Contract Management Best Practices: 15 Questions to Ask That Will Streamline the Contract Process

Contract management can be streamlined and simplified to minimize risk, cost, and increase revenue. How? These key questions assess current processes to show you where you excel, where opportunities lie for process optimization, and how a contract management platform can benefit.

Content Creation Process

1. How effective is team collaboration?

It’s rare that just one person is working on a contract—collaboration is vital to drafting and working on contracts. To assess efficacy of collaboration, consider the length of time from creation to signature, how much buy-in and alignment are between departments—Legal, Sales, Finance, Procurement, Operations. What does the actual collaboration look like? Are drafts of documents and comments and suggestions emailed back and forth? Is there any visibility into the changes made? Ultimately, collaboration should be comprehensive, but also take place in a timely manner.

A contract lifecycle management platform makes collaboration simple and easy. Team members and third parties can work in real time, and documents stored in the Cloud are accessible from anywhere, not just the desktop at work. Redlining and versioning are easy with transparency into who has made edits and at what point in the process. Everyone with access to the contract can receive alerts on comments and changes.

2. Are terms, conditions, clauses, and legal language standardized and approved?

Pre-approved language, clauses, terms, and conditions, always included on every contract, speeds up contract processes and cuts down on the administrative work required by Legal. Consistent templates that are used throughout a company ensures that the terms used in a contract from sales team are the same ones used in a contract from any other department. When industry-standard terms are used, there is less room for interpretation, minimizing risk for the company.

A contract management platform that integrates with a CRM system helps sales teams work directly from templates that Legal creates. For other teams, a contract management platform should contain templates that teams can either directly create a new contract from or even select certain clauses to be used in their contracts. Permissions can be set within the platform to ensure that certain teams only have access to templates they need to use, making it easier for their team and legal to be sure they are using the proper language.

3. Where are documents stored, and what type of visibility do you have into your contract portfolio?

Do documents live on hard drives, scattered amongst employee desktops ripe with compliance risk due to outdated information? Are they in Dropbox or Box…or dare I ask in a filing cabinet?

If you were asked right now how many contracts you have, of what type, what stage, with which vendors, and what the renewal dates were could you answer? Being able to answer this question is key to becoming strategic, as contracts hold not only the past but also the future of an organization in their pages.

A contract management platform is an easily searchable central repository, providing a high-level view into an entire contract portfolio—every contract, every stage—in seconds. Tagging and organization provide additional at-a-glance views of information such as types of contracts and vendors.

4. How much time does it take, on average, to draft a contract?

The first draft of a contract is the foundation of the entire rest of the business relationship. Starting from scratch every time you create a contract is not only not sustainable, it invites risk and compliance concerns as information may be left out. Utilizing templates reduces the amount of work that needs to be done, while maintaining the quality and compliance of the contract.

A contract management platform encourages faster collaboration, real-time editing, e-signatures, and workflow approvals, substantially reducing the administrative work required to create a contract and the amount of time.

Content Review and Execution

5. What is the approval procedure?

In your organization, once a contract is drafted, who needs to approve the contract before it is finalized? This process should be clearly outlined, and best practice is to create a workflow. This ensures every contract is reviewed and approved by the correct person or people at the right time.

Contract lifecycle management platforms should have approval workflows built into the platform. Best-in-class platforms may have approval workflows that are able to be set at the template level so every time a contract is created from that template, the approval workflow is already in place. You can either add approvers in a specific order or all at once, and select one person or an entire department.

6. How are contracts routed to approvers?

The old way to get contracts to the right approvers was emailing—or even mailing—contracts back and forth. With a contract management platform, all contracts are in one central repository, online. Approvers simply get notified when they need to review and sign, and can access the contract in a click. Because a platform is cloud-based, multiple people can edit and discuss a document at the same time, in real time also.

7. How are final contracts signed?

Electronic signatures, or e-Signatures, have become crucial for businesses as they seek to increase the speed of time-to-signature. e-Signatures are legally binding and have the same legal status as a written signature, as long as it fulfills the requirements of the regulation it was created under.

A contract management platform should include the ability to integrate with an e-Signature software, or include e-Signatures as part of the platform.

8. How are contracts validated for legal and corporate compliance?

As negotiations come to an end, be mindful of compliance. In larger organizations, this means manager approval or audit procedures, and ensuring that company procurement policies are met. Teams should be in constant contact with their legal teams throughout the entire process.

Instead of having to track down the legal team in person or email back and forth, contract management platforms simplify the process and relieve bottlenecks through approval workflows, and as mentioned before, pre-approved templates, so Legal is included in the agreement from the beginning.

Term Monitoring and Obligation Management

9. How are payment, delivery deadlines, and renewals monitored?

Are you missing renewals? If so you’re also missing revenue, and opportunities for growth and savings. Similar to visibility into the contract portfolio, are how quickly financial terms can be found.

For a quick way to get a high-level view of each contract’s terms, a contract management platform should have a summary section. An overview of financial terms and any payments can be reviewed here, instead of having to flip through pages of a document to find the right information. When it comes to deadlines and renewals, contract management platforms can also schedule out renewal notifications for whatever lead time makes sense for your business, e.g. 30, 60, or 90 days.

10. How many contracts are evergreen?

An evergreen contract is one that has automatic renewals until one party requests termination. If these are left unattended, they can have significant cost impacts with little value. If these agreements won’t work for the company, the clauses stating the contract automatically renews should be removed. If the clause makes sense or cannot be taken out, alerts can still be set in a contract management platform as a reminder.

Additional Questions

11. What percentage of contracts renew without renegotiations?
12. What analysis is run on the terms of the contract, or on the portfolio in general?
13. How is compliance monitored and is there a visible audit trail?
14. Where is transaction data stored?
15. How long would a contract audit take?

Automating contract management not only saves time, but provides a greater insight into the efficiency and return of the contracts and helps optimize one of a company’s most lucrative resources, its contracts.