6 Steps to Streamlining Your Contract Management Process

May 31st, 2023

An efficient contract management process can save organizations valuable time and resources – shaving up to 2% off annual costs with 75-90% fewer payment errors. Implementing an effective process requires streamlining procedures and frameworks for managing contracts throughout their lifecycle. With standardized methods and protocols, you can enhance efficiency and consistency in contract handling, reaping substantial benefits. 

This guide explains what contract management is and suggests steps you can take to perfect the contract management process in your organization. 

Key Takeaways

• The contract management process is a critical business discipline with the potential to reduce costs, lower risks, and boost efficiency.

• Contract management involves systematic handling and monitoring at every phase of the contract lifecycle.

• With the right practices and technologies, organizations can refine their contract management processes for significant bottom-line benefits. 

What Is Contract Management?

Contract management refers to the business process overseeing the various phases of the contract lifecycle. These include:

• Request and intake
• Initial draft
• Collaboration and redlining
• Final reviews and approvals
• Signatures and execution
• Deliverables tracking
• Archival and reporting
• Renewals and termination

The primary business goals of contract management are to maximize operational and financial performance while minimizing risks and liabilities. To achieve these goals, different benchmarks must be met in different contract phases.

• Negotiation: Successful contract negotiations require well-defined agreements that clearly articulate the expectations and obligations of all parties.
• Maintenance: Effective contract management involves ongoing oversight to ensure all parties adhere to terms, achieve milestones, and anticipate potential disputes. 
• Performance monitoring and review: Stakeholders such as legal teams, finance departments, and operations managers must regularly report on contract KPIs to ensure contracts remain beneficial and relevant as business needs evolve.

Digital transformation and advancements in cloud-based software-as-a-service (SaaS) platforms have revolutionized contract management. Modern contract management tools allow organizations to automate and streamline their processes, increasing efficiency and greatly reducing errors.

Steps to Perfecting Your Contract Management Process

Contract management is a technology-enabled business discipline that takes trial and error to master at the organizational level. Follow these steps to lay a solid foundation for the contract management process in your organization. 

1. Identify and Address Friction Points and Delays

Begin by assessing your current contract management workflow to identify bottlenecks and areas needing improvement. In large organizations, potential friction points abound across different departments and areas of responsibility. 

By proactively managing these friction points, rather than reactively, you can reduce delays, prevent errors, and avert last-minute rushes to meet deadlines. This approach also uncovers areas for increased return on investment (ROI).

2. Use Templates for Streamlined Contract Creation

Implementing templates for frequently used contract types can increase efficiency and simplify contract creation. Without templates, contract creation can lead to preventable mistakes and drawn-out processing cycles that over-rely on legal teams for even simple agreements. 

Keep templates up to date and easily accessible to all authorized business users to ensure smooth operations. Effective template use can reduce dependence on legal or procurement teams and speed up contract lifecycles.

3. Encourage Collaboration

Since contracts involve multiple stakeholders, everyone needs to have access to the most recent versions of the contract and can track changes and comments in real time. Modern contract lifecycle management (CLM) software allows all stakeholders to collaborate on contracts from any location and device, reducing the time to get contracts signed and minimizing the risk of errors or misunderstandings.

4. Leverage Automation Technology 

To avoid bottlenecks, use technology to facilitate contract lifecycle progress. Today’s CLM platforms have powerful automation tools that allow organizations to:

• Enable parallel reviews: Parallel viewing and editing permit different users to review contract sections simultaneously. With these tools, you can track the duration of each stage in your contract approval workflow, delivering valuable metrics and identifying any delays and inefficiencies.
• Customize workflows: Automate contract routing based on the completion of successive tasks. Automated workflows significantly reduce downtime between users.
• Use pre-approved language and clauses: Centrally stored language and clause libraries speed up contract creation and ensure consistency across similar contracts. Advanced CLM platforms can also deploy AI-based parsing and metadata extraction to quickly and accurately author contracts, saving time and delivering high-quality drafts.

5. Implement Digital and Electronic Signatures

Digital and electronic signatures can improve the contract management process. Though many users refer to them interchangeably, digital and electronic signatures are distinct. 

Both represent ways of signing documents electronically. 

• Electronic signature: This indicates a person’s intent to sign an agreement, like typing a name or applying a corporate seal to a contract. It allows organizations to obtain signatures without the delays of exchanging hard copies. 
• Digital signatures: This uses an encryption technology called public key infrastructure (PKI) to provide an additional security layer. Once signatory parties register a PKI-encrypted contract, no signatory can alter the contract contents without the other parties’ keys. 

6. Monitor Performance and Continuously Improve

Identify the contract KPIs you need to monitor and assign responsibilities to the relevant teams. Centralize all contract-related information in a single, secure repository to streamline the monitoring process and guide decisions.

With contracts accessible in real-time for all authorized users, different teams can effectively monitor progress and analyze data in their respective focus areas. When reporting data regularly flows from different contract processing stages to decision-makers, organizations can make incremental adjustments and improvements based on up-to-date data. 

Streamline Your Contract Management Process with Contract Logix

Contract Logix’s data-driven contract management platform can transform how your organization creates and processes contracts. With task automation, AI-enabled data extraction, and real-time collaboration features, Contract Logix gives organizations the tools to optimize their contract management process.

To learn more about Streamlining Your Contract Management Process, schedule a demo today.

Looking for more contract management insights? Check out our latest blog post on “How to Mitigate Legal Risk: 4 Suggestions with Contract Management“.

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