Achieving Better Contract Management through Automation

Transcription

1 Achieving Better Contract Management through Automation White Paper (281)

2 Though often overlooked, an effective contract management process can make a significant impact on the success of business operations. By leveraging the benefits of a better process, your sales team can build stronger relationships with suppliers and client, and purchasers can negotiate and enforce better deals. Once you commit to contract lifecycle management (CLM) automation as part of your approach, you can remove the pain and frustration that comes with your current system, all while improving revenue and spending less along the way. So what exactly is a CLM system? Essentially, it is software that manages everything related to your contracts, thereby streamlining the authoring, storing, and retrieval of these documents. Adding the ability to log and track the correspondence surrounding negotiations and the status of approvals further enhances the value of such a system and creates a strong database you can reference in the future. Finally, graphical analytics give you a bird s eye view of all your data, revolutionizing the way you think about contracts moving forward. Abstract Companies can transcend the status quo and build a better, smarter, and more efficient business process by adopting contract management automation. To start, you need to understand what is wrong with your current manual system namely that it is incredibly inefficient when compared to an automated CLM approach (see the Resources page at for a checklist to evaluate current processes). With manual methods for inputting data and authoring contracts, as well as a lack of a central storage system to house these documents, visibility into the process becomes limited, increasing the inherent risk found in your contracts and negotiations. To overcome these issues, an automated and standardized CLM approach offers the features you need to get the most from your contracts. Across every step of the contract lifecycle, from authoring and negotiations to approvals, storage, and retrieval, an automated, systemic approach streamlines the process and adds features that help you maximize the value of every legal agreement. A Lack of Visibility, a Convoluted Manual Process, and No Central Storage Plague Companies Today The challenges facing those who deal with contract management through a manual or inefficient system are myriad. At the top of the list is limited visibility into the development and authoring process. Systems that eschew automation fail to offer crucial insight during the development and authoring of the contract, leading to slowdowns and bottlenecks along the way, which create massive amounts of unnecessary risk and chaos throughout the process. Manual data entry errors further exacerbate that lack of control and visibility. These errors include mistyped or misallocated information in communications. Other sources of errors include typos and duplications when writing out contract details or transmitting this information from one platform, like an enterprise resource planning (ERP) system, to another. When these issues materialize, the ramifications to the contract creation process range from short-term inconveniences to long-term roadblocks that stymie the finalization of the legally binding agreement. (281) sales@prodagio.com 2

3 Using Automation to Centralize, Standardize, and Bring Control to the Process By incorporating a system that promotes centralization and standardization, you can gain complete control of your contract management. The process begins when you centralize the way your contract team views and manages these documents. From here, standardizing language, formatting, and everything else found within the creation of the actual contract will add speed and efficiency to a previously stagnant approach. Once standardization becomes the norm, the various steps of the process can be tweaked to strengthen compliance with regulatory and administrative bodies. This in turn leads to a system that constantly hits goals and milestones, as opposed to coming up short due to constant stoppages in the contract authoring process. Finally, gaining increased visibility into terms and obligations moving forward can continue this new culture and keep the lifecycle of future contracts moving at an accelerated rate. Step 1: Creating Better Contracts The first benefit of implementing a CLM system is cleaning up the creation phase, which leads to more control and better adherence to standards making everyone from the contract team to the legal department happy. However, this portion of the process is fraught with challenges that can stymie even the most competent, no matter how noble their intentions. The first challenge in the creation process centers on the need for expedience in order to cut down the time that elapses between the contract request and the delivery of the document. A lack of status availability can make this process difficult. Additionally, failing to incorporate standard contract language and to use the most recently approved variation of a contract template can also introduce unnecessary legal risk as the contract evolves and morphs far from the legal intent of its first iteration. Let s examine some best practices that can provide control and eradicate the above mentioned challenges. To start, a formal request process creates a consistent method for handling new contracts and helps cut down on errors while expediting the creation of this legal document. By having the requestors enter the data themselves, the potential for information getting lost in translation is completely removed. Once it is in the system, you never have to waste time retyping the information from a spreadsheet or . This means that the data fits right into your contract templates, saving you considerable time and effort. This centralized approach keeps your automated system rolling by serving as the basis for clause libraries and standardized documents. Having a repository of pre-approved legal language gets contracts up and running fast without needing a lawyer to review every standard contract, creating a substantial benefit for companies that embrace automation and standardization. Additionally, using software that tracks third party contracts gives contract teams a way to make third party papers searchable. With this functionality, finding unapproved language, eliminating mavericks, and lowering risk becomes significantly more manageable. Step 2: Streamlining the Negotiation Process Automation technology also improves negotiations between parties involved with a document. The major issues plaguing this step involve third party paper, poorly defined roles during negotiating, the logistical challenges of tracking communications and correspondence, and the difficulties of fostering collaboration between members of the contract team. (281) sales@prodagio.com 3

4 Third party paper is difficult to manage. Both sides of the table might have different priorities and perspectives regarding terms and wording, while a lack visibility into who makes changes can cause confusion and uncertainty when deciding whether to accept or decline offers and adjustments. Poor communications is another challenge found in many current systems, leading to a contract team s inability to collaborate with one another and connect in a timely and effective manner with the opposing party. To achieve a more successful and efficient level of contract management, an automated CLM system tackles each of these issues and implements tools that remove the roadblocks found in the negotiation process. Remove the confusion surrounding contracts that undergo several iterations with contract version tracking. Additionally, maintaining a uniform approach to negotiations and understanding the boundaries between business and legal operations will help to enhance a company s ability to successfully agree upon a fair contract. Including preapproved legal language, fallback clauses, and other formalities helps to expand upon this streamlined workflow, and give managers the tools they need to accurately measure the progress and success of the negotiating process. Step 3: Rolling Out Faster Approvals The next goal of an enhanced contract management approach is to streamline the approval process. This adjustment allows businesses to quickly push acceptable and agreed upon contracts through the approval process. Standardize and automate the approval process to help create an efficient and measurable approach to finalizing contracts. You can also work towards this goal by approving business terms during the request process. Incorporate ad hoc workflow and esignature functionality can also help provide flexibility on signoff and approval. If there is uncertainty over who can approve and when these individuals should approve, it could be a sign that your system either has failed or is failing.. Mixing business and legal approvals can also create issues, as well as dealing with exceptions and differing expertise in term level approval. The aforementioned best practices help eliminate these concerns, and streamline the approval of contracts considerably. Step 4: Complete Management Control via Automation With this automated approach, you ll eliminate failures to keep track of upcoming events through relying on mental notes or reminders found only on individual computers, and dispel any ambiguity about the value of a contract over the duration of its life. Adding in poor management protocols and an inability to collect or pay sums owed according to contract terms to the list further demonstrates how an automated and standardized management system alleviates some common management issues. It is important to take a deeper look into term management and how it affects the development and handling of contracts. With a strong, automated contract management system, companies can take a proactive stance in the management process. Companies need to keep track of contract milestones, target upcoming renewal dates and have a keen eye on liabilities and other potential issues that occur later in the life of the contract. With CLM solution in play to safeguard the process, you can decrease problems related to compliance while increasing performance. Automated alerts are a good example. These alerts can be triggered by the impending expiration of contracts, milestones related to the documents, and other critical events. Replacing spreadsheets can also make a difference in the contract lifecycle management employed by various businesses and companies. In the place (281) sales@prodagio.com 4

5 of these dated offerings, a unified and automated CLM platform provides the mechanisms, inputs, and data needed to get the most out of term management. In the event of a review, having these records in an easily accessible place can help avoid issues related to payment and discount compliance, as well as help mitigate risks in the short- and long-term. Step 5: The Power of Searching for Stored Contract Data Of course, for the contracts that extend deep into the future, keeping all the facts and terms straight over the duration of the document s life can be an exceedingly tough task. Along the way, many challenges can limit the ability of contract teams to successfully handle agreements and extract the maximum amount of value from the agreed upon terms. Some of the major obstacles facing the search and reporting functionality begin with the distributed nature of many document processes. With so many copies clogging up filing cabinets and storage, it is no surprise that many organizations struggle with codifying and retrieving these documents when you need them most. Adding multiple copies just creates more of a mess and adds another layer of difficulty for contract team members looking for a contract to reference. Additionally, having all of these copies floating around creates a situation in which contracts with different information and language get pushed down the chain of command, making it hard to manage and reference these documents. However, businesses can easily eliminate these issues with an automated contract system that to handles searching and reporting functionality electronically. Regarding search functionality, a strong system should embody some key best practice techniques. When finding an electronic replacement to the standard file cabinet and cluttered desk option, managers and contract team member should look for a solution with two levels of search capabilities, covering field level and full text options. As far as third party contracts are concerned, this type of virtual storage system should also be able to capture and convert the language held within these documents and automatically turn it into searchable text. When compared to manually inputting all of this content into an older system, the reason for selecting this route is clear automation in the contract management process saves a major amount time and effort for everyone on the team. However, new entrants into the field of handling contracts should tread carefully, and ensure that whatever system makes the cut has multi-level control over document viewership to ensure only the right people see the right contracts. Step 6: Reporting Should Give Visibility in the Contract Process and Performance Incorporating analytics into the process can bring new levels of understanding to your entire contract portfolio. These reports should cover the entirety of the contract lifecycle, giving the contract team the ability to drill down to different segments and pinpoint inefficiencies or strengths in the process. From here, team members can take a proactive stance and make a difference immediately. Having this coverage encompass every contract in the organization s portfolio is also an essential function of advanced reporting. Perhaps the most impressive offering that a virtual CLM system brings to the table is the ability to understand the financial value of these contracts throughout the course of their lives. With this information, team members can (281) sales@prodagio.com 5

6 properly maintain contracts and handle renewal issues easily. CLM takes out the guesswork, can streamline the process considerably, and can lead to better decision-making about every contract in your portfolio, both now and moving forward. No matter your company s current budget considerations, adding this tool to your process will give your organization the ability to maximize the value of each and every contract, Building a Complete Solution To wrap things up and review everything that we ve covered, let s look at a checklist of all the benefits you can gain by making the switch to an automated CLM system based on the six steps covered above: Enhanced visibility A central repository that gives you access to contracts immediately Access granted to only authorized users keeps your documents safe and secure Full-service virtual dashboard that incorporates search functionality Complete control A creation wizard that promotes standardized language and formatting from start to finish Automated creation helps avoid errors, thereby reducing your exposure to risk A clause library that helps eliminate legally unsound terminology and expedite the Usage log that helps you keep track of who is doing what with each contract in the portfolio Improved handling and reporting Escalation workflows that help explain the work that goes into creating contracts Reports that feature strong analytic tools expose bottlenecks and other issues, giving you Reminders that cover renewals, deadlines, and other critical, time-sensitive events creation process the ability to eradicate these issues and further refine the contract process When it comes to better contract management, the choice is clear. Sticking with a dated and inefficient process simply is unacceptable for contract teams that want to get the most out of contract lifecycle management. Having all the benefits clearly outlined, making the choice to switch to a standardized and automated system becomes significantly easier for any organization looking to extract real value from the contract management process. Learn more at (281) sales@prodagio.com 6

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