The average company has 20,000-40,000 contracts. How do you make sure these contracts, one of a company’s most lucrative sources of revenue, are properly protected?
Modern companies have thousands of contracts. From vendor relationships to sales agreements, there is no shortage of variety, types, and lengths of contracts for enterprise businesses. With the number of contracts only getting larger, there are many unpredictabilities associated with contract creation and management. Here are the top five risks surrounding contracts and how to mitigate them.
It isn’t uncommon for it to take weeks or even months to create a contract. Not to mention the time the legal team spends honing in on proper language or creating templates. All of these inefficiencies lead to a process that should take a fraction of the time it actually does. Slow operations shouldn’t be the thing that stalls contract creation, negotiation, and approvals. Time-to-signature is an important number, especially for sales teams. Goals shouldn’t be missed simply because the contract process isn’t fast enough.
One of the easiest ways to reduce the time spent in contract creation is by moving contracts to the Cloud via a contract lifecycle management platform. Having contracts stored in one easily-searchable location eliminates the need to dig through old emails—or worse—file cabinets and folders. Maintaining a template library that all users can pull from eliminates the need to create a new document from scratch for similar use cases. Finally, making sure that everyone who needs to view the contract can do so easily makes it so employees are no longer tediously emailing back and forth (more on that below).
Visibility and Access Rights.
As mentioned before, visibility can be a major blockade in contract creation. Yet this goes beyond just creation—having the right visibility into a contract helps the entire lifecycle.
Companies that don’t have the proper access for the people who need it have a more difficult time managing their contracts as a whole, no matter what stage they’re at. When it’s time for renewals, it’s easier for the legal team to quickly find, review, and approve a contract instead of a tedious process of back and forth, or even worse, cutting the legal team out entirely (or waiting until the last minute to ask for approval). Visibility is vital for companies in every part of the life cycle, especially in high-growth business phases.
Companies have the challenge of navigating regulations, requirements, and rules, along with industry expectations and business process changes. For any enterprise business, but especially a global company, internal and supplier risks need to be evaluated, analyzed, and eliminated. Noncompliance can lead to costly fines or breaches of contract that can break trust and damage relationships. Compliance is more than just legal rules to adhere to—it’s a core function of maintaining or increasing savings, a way to establish a good reputation, and ensure a well-respected brand.
An easy way to do this is through the visibility factors mentioned above. Contracts need to be viewed and approved by the necessary parties to maintain compliance. It’s also important to develop a strategy around being aware of changing regulations and how to comply going forward with these new rules. Analytics and technology should be used to assess and mitigate risk.
Even with completely automated systems, teams that work efficiently and effectively, and straightforward processes, laws and rules still change. It’s important for all teams, especially Legal, to keep up with current regulations to ensure that companies are working within the correct local and global rules. Establishing compliance ownership clarifies processes and ensures that all parties know what is expected of them.
To begin the conversation around regulation changes, it’s important to identify who is responsible for compliance, what their objective view for the company is, how compliance is enforced, how performance and compliance are related, and what measures are in place to keep employees aligned with compliance. With these key factors identified, managing risk even in a changing landscape will be much simpler.
Lack of consistency across a company’s documents and processes can lead to unpredictable pricing, rogue spend, compliance issues, and much more. Successful businesses have processes outlined and workflows in place to make sure these inconsistencies don’t happen in their organization.
Elements such as a template library and Legal visibility are just the first step in solidifying processes. Communication across a company and a well-planned, written strategy are necessary for any organization to reinforce efficient processes, allowing all teams to work smarter and faster.
Practical contract management involves being aware of and mitigating any risks that come along with the process. Ensuring contracts are optimized by implementing a contract lifecycle management platform is the first step in lowering risk and simplifying contracts.