Contract management is increasingly important for SMBs. Both legal and business considerations must be considered when drafting contract terms.
Following rigorous contractual management practices, businesses can easily check their agreements for potential breaches. Adopting these best practices can also keep up with all current obligations to their customers or partners.
What is Contract Lifecycle Management?
Contract management or contract life cycle management handles contracts between employees, customers/clients, and suppliers.
Because it encompasses creating, organizing, sharing, tracking, and storing key documents (among others), it’ll often be one of the most laborious parts of running a business. Small Business Software can help companies streamline these processes so their employees can spend less on them and more on what matters.
Properly managing business contracts means controlling costs, generating maximum benefit from your contracts, and minimizing risk. These are necessary and beneficial to small and large companies because they bring about business growth.
Good company culture or corporate governance involving contract management software means having a good relationship between your vendors, customers, and business partners. Therefore, if you want to have a good relationship with these people, you must be able to manage their contracts well.
You need to set up a centralized database where you store all your contracts and related info. Then, create an automated reminder service so that you can keep reminding your clients about important deadlines and actions.
Contract types that need to be managed may include any of the following.
- Contracts for sales
- Sourcing agreements
- Purchase orders and purchase agreements
- Employment contracts
- Outsourcing contracts
- Registration rights agreements
- Underwriting agreements
- Leasing contracts
- Consulting agreements
- Distribution agreements
- Intellectual Property Agreements (IPAs)
- Stock options
- Software licensing
Contracts allow organizations to codify their business relationship and operations into a legally enforceable format that they can use to obtain operational resources.
Business operations at a high level may appear similar from one company to another. Still, each company needs its unique resources to run its business effectively.
Each business has unique needs and requirements for contract process requirements.
Making things even more complicated, each contact requires action from the issuer at every stage of its lifecycle for it to remain valid.
Even if an individual company cannot afford to hire a full-time person to oversee all its contract management needs, it can easily get overwhelmed by the sheer number of contracts they need to manage.
How Are Small Businesses Different for Contract and Document Management?
When business owners of small businesses or self-employed people learn about the benefits of contracting software, they think it is only for larger companies. This, however, is not true. Contracting software is useful for both smaller and bigger organizations alike. Small firms such as individual attorneys and CPAs can benefit greatly from contracting software because they often deal with contracts that require them to adhere to certain conditions. For example, many individuals must abide by intellectual property laws.
The contract entails the detail of the deal, the type of work they will be carrying out, the deadline, the kind of task at hand and the deal's scope. Such an important document needs to be managed efficiently and effectively. Technology advancements have helped companies do just that through efficient management of deals.
The Fundamentals of Contract Management
Contracts between two parties usually specify the activities that will be undertaken by each party and the terms under which they will fulfill their part of the deal.
A poorly written agreement could cost organization millions of dollars. An effective legal team can help avoid costly mistakes. Writing a clear and concise document is essential to proper contracting. Having a legal team involved during negotiations can save money and headaches.
Managing contracts also apply to managing different contract process with freelancers or employees who need assistance. Sometimes these contract requirements need additional support and adjustments that benefit both parties.
Generally, contracts involve a few key stages. They're the early stages or pre-awards phase. This is all work that takes place before a contract is awarded to someone, whether you’re a mid - size businesses or an employee. The middle stage is when the process is approved. This includes all the paperwork to make the agreement official. Finally, there’re the post-approval phases. This is where a lot of contracts and agreements come into play.
These three basic steps are a simplified approach to understanding contract management. Still, the process is far more complex and can be seen in more steps depending on how detailed you want.
Elements of Successful Contract Management
To ensure success, companies need to implement effective contract management practices. These include having people who understand the legalities of contracts and using software tools that help them manage their contracts.
- The -expected-benefits and -financial-returns-are-being-realized-.
- The supplier is helpful and responsive to the company’s needs.
- The company has never encountered any contractual disputes or surprises.
- The service provided by the company is satisfactory to both parties.
Signs of Successful Contract Management
Contract management software helps companies alleviate logistical issues, cut down on their expenses, and save time when creating contracts.
Companies that manage their contracts effectively tend to see these benefits:
- Estimates are usually more accurate when made by an independent contractor rather than an employee.
- They're easier to set up and implement than contracts.
- It's easy to comply with industry-specific regulations
- Deadlines and contracts are easier to track when they're written down.
- Workflows for contracting are standardized.
- Templates are easier to write than custom agreements.
- Changes can be made quickly and easily through contract revisions and changes.
- Cash Flow Gains Enhanced Visibility
- Rogue expenses are easier to spot than legitimate ones.
- Contract analysis can help you understand whether an agreement has been fulfilled.
However, as you've probably already figured out, good contract management is more than just writing contracts, receiving deliverables, and putting the papers in a filing system.
Suppose you don't already have a good system for keeping track of important business records. In that case, eSignly can be an excellent tool for helping you organize them and protect them from loss.
We're proud to say our document management system is both secure and HIPAA compliant. And because we store everything for you, you don't need to worry about losing anything.
A contract has to be negotiated over an extended time frame, usually over a few months or years, with no action required between those intermittent stages.
This prolonged dormancy may lead to missing steps in the contract negotiation process.
That’s why implementing a reliable Customer Lifecycle Management (CLM) process, and solid CRM tools can be helpful.
Why is Contract Management Important for a Small Business?
Because contract management is so important for mid - size businesses and because they're so frequently mismanaged, it makes sense to focus on how well you handle them.
With a good contract management system, you can transform how your business works, which means you can get more deals and spend less time managing them. Here are some reasons why:
Contracting enables teams to collaborate effectively.
As your company grows, so too will its needs. You’ll always need to collaborate across different departments, even if one department becomes larger than another.
Contract management software encourages this type of collaborative working by providing several key features. For example:
- Establish robust approval processes
- Implementing a comment tool
- eSignly provides an easy way for contractors to view contracts they’ve signed.
Gain Valuable Insights
Mid - size businesses owner often overlooks contractual information and fail to realize its potential value.
- The -contracts that cause the most friction are
- Managing different types of contract
- End date and renewal date
- The cost/transaction
Even though they may recognize the benefits of collecting this data, managing contract documents in Excel can be a time consuming task, and they don't have enough time to handle it. How long have you searched contract documents for potential issues and key terms?
It makes sense to track contracts, but if you don't know where to start, then contact us. We're here to help!
Contracts Provide the Foundation for Your Business
Contracts and Agreements govern up to 80% of your company’s daily operations. They ensure you and your team don't forget what was agreed upon and who signed off on it.
Suppose you or your staff don't understand the terms of your contracts. How can you ensure that you adhere to their benefits and liabilities? A lack of understanding can cause you to miss important deadlines, misunderstand each other, and incur unnecessary expenses. These things can also lead to damage to the value of your contracts.
Effortless Data Protection
A small business can easily secure sensitive information using effective cloud computing contract management software. By implementing a robust cloud computing contract management tool, a small business can effectively protect itself against hackers attempting to steal proprietary information. In addition to ensuring that sensitive information is protected, a good cloud computing contract management tool allows users to manage contracts efficiently. For instance, if a user needs to change a contact name or address, they can do so without spending time manually re-entering details.
You might be running your business in a small size right now, but if you're planning on growing, you'd better start preparing for it.
As you scale up, small businesses may need a wider range of contract management tools, which include:
- Faster Processing and Creation: Most contract management systems allow companies to create their custom contracts. These customized contracts can then be used across multiple departments within an organization.
- Searchability: When you store and maintain digital agreements online, you can easily search for them, review their terms, and follow a detailed trail. This popular agreement tracking tool can provide the details you need for thousands of agreements on demand.
A good contract management system will enable your business to increase the number of contracts you create without hiring additional staff or spending too much money.
Once all of a business' contracts have been uploaded into one centralized location, it is much easier to sort through them and find the right ones. There will likely never again be the need to flip through documents looking for a particular clause. Even the need for agreements signed fast or addendums can be accomplished via the online contract management system. This centralization and automation will undoubtedly spare countless precious hours, as everything can be easily saved, found, and accessed. Time is invaluable for everyone but is often rather scarce for smaller companies when only a few individuals must wear so many hats!
Contracts Empower your Teams to Collaborate
As your company grows, so will its need for cooperation among different parts of the organization. It may even become necessary to collaborate with outside companies at some point.
Contract management software encourages collaboration by encouraging these things:
- Establishing robust processes for approving content
- by using a comment management system
- Our Contract Management System (CMS) provides an easy way for clients to browse through contracts and see which ones they need to sign.
The Business Risk and Financial Penalties of Non-Compliance Are Too High to Ignore
Not realizing the financial benefits of your contracts may damage potential revenue streams, while not adhering to their terms may result in a loss of bargaining power and harm your company's image.
Poor contractual governance practices can lead to significant losses in the event of default.
Send Contracts at Scale with eSignatures.
A signature is the most important thing in any agreement; an agreement without a signature is not valid. eSignatures make signing documents easy, simple, and fast.
With eSignatures, you can get your contracts or agreements quickly and easily approved.
You can sign your agreements on the go from any device, which helps you stay up to date if you manage many transactions. It's convenient for your client because they can sign instantaneously, so transactions close faster.
Improve Compliance with Contracts, and Your Business Will Run Smoother
Most companies don't read their contract until something goes wrong. Then, when an issue arises, everyone starts pointing fingers and threatening legal action.
With proper management of contracts, you can easily identify any potential out-of-bounds situations before they become serious problems. You can automate tasks for yourself, so you don't need to worry about them.
Helpful Tools to Boost Productivity
Another benefit of contract administration software is getting assistance from the tool itself. You will find that the application has features that allow you to monitor and manage your business activities. You will also be able to create contracts of high caliber in no longer than half the amount of effort that would normally be needed. And if you are self-employed, the same applies to your staff members. They, too, will enjoy the benefits of having an easy-to-use contract creation tool.
Negotiation is an essential part of any business deal. You can get the best out of your negotiation skills by preparing yourself properly before you go into a meeting. To do so, you should take advantage of the available tools, such as the one provided by the contract management system. By using this tool, you will be able to gather and analyze data about various contracts and other legal agreements. Once you have collected enough information, you will be ready to negotiate with confidence. Furthermore, the system will allow you to save time and effort because you won’t have to spend it searching through piles of documents.
Do more with Limited Resources.
In today s world, individuals are expected to accomplish a lot with restricted sources. Those who have just started greatly profit from this idea. Even though it works most of the time, it may not be appropriate in every case. One must consider the amount of effort they put in and the quality of output. A good management system should ensure they are efficient in their tasks and remove unnecessary ones. It should also allow them to streamline the procedure by eliminating several actions.
For instance, if no contractual clause specifies who has to approve a particular transaction, then the task could be automatically assigned to an approver. Suppose a specific contractual clause states that certain transactions must be approved by one party. In that case, the task could automatically be assigned to that party.
What are the Stages of the Contract Management Process?
There are several key steps involved in managing contracts. Still, they can be summarized into these five distinct phases: creating, collaborating, signing, tracking and renewing.
We can further identify particular components of the process. We can divide the process into nine distinct phases, each addressing one of the five major areas of concern. By managing these concerns in advance, we make it easier to deal with the inevitable end-of-quarter crunch when it’s finally time to sign off on new deals. Here are the phases of the process:
- Initial Requisitions: The Contract Management Process starts by identifying contracts and pertinent documentation to support the contract’s purposes.
- Authoring Contracts: Write a document by using an online document writing tool. Automate the process so that it becomes streamlined.
- Negotiate the contract. After writing the contract, employees should know which sections need to be revised so they can negotiate them quickly.
- Approving the Contract: Getting approval from your manager is the first bottleneck. You can pre-emptively fight this by creating tailor-made approval workflows, which include parallel and serial approvals so that decisions move quickly.
- Execute the Contract: The contract enables users to control and shorten the signing process using electronic signatures and fax support.
- Obligation Management: This requires much effort to manage projects, so they meet their deadlines and don't deteriorate during their early stages of development.
- Revisions and Amendments are necessary when changes need to be made to the original document. Frequently, these changes require additional time and effort to complete.
- Auditing and Reporting: Contract auditing and reporting requirements are important part of contract administration. It helps determine whether the organization is complying with the terms of its contracts and any potential problems that may occur.
Manually managing contract renewals can result in missing out on renewals and lost revenue. Automating the contract management process means that organizations can easily spot when a customer’s contract expires and be able to reach out to them before they expire.
The Key Takeaway
Small businesses can benefit from a cloud-based CRM solution to improve their business processes and increase productivity. A cloud-based CRM system costs less than traditional on-premise solutions because it doesn't require an IT team and maintenance.
If you're making frequent contractual arrangements, having someone who manages them for you could be a good idea.
Keeping track of contracts is important, but it can be hard to manage everything by yourself.
Luckily, tools and websites are available to guide you through the process.
Contract Lifecycle Management (CLM), a contract manager, and contract managing software are three major ways organizations keep their contractual agreements electronic eSignatures in order.
Regardless of your company size or where your business is with its contract management system, eSignly has tools for everyone.