A successful contract management system is critical to sustainable growth and the achievement of key business objectives. With bottlenecks, regularly delayed processes, and suboptimal workflows, the combination of multiple system inefficiencies can lead to prominent impacts on your business’s bottom line. When a poor contract management practice becomes a regular practice spread across thousands of contracts, the results can be detrimental and hard to recover from.
When small things go unnoticed within your contract management system over a prolonged time period, they can lead to below average contract management results. By conducting regular audits of your business’s contract management processes, you can identify the bottlenecks and various problems that consistently cause further issues further down the line in contract lifecycles. For example, basic contract management problems include legal risk exposure, lost or hard to locate documents, and wasted time.
It's imperative to have a trackable list of all of the possible problems to look for within your contract management system. Contact lifecycle management looks different from organization to organization. However, there are some basic questions and prompts that can aid you in your regular audits over different stages during contract lifecycle management.
Auditing The Contract Generation Stage
The contract generation stage plays a huge role in the duration of your contract lifecycles. With accurate and fast contract generation, you can improve the potential for growth of your business. The key player to improving the contract generation stage is to have the best tools available to your contract lifecycle management team so they can efficiently build compliant, professional contracts. In this way, your internal teams can properly collaborate on contracts, ensuring that all requirements are appropriately met. We highly recommend leveraging leading contract management software to make the contract generation stage that much more streamlined.
The three following questions can help you as you audit this specific stage of contract lifecycle management:
- Are there productive methods of communication between your business’s procurement and sales departments? This allows these two departments to properly communicate and collaborate on business requirements with your legal department.
- Are there acceptable, clear guidelines available for your teams to determine if working directly from a vendor's paper is acceptable?
- Is there an accessible, comprehensive library of preapproved contract templates for quick, accurate contract creation?
Auditing Your Negotiation Processes
In many cases, contract negotiations and reviews can take several months or even several years. This is one of the most important stages within contract lifecycle management. There are specific ways that you can optimize your business’s contract negotiation processes.
By eliminating many manual tasks and by allocating time towards developing organized and clear communication methods, you can reduce contract negotiation times and speed up the execution of your contracts. By defining a very clear process and centralizing your negotiation stage, you can create a contract negotiation process that is conducive to efficient, fast, and accurate contract lifecycle management – keeping clients and vendors coming back.
Consider the four following questions when auditing your business’s negotiation stage of contract lifecycle management:
- Are internal contract reviews centralized? This allows all contributions and feedback to be placed in a single, easy to access location.
- Is your contract management software equipped with audit trail capabilities so you can properly oversee and track all iterations and changes to uploaded documents?
- Is your contract management software equipped with version control features? This allows employees to review the most recently updated documents and contract drafts.
- Is your contract management software equipped with redlining capabilities so that you can easily review and compare redlines upon receiving newly uploaded drafts?
Consider The Accessibility and Storage of Your Contract Management System
How your organization stores contracts play a key role in the rate of productivity. As employees spend more time locating specific documents, sorting through copies, or attempting to find information with poor keyword search functions, heaps of money and time go to waste. It’s critical to audit the manner in which your organization organizes, categorizes, and stores contracts. In addition, we recommend taking a close look at the effectiveness of your contract repository’s search and filtering functionalities.
Use the four following questions to guide your audit regarding your contract management system’s storage methods and overall accessibility:
- Are all signed contracts stored in a single, centralized location?
- Is there an accurate and efficient search function that allows your team to locate key terms, individual clauses, and contracts within moments?
- Are documents categorized by a standardized labeling system?
- Are specific user permissions and user roles appropriately enabled to prevent risk from unauthorized individuals?
Audit the Level of Security of Your Contract Management System
Providing your contract management system with optimal security allows your organization to protect confidential document from risk exposure and cyber security breaches. Increasing the security of your contract management system doesn’t directly impact productivity or efficiency, but it will certainly make you more confident in the reliability and safety of your system. Maintaining high security standards is a necessary step to take during a contract management audit.
Consider the four following questions when auditing the security of your contract management system:
- Are the security standards of your contract repository compliant with industry standards and policies?
- Does your contract management platform possess necessary certifications that work to ensure compliance and various standards are met?
- Are encryption and back-up facilities included in your contract management software that function while contracts are stationary and in transit?
- Do you regularly conduct vulnerability tests to determine if external threats are present?
Audit The Effectiveness of Contract Renewals and Alerts
Issues pertaining to ongoing contracts can be a source of contention and disruption to operational effectiveness. For example, missed renewals are a result of suboptimal contract review processes and document storage. Poor contract tracking causes businesses to miss compliance milestones and things like price increases. While conducting an audit of your contract management system, you should examine all activities post-signature. Reviews should be conducted several times during the year, covering all of your company’s contracts. This allows you ensure that all deliverables are met.
Use the three following questions to determine the effectiveness of your contract renewals and alerts:
- Do negotiations occur on a regular basis, far in advance of auto renewal and/or expiration dates?
- Do you terminate contracts that do not increase the value of your organization?
- Does your contract management team utilize customizable, automated alerts to stay on top of key due dates and contract renewal processes?
When To Audit Your Company’s Contract Management System
What is the average duration of a contract lifecycle, from contract request and intake to contract execution?
Does the average time to finalize and execute a contract exceed 25 days? If so, we recommend auditing your contract management system on a quarterly basis.
Consistently monitoring your company’s contract management system allows you to stay aware of potential problems and proactively create solutions. Once you have identified inefficiencies and implemented corrective strategies, you can track the effectiveness of the solution used. We recommend defining clear guidelines regarding what operational success looks like for your specific contract management system (you might track a percentage of missed key dates and deadlines, for example). Upon system improvement and the achievement of several objectives, you can then schedule audits once per year.
By auditing your contract lifecycle management system on a consistent basis, you can pinpoint areas of improvement and create a more valuable contracting process that improves collaboration and client/vendor experience. The more accurate and systematized your contract management processes are, the more conducive your contract management system is for growth. With leading contract management software, you can reduce bottlenecks, human errors, and operational inefficiencies within contract lifecycles. Optimize contract lifecycle management today with Dock.
Contract lifecycle management can be largely improved with the correct contract management software. Here at Dock, we are experts in SharePoint and Office 365 and want to help businesses utilize their features to revolutionize and streamline contract management.
Our Contract Management System is equipped with several amazing features that will help improve the quality of your contract management processes with the help of a SharePoint and Office 365-based collaborative software interface. Improve business dealings, increase contract compliance, reduce bottlenecks and turnaround times, enhance risk mitigation efforts, and completely overhaul contract management team productivity for the better with our contract management software.
Ready to get started today? Reach out to us to learn more about our Dock 365 Contract Management System.
If you would like more information, we welcome you to schedule a free demo with us today.
Written by Lindsey Paulk
Lindsey Paulk is a Content Writer in Jacksonville, Florida that specializes in digitally communicating all-things contract management.