned images to searchable, digital files. Do your research prior to selecting one, and remember to ask key questions such as:

  • What key features does the software offer?
  • What compatibilities and integration (with contract management and other platforms) are built in?
  • What types of documents can it support?

The sophistication of the tool you need will depend on the size of your organization, the volume of contracts to be converted, and your unique business needs.

Step 2. Identify contracts that should serve as templates

When creating templates, you will want to start with the contracts most used throughout your organization. Contracts for business or regulatory purposes that cannot be negotiated or adjusted, and contracts where terms are consistent between contractual arrangements (e..g. NDAs), are both excellent examples of which contracts to start with when creating templates.

Step 3. Review contract content

Compare different versions of the same contract and narrow the versions of each contract into the most current, comprehensive version. If more than one version is required, try to limit the number of versions to three or less whenever possible.

Step 4. Create and approve templates

Prior to creating the actual contract templates, it is important to identify the key stakeholders who should be involved in the drafting and approval process. Collaborate with all stakeholders to:

  • Document the business case and process,
  • Make template decisions,
  • Confirm approvals prior to official documentation,
  • Communicate the plan to all team members who are affected by the process change, and
  • Implement the move-forward template process.

It is imperative to include all stakeholders in the development process, especially departments such as legal and finance. Make templates and clause libraries accessible to all relevant departments, but limit the ability to make revisions and create guidelines to authorized administrators only.

Step 5. Establish a clause library

As the gatekeeper to contract requirements, focus on accuracy when building your clause library. Start by identifying clauses that appear in every contract, and work your way to the clauses specific to only certain types of contracts. Be sure to identify regulatory requirements and business rules that need to appear in contracts. It is important to work closely with legal to obtain approval on all clause language.

These five steps will help any organization standardize its contract management process to ensure uniform quality. Standardization, the second building block for high-performance contract management, ultimately creates contracting tools and best practices that empower users, streamline their workflow, save time and reduce risk.

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 ways processes, workflows, and technology can work together to improve coordination, collaboration, communication among team members.