How to integrate the contract management process

In the dynamic world of modern business, managing contracts efficiently is crucial for ensuring smooth operations and maintaining strong relationships with partners, suppliers, and customers. Yet lack of efficiency in contract management continues to cost companies 9% of their bottom line, according to World Commerce and Contracting (WCC).  

Contract management involves overseeing the creation, execution, and analysis of contracts to maximize operational and financial performance while minimizing risk. Integrating the contract management process into your business operations can streamline workflows, reduce costs, and enhance compliance. To be clear, we’re not talking about integrating CLM technology, which you can learn all about here. We’re talking about integrating an efficient process into your business.

Here’s how you can do it: 

1. Understand your current process

The first step in integrating the contract management process is to thoroughly understand your current practices. Identify who is involved at each stage, what tools are being used, and where bottlenecks or inefficiencies exist. This understanding will provide a solid foundation for improvement and integration. 

Usually, contracts follow the format of the main five stages (with some variation across industries and purpose): 

Inception

The identification of contracts and relevant documents that underpin the purpose of the contract kicks off the whole process, followed by creating the contract in and of itself — a task made easier with CLM software. 

Collaboration

Following the drafting of the contract, it is important for employees to have the ability to review different versions of the contract and identify any inconsistencies, which can help in minimizing the time spent on negotiations. 

Signing

Getting approval from all stakeholders and relevant parties naturally comes next, with the inclusion of certifications if needed. While the signing stage may move throughout the process according to the needs of the contract, ultimately, it is the official start of the execution phase. 

Tracking and amendment

Significant project management efforts take place to guarantee that key stakeholders are meeting deliverables and that the contract’s value is maintained during its initial growth phases. Overlooked items or new concerns are bound to appear as execution progresses, meaning that amendments must be made in the contract to address such changes.  

Additionally, contract audits play a crucial role in assessing the compliance of both organizations with the agreement’s terms and identifying any potential issues that may emerge. 

Renewal

As contracts of various types progress through their respective stages, it’s essential for contract managers to monitor any modifications or violations — making contract lifecycle management vital. Managing contracts manually can often lead to overlooked opportunities for renewal and a decrease in business income.  

Managing the performance and risk associated with vendors is a key aspect of contract management; by automating the process, organizations can pinpoint opportunities for renewal and generate new contracts. For instance, should a vendor not fulfill its contractual duties, revising the contract or implementing disciplinary actions may become necessary. If a contract reaches its end, renewing with trusted vendors would require renegotiation and updates. 

2. Define clear objectives

Before making any changes, it’s important to define what you aim to achieve with an integrated contract management process. Whether it’s reducing cycle times, improving contract visibility, or enhancing compliance, having clear objectives will guide your integration efforts and help measure success. 

3. Choose the right technology

Technology plays a pivotal role in integrating the contract management process. A robust Contract Management System (CMS) can automate many aspects of contract management, from template creation and document storage to workflow automation and reminders for key milestones. When selecting a CMS solution, consider factors such as: 

Ease of use

Does it fulfill your needs in the most straightforward way? Your users will thank you for this consideration during the change period. 

Scalability

What will your system look like in ten years and will the solution work for you during future growth?  

Security features

What are the security walls and precautions your contract management system needs?

Integration capabilities

Does the solution work and connect easily with other systems your business uses?

4. Standardize contract processes

Standardizing your contract processes is essential for efficient contract management. Develop standardized templates for common contract types and establish clear guidelines for contract creation, review, approval, and renewal. This standardization not only speeds up the contract lifecycle but also ensures consistency and reduces errors. 

Weshare reports indicate that automating contract management processes can cut the time needed for negotiation cycles by up to 50%. Moreover, it significantly lowers the occurrence of inaccurate payments by 75% to 90%, thereby greatly minimizing financial risks. 

5. Train your team

For an integrated contract management process to be successful, everyone involved in contract-related activities needs to understand their roles and how to use the chosen technology effectively. Invest in training for your team to ensure they are comfortable with the new processes and tools. This will help maximize adoption and minimize resistance to change. 

6. Implement a centralized contract repository

A centralized contract repository where all contracts are stored and easily accessible is crucial for effective contract management. This repository should allow for easy searching, tracking of key dates (such as expiration and renewal dates), and monitoring of contract performance. 

An astounding 71% of companies cannot find 10% or more of their contracts, according to The Journal of Contract Management. Ensuring that contracts are organized and accessible can significantly improve efficiency and reduce the risk of missed opportunities or compliance issues.  

7. Monitor and analyze contract performance

With an integrated contract management process in place, continuously monitor and analyze contract performance against your defined objectives. Use the insights gained to identify areas for improvement, adjust processes as needed, and inform future contract negotiations and renewals. 

Contract management is an ongoing process, and there will always be opportunities for improvement. Regularly review your contract management processes and technology to ensure they continue to meet your business needs and adapt to changing circumstances. 

Overall…

Integrating the contract management process into your business operations can seem daunting, but by following these steps and leveraging the right technology, you can create a streamlined, efficient system that delivers significant benefits.

Improved contract visibility, reduced risks, and enhanced operational efficiency are just a few of the advantages of an integrated contract management process — talk to us about how you can achieve these benefits.