For businesses, contracts support much of what they do. Contract lifecycle management (CLM) plays a pivotal role in supporting the contracting function by ensuring that contracts are properly created, managed, and negotiated. In negotiating agreements, a critical step is for each side to propose changes to the proposed contract. Redlining is the process of proposing, tracking, and responding to changes made to the contract as it is being negotiated by both parties.
While of course, you’d love for the other party to simply accept your proposed agreement as is, that usually not the case. The reality is that redlining occurs and sometimes it can be extensive. Relying on manual methods to manage the redlining process causes delays and opens the door for errors such as incorrect versioning, overwriting previous changes, and failing to track accepted changes and issues that are still being negotiated. This can extend the negotiating process and slow down your sales cycle. Consider how often have you searched through your emails wondering which is the latest version of the contract being reviewed, for example…
Redlining and negotiating with another party can be a long and painful process full of tedious back and forth. It’s way too easy to lose sight of where a contract is and who has touched it last. Contracts can go dark, be lost entirely, or have multiple parallel versions floating around, making it almost impossible to know which one is the latest and most accurate. Not to mention, often the metadata within the contract becomes out of sync with the contract terms, which can result in significant risk exposure.
But it doesn’t have to be this way.
In this post, let’s explore the three best redlining practices that can lead to smarter and more successful negotiations in the world of CLM. It can also help to create and nurture relationships with clients, vendors, and other internal departments by keeping everything running smoothly and ensuring that everything is agreeable between parties.
- Clear and collaborative communication
We all know the importance of communication when it comes to any interpersonal relationship. Experience also shows us that the strongest relationships are those when communication is constant, clear, and effective. This lesson holds true when it comes to redlining. Here are some considerations to keep in mind for keeping communications clear and collaborative when redlining:
- Real-time collaboration: Avoid waiting to communicate to comment on an issue or to ask a question or to propose a change to a clause. With Malbek’s CLM, all parties can access and edit the contract simultaneously, reducing delays and making sure there is one single source of truth everyone is working on.
- Tracking Transparently- CLM solutions allow for all edits to be tracked, saved, and shown so you can easily see who last made an edit to an agreement and when. Malbek’s solution goes a step further and maintains an audit trail allowing all parties to see the evolution of changes made and by whom.
- Email thread avoidance: Rather than engage in time-consuming digging through email threads to see who last commented on a document and who has the latest version, using Malbek’s solution allows stakeholders to comment and engage in conversations within the platform, allowing everyone to explain their changes and facilitating smoother and quicker decision-making.
- Standardizing Redlining Procedures
By using standardized redlining procedures within your organization, you can streamline negotiations and minimize risk and the time spent. Here are some ways how:
- Establish guidelines- By creating clear, systematic, and consistent redlining guidelines on how changes should made, on how various symbols are used, and how notations should be marked will avoid misinterpretation and keep things consistent for all involved parties.
- Training and Onboarding- Training and education is essential. Training all stakeholders and involved individuals will allow for more consistent and reliable contracting negotiations with clear responsibilities and tasks. In addition, this can make a key difference in ensuring your CLM solution is used by those who should use it and in the ways to best benefit from having it in place.
- Create templates- Don’t reinvent the wheel when it comes to creating contracts. Instead, create and store go-to templates for common contract types that contain standard clauses and terms. By using templates as a starting place, negotiations can be completed quicker and focus on the key issues rather than a battle of the forms.
3. Data-Driven Insights
The lifeblood of a business is data. Data and analytics allow businesses to make more informed decisions. By incorporating data and analytics into your contracting function, you can gain valuable insights for smarter negotiations. For example:
- Performance Analytics- Using historical negotiation data, your contracting team can easily identify problematic language, turn to reliable compromise language, and improve upon past redlining and negotiation strategies.
- AI-Powered Suggestions- Malbek’s CLM offers AI-driven analytics suggestions during the redlining process. These suggestions can help you determine the best changes to propose and potential language to avoid thereby saving time and minimizing risk.
- Risk Assessment- A valuable CLM platform will also provide functionality to evaluate the relative risk level of different changes. Such data can help you and your team evaluate in real-time where there may be certain risks you will want to avoid. This is another way for your team to make more informed redlining decisions in less time.
Automated workflow and controlled external party redline review can help your business achieve success. Malbek Contrax™ provides role-based hierarchies and permission levels combined with intelligent routing workflows for approvals to ensure that the right people are included in the contract review process at each level of change. In addition, audit trail and version control make it easy to clearly identify contract modifications, preventing edits from going unnoticed and safeguarding the integrity of each version in the approval process. The ability to exchange emails with external parties directly from Malbek with our tight MS Word and email integration facilitates the redline and negotiation process.
Using automated workflow for internal approvals and external party negotiation helps to streamline the contract lifecycle, eliminating redundancy and wasted time. Full transparency is maintained for ease of reporting during audit inquiries.
Efficient contract negotiations are essential for the success of a partnership. By embracing these redlining best practices, clear and collaborative communication, standardized procedures, and data-driven insights, your organization can optimize its negotiation capabilities and achieve smarter, more advantageous agreements. Smart redlining not only quickens the process, but it also ensures that contracts are compliant, minimizes risk, and helps foster long-term relationships with partners and customers.
If you find that your contracts are suffering during the redlining, negotiation, and review process due to manual effort, it may be time to look at Malbek’s solution that can make your contracting function an efficient and data-driven one. Reach out to us and request a demo.