This is why forward-thinking organizations rely on robust contract management software to circumvent these potential pitfalls, guaranteeing contract compliance, transparency, and efficiency.

In this discussion, we will delve into the critical role of contract management in safeguarding your business from legal hazards. Furthermore, we’ll explore how the use of automated and efficient contract management solutions can prove to be an invaluable partner in this process. Let’s dive in!

It’s not worth the risk

When it comes to legal risks, the adage “better safe than sorry” couldn’t be more true. No company wants to deal with the ramifications of being subpoenaed. Even short of direct legal action, failing to manage contracts effectively can open the floodgates to a host of potential pitfalls, including losing clients, losing money, affecting company morale, and damaging brand trust. So, before we explore solutions, let’s break down the types of risks in contract management and the possible consequences an organization exposes itself to if it doesn’t take the proper measures.

Beware of common legal risks in business contracts

As the global regulatory landscape continues to grow in complexity, non-compliance with laws and regulations remains a grave concern for a company’s legal department. There are, however, common legal risks that companies need to be aware of and work to actively avoid. Types of risks in contract management include: 

1. Non-compliance with laws and regulations. Failing to comply with industry-specific regulations, local laws, or governmental requirements can have serious consequences. Non-compliance may lead to:

• Sizable fines
• Revocation of licensing/loss of permits
• Criminal charges

2. Breach of contract. Breach of contract is triggered when one party fails to fulfill its obligations as specified in the agreement. Typical contract breaches include: 

• Failure to deliver goods or services
• Non-payment
• Violating specific terms and conditions 

3. Unclear or incomplete terms and conditions. Contracts that contain vague language run the risk of creating confusion and ambiguity. Disagreements can easily arise over the interpretation of contract terms which can spiral into larger disputes or more serious legal battles. 

4. Failure to meet contractual obligations. Either party failing to fulfill its obligations as specified in a legal contract will affect a company’s bottom line. Obligations vary and contractual failures may lead to:

• Delays in project/product delivery
• Non-performance
• Low-quality deliverables 
• Sub-standard services 

Impact of legal risks on organizations

The risks associated with poor contract management can be severe and far-reaching, affecting both the bottom line and the overall well-being of your business. When contracts are not carefully managed, companies may face:

1. Financial losses. Financial losses from poor contract management manifest as penalties, fines, damages, or settlement costs. These expenses can significantly impact a company, potentially reducing profitability, causing cash flow issues, and hindering future growth opportunities.

2. Reputational damage. Legal risks and disputes can damage a company’s reputation and erode trust among stakeholders, partners, and customers. When it comes to business, negative publicity, media coverage, or online reviews can damage a brand image, resulting in a loss of customers, reduced market share, and diminished competitive advantage.

3. Legal disputes and litigation. Contract disagreements can easily escalate into expensive, time-consuming legal battles. Lawsuits, arbitration, or mediation proceedings can drain valuable resources, diverting time, money, and energy from core business activities. These can also disrupt operations, strain employee morale, and negatively impact productivity.

4. Operational disruptions. Legal risks cause significant disruptions to business operations. Whether it’s dealing with regulatory investigations, contractual disputes, or non-compliance issues, organizations may face distractions and increased administrative burdens. Attention and expenses diverted from core activities can impede growth and progress.

The impact of legal risks in poor contract management can be devastating, especially for small and medium-sized enterprises that operate on tight budgets and may not have the means to bounce back.

All of this is entirely avoidable when the right processes are in place to manage contracts and maintain regulatory compliance.

Mitigating risk with proper Contract Management processes

Companies that put the proper contract processes in place can remove much of the risk surrounding agreement structuring. Finding ways to streamline and standardize are integral to lowering the likelihood that essential aspects of a contract may be overlooked. 

Automating security measures

• Adding role-based security to gatekeep who can access contracts. Companies that adopt solutions that allow role-based access can ensure only those with standing read or write documentation or agreement types while denying access to those who shouldn’t be able to view or edit. This prevents proprietary information or sensitive data from falling into the wrong hands.
• Leverage encryption to protect data. If a company is concerned with unauthorized access, it can also add data encryption to protect information end-to-end.

Properly managing contracts over time

• Use of alerts and notifications. Contracts handled manually run the risk of missing renewals, milestones, or dates integral to written agreements. With a trusted contract management process, it’s easy to automate these items so that the correct people get alerts, are assigned tasks, or have calendar reminders so that nothing slips through the cracks. 
• Version control. When multiple parties are redlining the same document, tracking changes is critical to make reviewing and approving changes more manageable. Version control helps all parties avoid missing items, duplicating information, or entering inaccurate information into the copy.

Maintaining compliance across every process

• Templating language. Non-compliance can derail agreements when there is improper language in contracts. Avoiding this is as easy as having a library of templates that contain wording already preapproved by an organization’s legal team. 
• Automation of business processes. When combined with template libraries, contract workflows help ensure no details are missed during negotiation and approvals. These workflows also provide a paper trail for organizations during auditing processes. 
• E-signature approvals. Another way to authenticate contracts and maintain seamless audit trails is to incorporate e-signature technology into your contract management process. E-signatures are tamper-proof, make collecting signatures seamless, and become one single source of truth for all parties.

Modern contract management software combines all these powerful elements under one umbrella to ensure contract creation, maintenance, and renewals are seamless, transparent, and straightforward for all parties. 

Contract Management software: safeguarding your business from legal pitfalls

Contract management software has the potential to be game-changing – especially for teams that handle contracts and compliance manually. Leveraging future-forward technological solutions to contract management benefits businesses as they can streamline their contract processes, mitigate legal risks, and gain a competitive edge.

How is that possible? Through the right balance of automation, transparency, and integrations. Here, for example, are three key features and benefits of contract management software that shield your business from legal pitfalls:

Streamline contract creation and approvals

Businesses no longer need large staff pools to sift through piles of paper contracts or navigate a sea of email attachments. Contract management software provides a centralized contract repository. This central repository allows teams to easily store, organize, and retrieve contracts. With automated workflows and contract drafting, sales teams can save time and ensure accuracy (without each contract needing legal review) by leveraging pre-approved templates and clauses. Having approval workflows and electronic signatures like eSign also streamlines the contract approval process, eliminating bottlenecks and reducing the risk of delays or missed deadlines.

Enhance contract visibility and tracking

With contract management software, companies gain complete control over each contract from creation to expiration. Document version control ensures the right people can always access the latest contract revisions. This helps teams avoid confusion or reliance on outdated terms. Real-time contract tracking and reporting also provide visibility into the status of contracts, key contract milestones, and essential deadlines. Through alerts and notifications, you can stay on top of critical contract events, such as renewal dates or termination clauses, ensuring you never miss an essential obligation.

Ensure compliance with laws and regulations

Think of contract management software as an on-demand legal expert that excels at navigating the complex web of laws and regulations. By integrating legal requirements into contract templates, you can rest assured that your agreements are compliant from the start. Automated compliance checks identify any deviations or non-compliance issues in real time, allowing you to take corrective action promptly. With regulatory reporting capabilities, you can generate comprehensive reports demonstrating adherence to industry standards or governmental regulations. This not only provides peace of mind – it also creates a new level of transparency and reduces legal exposure.

Unlocking efficiency, compliance, and peace of mind with Contract Management solutions

To avoid potential legal woes, consistency is critical, and the best way to standardize contract management (while reducing the introduction of human error), is to automate the process altogether via investment in a digital contract management solution. Automation improves efficiency and accuracy and ensures contracts are completed correctly so that no information is ever missing (which is integral from a compliance perspective). Contract management solutions also help sales teams navigate contracts without having to be legal experts themselves.

Of course, the most compelling case for contract management software adoption is that it significantly reduces the likelihood of contract disputes and litigation. A company will create a solid foundation for smooth and transparent business dealings by centralizing contract processes, streamlining approvals, and maintaining compliance. It saves time in the short term by simplifying contracting processes and removing bottlenecks that can frustrate clients. In the long-term, it avoids future time-consuming and costly legal battles and broken trust between the company and its clients. 

The benefits of contract management software time and cost savings are undeniable. With streamlined contract creation, approvals, and contract renewals, you can accelerate your contract life cycle, allowing you to focus on core business activities. Integration with CPQ (Configure Price Quote), Billing, and Revenue Recognition Software optimizes the renewal process, ensuring revenue recognition compliance, and preventing revenue leakage, boosting overall financial health.

Final thoughts

In today’s legal landscape, safeguarding your business from legal risks should be a top priority. Contract management software emerges as a necessary tool for organizations looking to protect their interests, ensure compliance, foster growth, and align goals. When streamlining contract creation and approvals, enhancing visibility and tracking, and enabling compliance with laws and regulations, contract automation solutions provide a solid shield against legal pitfalls. Contract lifecycle management benefits unlock efficiency, compliance, and security, allowing teams to focus on what they do best – nurturing clients and building toward future growth. Take charge of your contracts and shield your business from unnecessary legal risks with the power of contract management software.

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Contract Management Process

Contract management involves every stage of the contract management lifecycle, which includes:

• Requests: This phase includes information gathering and looking at details that are relevant to a potential agreement
• Authoring: Contract writers draw up the actual agreement in writing, including contract clauses, dates, and any essential information to the contract.
• Negotiation: This happens during the drafting phase and includes discussions over expectations and proposed revisions before the contract is final
• Signature: Each side signs that they agree to the contract.
• Obligations: Both parties recognize and fulfill what they agreed to by fulfilling deadlines and milestones and delivering promised items or services.
• Compliance: This includes oversight and ensuring that standards and guidelines are complied with. In this stage, reminders and late fees are issued. Getting to grips with charging late fees on invoices is important, and requires all parties to be up to speed with the part they need to play to fulfill the terms of the agreement.
• Renewals: The contract is renewed if both parties agree.

This is an overview of the lifecycle of contract management. There are essential details that will improve the contract management process in every phase.

Create a Template

When the parties are still in the research phase, and the discussions before an agreement are taking place, having a template ready to go when the two parties are prepared to sign is of the essence. Not having the right contract at a time when two parties are in an agreeable frame of mind can lead to lost opportunities. Getting access to contract templates is good preparation.

The challenge with creating documents that will be signed in to make them relevant to the situation, the industry, and in legal language that will make the contract enforceable.

Hastily drawn-up contracts involve bottlenecks and delays as the legal department identifies holes and problems. A relevant contract composed of inaccurate standard language saves time and can facilitate an agreement.

If no template suits the current agreement precisely, it is possible to improve the template without interfering with its basic structure or legal status. If revisions and improvements need to be made, check with legal experts that no revisions interfere with the contract’s legal status.

After researching templates, making improvements, and paying particular attention to structure and agreements, the next step is authoring the contract.

Write the Contract

Of course, not every word of a contract is written from scratch. Contracts often include several boilerplate text passages or passages that can be reused from one contract to the next if the stipulations are the same.

As with any template revisions, it is essential to check with legal experts to ensure that none of the boilerplate text is contradictory or involves something other than what both parties intend to agree on. The following are examples of common boilerplate texts in contracts.

Choice of Law involves both parties agreeing that the contract will be enforced according to a specific jurisdiction. This is particularly relevant if the parties are located in different states or countries.

Choice of Forum controls where a suit will be brought if there is a legal dispute between parties. It gives a court “personal jurisdiction” and provides a venue to judge the dispute.

Arbitration involves so many different elements depending on the contract. The boilerplate arbitration text could include a variety of issues such as choice of administrator, number of arbitrators, issues in a potential trial, duration of the trial, and parameters and format of the award.

Severability outlines situations in which the contract may be unenforceable. It may leave parts of the agreement intact or allow the entire contract to be null and void.

Integration states that the contract is in accord with what the parties know at the time of signing the contract and supersedes prior discussions.

Confidentiality is an agreement that the parties are not to disclose specific types of information. The clause can state certain exceptions and outline penalties if such a disclosure is made.

A contract manager is responsible for overseeing compliance with the terms of a contract. It is relevant to consider this during the writing stage because the contract’s clarity and careful consideration of the wording before it is signed can prevent compliance issues later on.

One or more parties may not understand what is required because of certain ambiguities in the contract’s wording or can find loopholes to get around certain previsions. Looking at a contract carefully, consulting with legal experts, and ensuring it is airtight can make compliance easier.

When drawing up a contract, being proactive about compliance includes a system of notifications to ensure the terms are met on time and an official system to track compliance regularly. If both parties agree to an oversight at the beginning, there will be less opportunity to dispute it later.

Contract Repositories are the advanced alternatives to old-fashioned filing cabinets. They make information easier to locate, protect, and organize. Spreadsheets may seem like a reliable way to track contracts, but manual functions’ reliance may create the risk of missing important milestones and deadlines.

Tools provide notifications coordinated with previously agreed-upon dates and make it simple to locate and share information.

Defining and managing metrics is another task of a contract manager. Identifying what metrics are most essential to fulfilling the terms of a contract and keeping track of these numbers is part of ensuring compliance. Cost, timeliness, satisfaction, and safety are priorities for any business, and looking at associated metrics ensures targets will be met.

Audits and examining iterations of the contract ensure that the parties are on the same page.  Keeping tabs on performance data makes troubleshooting easier. The audit sessions are inspired by the goal of continual improvement and helping each party refine what is meant by the agreement’s terms.

Review the Contract

When the contract is drawn up and discussed, it is essential to examine it carefully before obtaining signatures. Look for the following:

• Key Clauses & Terms
• Termination and Renewal
• Clear language
• Dates and deadlines

Ensure that all clauses and terms are clearly defined and appropriately emphasized. Major points should be stated in a way that they are shown to be primary rather than secondary points. The contract should state clearly what conditions are present and the procedures needed for termination and renewal.

Proofread and edit the contract to ensure that the language is clear and free of any ambiguities. The contract should be accessible to all signers. Finally, the names and information should be confirmed as correct, and dates and deadlines clearly stated. Small errors can lead to significant misunderstandings.

Approve the Contract

When the contract has been written, revised, proofread, and when relevant experts have looked it over, approval and signing is the next step. The last steps toward acceptance involve:

• Review by correct people
• Communication and redlining
• Audit trail
• Visibility for stakeholders

This step involves the contract being passed around to different parties. Automating the process saves time and can increase the chances of prompt approval. Unfortunately, many deals pass by because of the inefficient manual passing of documents from one point to another. Therefore, tools that automate the process are recommended.

The contract should be reviewed by legal experts as well as the parties involved. They may discuss specific terms in the contract and may request clarification. A contract manager keeps track of the audit trail and should confirm who requested approval or clarification at which points. Keeping track of this process provides visibility for stakeholders who also have a vested interest in the deal succeeding.

Related article: Why is Contract Management Software Important to Compliance?

Contract Performance

There are several ways to measure performance in connection with contracts. One way is to collect information on what is working and what isn’t using performance indicators:

• Annualized contract value (ACV)
• Terminated contract remaining value (TRV)
• Order Value Variance from Original Contract Value (OVV)
• Compliance

The annualized contract value is a useful indicator for recurring contracts because it measures the value of contracts that are renewed annually. It also measures routine contracts’ revenue compared to new contracts and estimated losses from non-renewed or terminated contracts.

Terminated contract remaining value prevents revenue losses because it calculates unpaid invoices and outstanding fees. This indicator measures performance and compares the value of ongoing contracts with terminated contracts.

Order Value Variance measures performance and points out areas that can be improved, including communication and errors. This indicator provides a rating of under 5% as acceptable and 10% and over revealing a need for improvement.

Subscription Management

Managing subscriptions requires organizational skills that deal with scale while focusing on details and encouraging renewals. The keys to successful subscription management are to:

• Simplify
• Guide
• Control

Simplifying subscriptions standardize packages and payment terms, customizes pricing, personalizes billing, and communicates new services. Guide with a Playbook and a step-by-step approach to the process guided by rules and logic to standardize subscription. Make changes to the Playbook as needed.

Control processes such as offering upsell, discounts, and price reductions on renewals. Put renewal notices on a schedule, forecast revenue accurately, and improve customer engagement with strategies that encourage subscription renewals.

Related article: How to Increase Revenues Through Subscriptions

Contract Renewal

Contract renewal occurs when a contract is about to expire, and the parties decide whether to let the contract expire or renew it for a longer period of time. They may choose to renew the contract on the same terms or may want to renegotiate the terms.

Many contracts are renewed automatically, but depending on the type of contract. This is a convenient way to continue a contract that has provided value. It is more convenient and faster than manual processes. The manual method of renewing contracts does allow time to review the contract, but this could also be possible with automation if there are reminders in place.

Whether contract renewal is manual or automated, it is imperative to send reminders within 30 days of a contract expiring. This will give the parties a chance to review the contract and request information or clarification ahead of the due date.

Successful Contract Management Strategies

Contract management is a complex process that involves many moving parts. The following are essential tips for improving the contract management process:

• Implement KPIs

KPIs or Key Performance Indicators are ways of monitoring how much value each party is providing. Incorporating these metrics into the contract can ensure that performance remains consistent and efficient.

• Develop Relationships

Contracts are not a replacement or an alternative to a business relationship. Ideally, the parties already have a strong working relationship, and a contract is a way of cementing that connection. If the parties are not familiar with each other, a solid contract can build trust and foster a long-term working relationship.

• Stay Proactive

Once the contract is signed, the work isn’t over. Ongoing and thorough management of the contract is the best way to spot potential problems before they happen. Monitoring contract-related activities can pinpoint issues and provide opportunities for improvement.

• Keep in contact with suppliers

Reviewing contracts with suppliers regularly and staying on the same page can prevent interruptions and misunderstandings during times that may be crucial to the business. Create a plan of action with suppliers to improve performance and ensure delivery according to the timeline.

• Have a Game Plan for Expiration and Renewals

When drawing up a contract, pay careful attention to circumstances in which a contract may become no longer enforceable and issues surrounding expiration. Contact parties well in advance of expiry and consider using automation for instant renewal.

Improve Contract Management with DealHub

Contract management is essential to maximizing the revenue impact of your sales pipeline. DealRoom is an advanced technology that empowers leaders to take control of their entire contract lifecycle.

DealRoom brings next-generation sales technology to your organization:

• Simplify contract creation
• Use pre-approved templates to minimize errors
• Standardize approval workflows
• Streamline revisions
• Receive real-time engagement notifications
• Integrate e-Signature

The post How to Improve the Contract Management Process appeared first on DealHub.

One of the primary bottlenecks in the sales process is the creation, flow, and approval of contracts. Roadblocks can be prevented, however, with the right contract management software. Using the right tools, your sales team will work faster and smarter, eliminate mistakes, and accelerate negotiations and approvals. An efficient contract management process plays a key role in reducing the sales cycle.

What’s Packaged into Best-in-Class Contract Management Software?

There are a variety of contract management software solutions on the market, although they are not all created equal. The basic requirements for a good contract management solution, according to G2Crowd include:

•     Categories with a repository of documents
•     Customizable templates
•     Internally and externally collaborate and create, edit, and share documents
•     Meet all business legal requirements and internal business rules
•     Notifications when changes are required
•     Tracking and monitoring every step in the process

Benefits of an Effective Contract Management Solution

Beyond the obvious benefits of keeping contracts organized and the approval process on track, a best-in-class contract management solution offers these advantages:

Simplifies Contract Creation

Automates contract creation according to the Legal department’s requirements. Makes it easier for sales reps to create and send contracts while eliminating costly mistakes.

Standardizes Organizational Collaboration and Approvals

Spend less time getting approvals and follow a structured process every step of the way. Add in the right stakeholders to keep everyone in the loop.

Streamlines the Contract Review and Negotiation Process

Centralize conversations and contract documents in one place without the back and forth of emails.

Creates and store Contracts directly from your CRM

Generate and then safely store agreements directly in your CRM. Signed contracts can be viewed at any time to confirm all the deal terms.

What Does DealHub’s Contract Management Solution Offer?

DealHub Contract Management solution helps you move contracts and negotiations forward. You’ll close deals faster when all contract generation, tracking, approvals, contract redlining, and e-Signatures are managed within one easy-to-use solution.

Key Advantages of DealHub Contract Management Software:

• Easy to use – DealHub streamlines contract creation using Predictive Sales Playbooks, which enable salespeople to effortlessly generate the right agreements that fully adhere to Legal’s guidelines.
• Tracking – Uncovers real-time insights on buyer’s activity to keep contracts moving and track where things stand in the contract negotiation process with your customer.
•  A single engagement interface – DealHub provides a consistent customer experience with all deal interactions in one place.
• e-Signatures – Quickly facilitate obtaining signatures.
• Approval workflows – Oversight and workflows ensure all necessary departments are signing off on contracts before they are sent out.
• All-in-one – Combined Document Generation, CPQ, Contract, and e-Signature all in one solution.
• Seamless CRM integration – Easy implementation and seamless integration with your CRM, including all the relevant fields pulled from the CRM and all the information automatically synced back to the account.
• Contract redlining – Review contracts and manage redlines while providing real-time status and visibility to all. See DealHub Contract Redlining in action – Watch the Webinar! 

Learn more about DealHub’s Contract Management Software.

With DealHub all Teams are Aligned

Simplified Collaboration and Approval Workflow

We’ve taken the complexity and wasted time out of the contract management process. The collaboration and approval workflows in DealHub are streamlined and efficient compared to other solutions. We’ve eliminated the need for email chains and numerous phone calls between the salespeople and the legal team. DealHub gives the right people permission to see sections of a document and make edits, including legal and finance, simplifying the internal contract generation processes.

A Transparent Process

Eliminate delays and create visibility into the sales process. Need to obtain a few signatures on a complex contract? No problem! You will know exactly who has read the document and who still needs to sign.

Generate All Your Legal Documents in One Place

DealHub helps you quickly generate all the documents you need, from NDAs, MSAs, and Agreements, to Quotes.

Re-use Previously Amended Agreements

DealHub’s Contract Generation and Contract Repository enables sales reps to re-use previously amended agreements. Our streamlined and organized approach to contract management increases efficiency and minimizes delays throughout the entire contracting process.

Learn more: What is Contract Management Software?

DealHub is Designed for Business Leaders

Unlike many solutions, DealHub was designed and developed to be configured by business people – not developers. It’s easy to set up and customize – your team can be set up and using DealHub’s contract management software in a week.

Would you like to reduce the time your sales team spends on administrative tasks so they can focus on doing what they do best – selling? DealHub helps reduce the load on your Legal team while facilitating faster sign-off on deals.

Learn why we’re the highest-rated CPQ on G2. Take DealHub’s contract management software for a test drive. Contact us today for a demo to learn how DealHub will help your sales team close deals faster.

Editor’s Note: This article was originally published in October 2018 and has been updated for completeness and accuracy.

The post How the Right Contract Management Software Helps Close Deals Faster appeared first on DealHub.