A contract is more than just a piece of paper, a digital document, or a firm handshake; a strong contract sets the tone for a productive business relationship. With a well-made contract in your arsenal, you don’t have to worry about misunderstandings down the road, you can rest assured that all parties will stick to their word – they’re legally obligated to. However, without a process to manage these agreements, companies are placed in a vulnerable position.
When contracts slip through the cracks, a company may find itself with all sorts of issues; accidental breaches, termination without a company’s knowledge, or a failure to renew when necessary can cause severe repercussions. Accordingly, it’s of the utmost importance to closely monitor your contract management lifecycle. However, that’s easier said than done, especially as the number of contracts you’re dealing with creeps up. That’s where modern technology comes into play. Software automation has the potential to revolutionize the contract management lifecycle, adding efficiency and clarity to a process once rife with issues.
The Contract Management Lifecycle
Contract management is the act of overseeing contracts from their inception to their expiration, and any business that interacts with these legally binding agreements could stand to benefit from implementing a strong contract management process. World Commerce and Contracting found that poor contract management alone costs businesses an average of 9% of their revenue each year, and Aberdeen’s research determined that it takes an average of 20-30 days for a company to create and finalize a contract (and that’s not including the 3.4 weeks it takes to get a contract approved).
By building a robust contract management lifecycle process, companies can not only keep their hard-earned money, but use their time and resources more efficiently.
Initiation is the first stage of the contract management lifecycle, and it begins with the relevant parties deciding that they would like to enter into an agreement. Once everyone has determined that a contract is necessary, the process of creating that contract can begin. Unfortunately, the first stage of the contract management lifecycle is also the first place major issues can arise; many businesses don’t collaborate on their contracts, which places a great deal of responsibility on the person in charge of making them. Not only do they have to factor in company values and standards, but they also need to have a solid understanding of applicable laws and regulations. A mistake in this area could lead to increased risks, liabilities, or even an accidental infringement of the law.
The right contract management software all but solves this issue. With ComplianceBridge’s software, employees can create contracts collaboratively. By allowing experts from every relevant department to contribute, one individual isn’t burdened with having to understand every single aspect of the contract – they can delegate to someone who already does.
The execution stage is where the relevant parties sign the contract, transforming it from a regular old document into a legally binding agreement. Signing means that you are willing to fully comply with the terms within, essentially, that you will hold up your end of the deal. All written contracts require a signature to go into effect, but verbal contracts, excluding those for the sale of land or exchange of goods over $500, don’t necessarily need a signature. That being said, company contracts should usually be in writing, as verbal agreements are a bit too subjective for the business world.
Collecting signatures can be a massive pain point in the contract management lifecycle, especially when you’re trying to get more than one or two individuals to sign. Plus, it’s often difficult to keep track of who has acknowledged the document and who hasn’t. Whether the issue is that people are dispersed, bad at communicating, or they simply forgot, the result is the same – you don’t get the signatures you need within the timeframe you need them. Automation will solve the brunt of that problem.
To start, contract management software allows you to send contracts to a targeted selection of individuals or groups, ensuring that they end up with the right people. The real advantage to software in this stage of the process, however, is that it allows you to monitor who has reviewed and signed, removing the confusion associated with collecting signatures by hand. If people haven’t signed after a certain period, you can even send notifications to remind them.
Once the document is signed, it’s time to enter into the performance stage of the contract management lifecycle and put it into action. However, in order for people to follow a contract, they need to have access to it – preferably without too much hassle. While paper contracts suffice, electronic contracts definitely have a leg up in this department.
With an automated contract management system, everyone can access these essential documents, and they can do so anywhere from the web. Of course, just because you can access a document doesn’t mean it’s accessible; in fact, The Journal of Contract Management found that 71% of businesses can’t locate at least 10% of their contracts. To ensure the process of retrieving the contract isn’t too arduous, the right contract management software should also keep contracts organized. With ComplianceBridge’s platform, users can group contracts by client, organization, vendor type, or document type. Another feature that helps keep contracts organized is version stacking. While it’s important to keep a record of past versions, most people only need to see the current one; version stacking allows users to easily retrieve the most recent version without sacrificing past iterations.
Renewal & Expiry
In the final stage of the contract management lifecycle, renewal and expiry, the involved parties typically have three options; extend, renew, or terminate the contract. While renewal and extension sound similar, the two are not one and the same; renewal is the replication of that agreement or a renegotiation of its terms, while extension is a continuation of the previous agreement. Once a contract has expired, it can’t be extended – legally, it doesn’t exist.
Often, a contract is created, implemented, and almost instantly forgotten, which can cause some issues. If the deadline to renew or extend passess unbeknownst to either party, the contract could expire accidentally, automatically renew without a renegotiation of it’s terms, or the situation could change and one party could breach the contract unintentionally. Luckily, software can be quite effective at preventing this from happening.
Contract management software can automatically remind parties to review at a set date, ensuring that the deadline doesn’t pass without anyone’s knowledge. And when the time does come to review, software will simplify the process. ComplianceBridge, for example, offers automated workflow staging. Users can easily access the instructions, revisions, and approvals for each contract they create, then send updated versions to relevant parties (internal or external) through workflows.
Streamline Your Contract Management Lifecycle With ComplianceBridge
The contract management lifecycle can be difficult to keep a grip on; there are legal requirements at play, multiple parties involved, important dates to remember – and on top of all of that – you have the rest of your job to do. Luckily, you can transfer the better part of this burden to ComplianceBridge. With automatic reminders, targeted distribution, organization features, and intuitive workflows to streamline the process, our software can transform your contract management lifecycle. Ready to get started? Request a demo with ComplianceBridge today!