Ineffective contract management costs businesses around 9% of annual revenue. Find out how to improve the process with IT solutions in this article.
Working with contracts is a regular activity for businesses and legal departments. Yet few companies can set up an efficient process and get the most out of their deals. Research shows annual revenue loss is around 9% and 5 to 40% on individual agreements.
The reason is the 'manual' approach to contract management. When there are many parties involved in the process, there are inconsistencies, extra negotiation rounds and lengthy message threads. And if the system is scattered across different spreadsheets, emails and repositories, it seems uncontrollable.
CLM (Contract Lifecycle Management) systems solve the issue. This is software that simplifies every stage of working on contracts - from the formation of requirements by internal customers to meeting terms and conditions. UK companies can try the multifunctional LIGA UNITED solution, which includes CLM tools.
Let's discuss below which stages of the contract lifecycle can be managed automatically with LIGA UNITED to save time and money for the business.
Communication and Cooperation in the Team
Problem: Uncoordinated actions between teams, lengthy contract preparation
Anyone who has ever dealt with contracts knows how many stages it takes from drafting to signing. And they also know that the process extends far beyond the legal department.
The business customer requests the legal department, a draft is prepared and the redlining process begins. The legal team receives comments from several departments and the other party via e-mail, they need to combine all the comments into a single file and communicate the changes.
As a result, employees lose time generating an up-to-date document and reviewing edits. They have no way to track changes or look back to previous versions of the text. Profitable deals are delayed, while the company could have made money on them much sooner. Thus, improving contracting should start with communication.
Solution: Store and create documents in a cloud storage
Cloud repositories allow you to work with your documents in sync. They allow the team to view a single version of the text, with the latest edits and comments. Employees can access files outside the office and from multiple devices. And at a negotiation stage, it's easy to check when and what edits have been made.
When choosing a cloud solution for contracting tasks, you need to pay attention to data protection, as contracts involve personal and confidential information.
LIGA UNITED benefits for teams:
- Creating a single database of contract templates - the system allows you to create custom templates that you are most likely to encounter in your work;
- Project timeline to keep track of all stages. The system will automatically suggest dates for monitoring, and you can also add your events;
- Convenient contract systematisation and search filters;
- Secure cloud for out-of-office work;
- Contract passport for a quick review of the document's content.
Risk Check or Quick Approval?
Problem: Rushing into concluding contracts at the expense of checking risks
The main point of contention in the contract lifecycle is the balance between speed and control. Since contracts involve significant financial and legal risks, lawyers prefer to check every clause 'under the microscope'. The sales department asks to speed things up so the deal closes faster. The departments compromise, and risk checks are done in the least amount of time.
As a result, the already signed contract reveals hidden penalties, unfavourable terms, or conditions that cannot be met due to unreliable contractors.
To avoid losing money, businesses have to be quick to sign contracts, but they also have to control risks. Fortunately, both tasks can be automated.
Solution: Automate contract checks and risk analysis
A major advantage of CLM systems is the minimisation of the 'human factor' in contractual work, which makes it possible to identify errors at the early stages of document preparation.
But contract risk management touches on a broader pool of tasks than just checking texts. When the legal department starts working on a contract, it analyses and compares vast amounts of information. This includes the assessment of terms and conditions and the reliability of the parties. Only by seeing the complete picture is it possible to assess future risks.
LIGA UNITED covers all these needs with no extra legal tech/risk management software required.
Which analytical tasks can LIGA UNITED help you with?
- Define the structure and sections according to contract type (the system recognises more than 70 types of contracts);
- Check party risk factors (sanctions, court decisions, ultimate beneficiaries owners, business links, trade activity);
- Verify the sums, payments and penalties;
- Review party details and dates and check common errors in the text.
Working with text in LIGA UNITED is designed to be intuitive for the user, as the text editor is based on the familiar MS Word interface.
Contract Audit and Monitoring
Problem: Missing deadlines and contract renewal dates
Working on contracts does not stop once the documents are signed. Finance departments make payments, lawyers check for regulatory changes, and other employees check for changes in counterparties that could affect terms and conditions delivery. On top of this, when an agreement is about to expire, businesses need to prepare for the next round of negotiations.
Manual contract monitoring requires a lot of human resources. Employees could instead use their time more efficiently by searching for new partners and communicating with customers.
Solution: Set up automatic monitoring for deadlines and other parameters that affect contract performance
LIGA UNITED offers the following types of monitoring:
- Key contract dates. The system will notify you when documents come into effect and expire, the due date for payment or services to be delivered.
- Changes in the parties' activity. You will be notified of changes in company details, ownership, or if the business has suspended its activities.
Problem: Absence of auditing and performance review for agreements
Large companies handle up to 350 contracts per week. At this pace, even with a large legal department, it's difficult to assess the effectiveness of agreements or to gather information for analysing and evaluating the process.
Thus CLM systems, with easy storage and retrieval of information on company contracts, come in handy when auditing contracts.
Solution: Store contracts in a unified repository for easy information access
When documents are gathered on a single platform, organised into folders, it is easier to identify errors in the process. This way, responsible staff members spend less time collecting information and more time analysing and evaluating contract performance.
With LIGA UNITED functionality, you can build a complete database for your company's contracts, and search for documents by folder or keywords.
Contract management is just one aspect of business automation. Companies are evolving to be more efficient and responsive to change. And the trend for legal software intensifies every year.
LIGA UNITED has thus been designed as a multi-functional system that connects several information streams at once. It is a one-stop solution for managing a business, with tools for different roles in the team.
Companies use LIGA UNITED for legislation and media monitoring, KYC/AML audits, legal research and risk analysis. Order a demo access to learn more about the system's capabilities.