Most small businesses manage their contracts in the same way - a combination of hard copies and digital files, spread out all over the place, none of which are easily accessible. It’s significantly more time consuming and error-prone than having a contract management system that allows you to be more efficient. An inefficient process can lead to incomplete contracts, missed deadlines, missed sales opportunities and, depending on your industry, compliance issues that may cost your business considerable time and money.
What’s A Contract Management System?
A contract management system is a way to manage your businesses contracts, whether they be from vendors, clients, customers, employees, contractors, partners, etc.; in its simplest form, it’s at least a digital file cabinet so you can easily access all of your agreements. But, it should be much more than that. Smart businesses will use a contract management system to help them run more efficiently and improve business operations. You can use a contract management system to set up legal approved templates and playbooks that will help facilitate the contract process and manage electronic signatures.
Why Does Your Small Business Need a Contract Management System?
- You can make more money. IACCM research suggests that organizations lose 9.2% of revenue every year due to poor contract management and oversight. That’s right, your business could increase its revenue just by being better at managing contracts - seems like a pretty simple solution to make more money. Companies are making payments they shouldn’t, missing out on rebates or discounts or letting expiration dates pass without action. The bottom line is that businesses who are using some form of contract management system are making more money; and this isn’t only a money issue, it goes to a business’s risk management.
- It will improve compliance with contracts and your business will run smoother. Most companies file contracts away after they are signed and never look at them again, unless a major issues comes up then everyone tries to determine who is at fault. Then there is a bunch of back and forth about who had what responsibilities, who did or didn’t do what and threats of lawsuits. Properly managing a contract lets you know when a party is out of compliance with a contract, the issue can then be addressed and often cleared up quickly and amicably without a bunch of back and forth and arguing over issues that have been compiling over month. Using a contract management system, you can automatically find information about price, deadlines or other details and add necessary information to your calendar in order to reduce risk and streamline efficiency and be more productive.
- It centralizes all of your contracts in one place. No more searching through file cabinets, your email or other digital files hoping to find the agreement. That’s a huge time waste. Putting all your contracts and the important information about them in one, easy-to-access, digital platform will save time and is more efficient.
What Your Contract Management System Should Do
There are probably more companies online selling contract management software than you can count, and I’m sure most of them are very good, but you don’t need to pay for a formal service in order to take advantage of setting up a contract management system for your company. You can probably use some tools you already have like excel, or google sheets, or your have your lawyer manage the process for you. I’m not saying that using contract management software isn't beneficial or in your best interest, but if you’re a small or medium sized business paying for a service, that might take a lot of time to get up and running and probably won’t be fully adopted by your team. Think about what your options are and what will work best for you. With that in mind, here are a few things a contract management system should do for your business:
- Put everything in one place. You need a central depository that houses all of your contracts, both internal and external, that way you always know where to find them and they are easy to access.
- Keep templates for contracts that you use regularly. Most of the time you need a custom contract for each individual client or customer to address their specific needs, but you shouldn’t be reinventing the wheel or starting from scratch every time. Your contracts will probably have repetitive language used in every one, especially in terms of legal notices and clauses that are there to protect you. You can create templates for all of these contracts and use them as a starting point; it will be much faster, more efficient and less likely to lead to errors or omissions. Then just make sure to manage the templates so they are updated with to reflect any changes in the law or best practices.
- Calendar notices of important dates (such as when the contract terminates or is automatically renewed): a brief summary of the important terms, information readily available about pricing or payment and details on the obligations of each party involved. This is risk management, it makes sure the parties are living up to their end of the bargain.
- Be accessible to the necessary parties or departments. There are countless tools that can be used to do this, but make sure that all the necessary people can access the contracts they need; both templates and signed agreements. For example, if you’ve got a salesperson selling widgets, and then a warehouse worker fulfilling orders, you’re going to want both of them to be able to access customer contracts so they can easily see the details and possibly get answers to questions they may have.
Contract management can be tricky and time consuming, and you’ve got a business to run. If you need help or want a free consultation, contact us to see how we can be of assistance.