Do you still believe that contracts are the exclusive domain of the legal department? Do you still think of contracts as PDF files that are difficult to read and edit? Do you sign agreements and then leave them lying around collecting dust? Then it's time to reconsider your approach because top-tier businesses have a very different idea of what is contract management.
Powered by big data, companies today see contracting as a growth opportunity, a way to maximise profits and achieve business goals. Keep reading to learn best practices to streamline your workflow.
It’s a LegalTech Revolution
Legal technology has fundamentally altered contract management. Interest in automation began to grow in the early 2000s. As the document load on legal departments increased, it became difficult to keep track of a long chain of letters and spreadsheets.
CLM (Contract Lifecycle Management) software came into play at this point. These tools have not only assisted in dealing with the increasing volume of tasks but also fuelled a new vision of contracting - and what it can truly be.
So what has changed?
- A legal department's interest in contracts is no longer exclusive. Companies recognise that every division faces contracts daily. HR managers hire new employees, procurement looks for suppliers and buys goods, and the sales department negotiates with customers. None of the tasks listed above can be completed without documentation, i.e. a signed agreement.
- Contracts are viewed as a dynamic process that must be monitored and updated regularly, rather than just as static files. The parties' circumstances can always change, a legislative update may appear, or force majeure circumstances may occur. When these situations arise, businesses must be prepared and respond as quickly as possible.
- Today, companies understand that although agreements carry many threats, they also open up many opportunities. The use of digital contracting ensures the appropriate use of human resources, simplifies document preparation, reduces errors, and reduces extra costs. This increases profits, especially for large enterprises.
- Automation has changed the role of lawyers in business. By having access to information and eliminating "blind spots" in documentation, lawyers become reliable partners and advisors to company management rather than wasting time on mundane paperwork.
- Contract workflow must always be analysed, evaluated, and improved in a dynamic and competitive corporate environment. It is impossible to stay afloat if internal company processes lose efficiency and become obsolete.
- Software is already changing the business world, and its role will only increase. That is why, if you are still doing things the old-fashioned way, now is the time to change your approach to remain a market-relevant specialist or team.
Why Is Contract Management Important?
The answer is straightforward: business success and viability. Poor contract management can cost your company up to 9% of its revenue, so CLM is more than just a trendy tool or a handy life hack.
A smooth contracting process solves many business priorities:
- Protection against risks and "pitfalls" in agreements.
- Getting the most value out of every deal.
- Compliance with legal and regulatory requirements.
- Faster turnaround and signing of profitable agreements, as well as rejection of unprofitable ones.
- Checking the reliability of the parties.
- Monitoring factors affecting the fulfilment of terms (changes in parties, legislation, etc.).
- Adequate use of the company's human and financial resources.
What Is the Contract Lifecycle Management (CLM) Process?
The CLM process entails controlling and simplifying each stage of contracting.
The prefix "lifecycle" in its name is not by chance. It emphasises the importance of dealing with the contract workflow as a whole, from start to finish. In this chain, there is no room for weak links.
Now let’s look at how to manage contracts and what tasks are performed at different stages.
The signing of the agreement is preceded by a very active period when it is crucial to make sure that the contract is error-free and safe to sign. This is especially true for typos in the text caused by the human factor, adherence to legal regulations, the absence of hidden terms, or disadvantageous obligations.
1. Contract creation
The agreement's outcome is established from the first minutes of work. At this stage, business customers contact the legal team with a request, the needs and goals are clarified, and the persons involved in the process are established. Around this time, preliminary verification of the parties is also performed.
All things considered, the first draft is formed and sent for approval.
2. Redlining & negotiation
This is one of the most difficult and time-consuming stages. It entails active communication between the agreement's parties as well as within internal teams. Companies thoroughly review each clause and negotiate terms. After all the edits have been completed, the parties can reach an agreement on the document.
3. Signing the contract
There are several options for signing contracts. Nowadays, many companies prefer e-signature over wet signatures.
What pre-signing tasks can LIGA UNITED help with?
- Counterparty verification.
- Providing templates and automatic structure to your draft.
- Checking for errors (such as signers' names, dates, and ambiguous terms).
- Working with the team on a single version of the text.
Legal professionals understand that contract management does not end with signing. Financial departments make payments, lawyers monitor if regulations have changed, and employees check if there have been changes in counterparties that may affect the performance of obligations. In addition, if the agreement is concluded temporarily, the company must plan for its renewal.
1. Fulfilment of the terms
Businesses must control the dates of contractual obligations and their content. Otherwise, they risk fines and penalties.
Every day, the corporate environment changes, so your company must understand whether the circumstances of your partners, regulations and the country's or market's situation have changed. Monitoring also helps to assess whether the contract should be extended.
To protect the company, it is critical to ensure that contracts are stored in a secure and reliable repository.
4. Audit & reporting
At this point, you should assess whether your company effectively manages contacts. This applies to both individual agreements and overall processes.
It is necessary to plan ahead of time for contract renewal. To decide whether to extend the agreement, your organisation may need to perform a thorough analysis. In other cases, you can update contracts automatically, reducing the team's routine workload.
What post-signing tasks can LIGA UNITED help with?
- Monitoring company changes.
- Secure document storage.
- Document search and analysis.
- Contract timeline tracking.
Best Contract Management Practices
Managing contracts is an essential part of running a business. Here are ten best practices that will help your legal team.
1. Determine your weaknesses
Do you want to reduce the time it takes to complete a contract? Start by assessing your company's workflow. In some cases, your team might spend a lot of time on drafts. In other cases, it might be necessary to shorten the time required for approval and signing. Or perhaps you should focus more on control and monitoring to avoid making mistakes when extending deals. By analysing the process, you can identify weak points where approaches should be changed.
2. Create a template database for your team
By keeping standard templates on hand, you can automate document preparation. Start with the most common types of agreements at work, such as employment contracts, supply contracts, or Non-Disclosure Agreements (NDAs).
If your colleagues in other divisions have ready-made templates at their disposal, they can form a draft without the involvement of lawyers. Every day, HR managers deal with employment contracts, marketers sign agreements for advertising on third-party platforms, and procurement departments close deals with suppliers. Your team can ensure that no tasks are slowed down by inefficient document flow by using templates.
3. Control the approval time
Delays in the approval process are not uncommon. The parties propose corrections not only among themselves but also within teams. When text comments are scattered across multiple files and long chains of letters, redlining becomes time-consuming. Furthermore, you are at risk of signing text that contains errors caused by manual redlining. Automation allows you to cut turnaround time from weeks to just a few days.
4. Form a standardised contract repository
Effective contract management is not possible if you do not see the entire volume of your company's documents. This has several practical applications. For starters, you can quickly locate the document you need. Second, you can make changes to several agreements at the same time. This is the case if your legal department has proposed better wording for a common clause, legislative changes have occurred, and so on. A centralised repository allows for more analysis. When you convert your contracts into data, you can easily extract the required sections, file information, and evaluate them using various metrics.
5. Define KPIs
Contracting is a key business process, so it is critical to define and monitor KPIs that correspond to your company's goals.
6. Conduct regular audits and keep an eye out for changes
Effective management entails knowing how much money is spent on contracting, how much revenue is generated, and how long it takes to sign the agreement. It is crucial to remember that the business world never stands still and that circumstances are constantly changing. As a result, you should monitor information that affects contract performance, such as changes in your partners' activities, in the media, and the legal field.
7. Remember due diligence at every stage
At any stage of the contract lifecycle, due diligence procedures are inextricably linked. Before signing, you should thoroughly review the contract's parties and terms, and after signing, you should ensure that your counterparties and clients remain trustworthy.
Because contracting involves many risks, compliance and due diligence must be considered throughout the entire process. You should consider the security of your company's contracts even before your lawyers start writing them.
8. Make use of technology
With the help of software, you can take contract management to the next level. You can free up your team's time to find effective solutions, close profitable deals, and collaborate with customers and partners by automating routine tasks.
9. Encourage transparency and responsibility in the team
The more team members there are in the process, the more difficult it is to navigate. The software allows for greater process control and transparency. Everyone is aware of who is working on the document, who is making changes, and the current state of preparation.
10. Set yourself up for long-term and systematic work and don’t be afraid of change
Contract automation is not a one-time task. The market is constantly evolving, and new approaches and tools emerge. To stay afloat, your team must constantly evaluate performance and be willing to introduce changes.
The Bottom Line
In today's business environment, where competition and work pace are constantly increasing, it is impossible to meet needs using traditional methods. Businesses use software to automate work processes.
LIGA360 takes contracting to the next level. This solution, besides automating mundane tasks, monitors key information flows such as company files, media fields, legislation, and court practice.
You will find yourself in a position of complete contract control, where you can see every partner, every document, and every risk from a 360° angle. With big data insights, you can be confident in every decision you make.
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Contract management has an impact on all key business metrics. Contracts are directly related to the work of procurement departments, HR departments, and PR staff. It is critical to ensure that the agreements add the most value to your company.
This is how contracts are managed at each stage. Control is typically provided by specialised software.
A contract management system or software is designed to make business operations easier. The functionality includes contract storage in a single, secure location, risk verification, and performance analysis.