Is your ad hoc contract process putting your business at risk?
As the builders of a platform that was made for small business contract management, we have heard firsthand some of the horror stories that stem from a lax contract process: An apparel company had a multi-million-dollar deal go to their competition because no one noticed the upcoming renewal date. The CEO of a computer hardware maker had to fly to its parts manufacturer, cap in hand, to grovel for a new contract after a non-legal team member edited a legal clause and put the company at risk of a breach.
Many companies look into how to improve their contract process only after something goes wrong. But here are our tips for how you can get on the front foot to build an efficient, safer process that will save you money.
Contract Process Best Practices
An oft-quoted statistic from technology research group Aberdeen is that 12-15 percent of an organization’s contracts are lost or unaccounted for. These best practices will save you from the pain of tracking down or reproducing missing files.
1. A Contract Repository for All Your Files
Some of the risks of storing contracts in an ad hoc way include:
- You don’t have the ability to search for current or historic contracts.
- There are potential security vulnerabilities because business-critical information is stored in email, shared drives, and transferred insecurely.
- You could miss important milestones like delivery dates and renewal timelines.
- It’s impossible to examine patterns and develop workflows that can improve your contracting process.
The solution is to invest in a tool that includes a contract repository. Platforms like Anapact allow you to tag your contracts to increase findability. Additionally, it helps you identify potential problem patterns and areas your teams can improve.
2. Contract Production is a One-Way, Standardized Process
Small businesses often find trouble because they don’t have a standard process when drawing up and negotiating a contract. In our experience, it’s best to follow a seven-stage contract lifecycle management flow from request through drafting, negotiation, approval, execution, compliance, and renewal. We recommend this flow because it reduces the time spent bouncing forward and back between stages. It is not only expensive but introduces opportunities for mistakes. Contract lifecycle management tools help keep you on track by walking you through this process.
3. Lock Down Important Sections With Role-Based Controls
As a business leader, it’s your job to identify and enforce a system where only the right people can edit sections of your contracts. Your legal team should have the ability to create and edit clauses. But others should be able to drag and drop those clauses into new contracts without the need for more legal checks. This is done with role-based controls. As helpful as he is, Jerome in accounting should not be messing with the clauses in your $2 million procurement contract.
4. Unlock the Power and Savings of Workflow Automation
Once your contracts are in a single place and you’ve established a one-way, standardized process with role-based controls. You can use all that data to elevate your business. Set up team alerts when a delivery or renewal date nears. Examine your entire contract load and figure out where the contract process can be sped up.
Prepare Now, Before Something Goes Wrong
Now that we know contract process best practices, let’s return to the horror stories from earlier.
With contracts in a repository and workflows automated, a contract manager at the apparel company would have received an automated heads up as the renewal approached. They would have had plenty of time to renegotiate a new contract and stopped that business from going to the company’s rival.
The hardware manufacturer’s contract breach could have been prevented with role-based controls that allowed only the legal team to edit clauses. The contract manager could make a note to request a change for the legal team to approve. All within the platform for accountability.
When running your business, you know it’s better to anticipate problems before they become nightmares. And you care about your company’s contracts or you wouldn’t be here. Our experience has taught us that approaching your contract process with best practices in mind is the best way to become more efficient and prevent breaches. Anapact is a safe, reliable, and affordable contract lifecycle management platform for small businesses. Get a demo today.