Maximizing Efficiency: A Guide to 10 Crucial Contract Management Best Practices
In the fast-paced world of business operations, contract lifecycle management (CLM) plays a pivotal role in preventing unnecessary financial losses and boosting operational efficiency. To navigate this complex landscape, Sales, Procurement, Legal, and Finance teams must adhere to a set of best practices that are integral to efficient contract management.
Here, we delve deeper into these ten key standards for optimizing your CLM process:
1. Standardized and Streamlined Contract Drafting:
Standardization is the foundation of a streamlined contract drafting process. By developing a standardized contract development process, you can ensure that each contract follows a consistent format and includes pre-approved contractual language. This approach not only reduces the time it takes to review contracts but also allows teams to focus on the unique aspects of a contract, whether with a vendor or a counterparty.
2. Contract Search:
A robust CLM solution should incorporate an effective contract search feature. This all parties involved to quickly search for specific terms or keywords within the document. Such a feature can save valuable time when updating contracts, confirming clauses, or checking contract specifications. The ease of use of this search function is a valuable time-saver that both your team and users will appreciate.
3. Document Storage and Security:
An efficient contract management process encompasses secure storage of sensitive documents while ensuring accessibility. A centralized document storage system with varying access levels ensures that the right people can access the right information, safeguarding the integrity and confidentiality of your documents.
4. Track and Streamline Contract Approval Time:
The contract approval process is often perceived as a lengthy and cumbersome stage in contract management. With multiple revisions and reviews for each contract, precious time can be lost when seeking approval from various individuals or parties. Relying on email or other less efficient communication channels can also lead to contracts slipping through the cracks. To combat these bottlenecks, a contract management system plays a crucial role in streamlining and tracking contract approval. It automates the process, sending notifications of key deliverables and upcoming dates to the relevant contract parties. This ensures that deadlines are not missed, and unexpected delays are avoided.
5. Scale Contract Analysis with AI:
Infuse your contract management with the power of artificial intelligence (AI). AI can assist in contract and clause classification and identify similar contracts and clauses for ease of reusing pre-approved language in new contracts. AI-driven contract management eliminates errors, speeds up the processing of third-party contracts, ensures consistency in negotiations, simplifies contract compliance, and ultimately enables quicker, better-informed decisions. Bek, the Legal Copilot brings a powerful and ergonomic experience to enterprise contract lifecycle management.
6. Automate Contract Communications:
The traditional back-and-forth of email communications for contract review and approval is not only time-consuming but also resource-draining. With a cloud-based system and centralized document storage, multiple individuals can access documents in real-time, facilitating collaboration on inclusions or omissions. Automated reminders help parties stay on schedule, reducing the risk of bypassing important approvers and contributing to a more efficient and organized contract management process.
7. Set Contract Management KPIs:
An effective CLM solution provides the means to measure key performance indicators (KPIs) transparently, offering department heads clear expectations to work toward when developing their contract processes. KPIs serve as performance benchmarks and enable teams to identify instances where goals or expectations are not being met. Additionally, tracking the pricing of popular documents and staying informed about changes in production or sourcing empowers organizations to negotiate more competitive contracts, backed by data-driven insights.
8. Execute Regular Compliance Reviews:
Contract compliance is a crucial practice that ensures all signing parties follow through with their legal obligations. each contract’s terms, and conditions must be reviewed to ensure compliance. It’s equally important to verify that both parties adhere to any federal, state, industry, or other external regulations on a contract-by-contract basis. Failing to comply can result in substantial penalties and steep fines. A proactive approach to contract compliance can lead to significant cost savings and safeguard an organization’s reputation.
9. Legal Protection:
Contracts are legal documents that serve as a safeguard to ensure both parties fulfill their obligations. In situations where one party fails to meet their contractual obligations, legal recourse provides a means to ensure compliance. Contacting the contract manager of the non-compliant party is an initial step in addressing issues and potentially avoiding litigation. However, consulting an attorney may be necessary to explore legal avenues for contract enforcement and seek compensation for any losses caused by the non-compliant party.
10. Resolve Disputes Promptly:
Timely dispute resolution prevents problems from escalating and becoming more challenging and costly to address. Addressing issues when they are first noticed ensures smoother contract management and minimizes disruptions.
As you navigate the intricacies of contract management, consider a comprehensive CLM solution like Malbek. Our solution not only aligns with best practices and standards but also propels your organization toward heightened success.