What is contract management?

Contract management is how businesses make and keep track of customer relationships, leads, and prospects. The phrase does not refer to a single event. At any point in a contract’s lifecycle, it lists all the actions all offices must take. A lot of people also call it contract lifecycle management (CLM).

Contract lifecycle management includes making the contract terms, redlining them, approving any changes to the terms, and being able to e-sign documents.

Contract management is integral to making a sales plan that brings in the most money because it’s connected to the customer lifecycle.

Synonyms

• Contract lifecycle management
• CLM
• Contract administration

Steps in Contract Management

Deal management includes every part of the whole lifecycle of a deal. Organizations use strategies, methods, and principles to make every step easier. It’s essential to look at the contract management process as a whole. Any slowdown can lead to longer wait times for responses, extra time spent on administrative chores (or doing them again), and problems with prospects that can hurt the customer journey.

Every part of the experience is different, even though they all work together to make the whole thing. This is why it’s essential to figure out which ones they are and make different plans to streamline and improve each.

The steps that make up the process of managing contracts are:

1. Asking for a contract.

When the sales price is set, the sales reps send a request to the legal department. Legal will make a contract with all the necessary terms and conditions for the product(s) and price listed in the quote.

2. Talking about a contract.

Once the contract is made, sales reps give it to leads so that they can start negotiating. In some companies, the deal desk negotiates and approves contracts. The terms and conditions will keep changing as long as the sales or deal desk reps are in talks with the client.

3. Approving the contract.

All parties with a stake in the company must agree to any changes before allowing the prospect to sign the contract. In general, this includes executives, area heads, and legal.

4. Carrying out a contract.

After being signed, contracts are kept to be easily found in case of a disagreement or problem with following the terms.

5. Contract Extensions and Ends.

When a license is renewed, or co-terming happens, the agreement’s price and other terms must be reviewed and changed. It could also not be extended, and the contract would end on its due date.

The steps of contract management don’t have to happen in a certain way. For instance, unacceptable contract terms might come up during talks. Then, the deal would go from being negotiated to being approved. In the same way, if changes need to be made to the specific terms and conditions during the renewal phase, the process may need to go back to the negotiation and approval steps.

Problems with managing contracts

Companies know how to handle the contract process at every stage if they know where the inefficiencies and bottlenecks are. Companies should come up with plans to deal with the problems that come up at each stage. On the other hand, they need to consider how the process makes potential customers feel.

Not paying attention to both will lead to errors that limit the number of money-making opportunities businesses can avail of.

These problems can arise when managing contracts:

1. Quickly come up with the correct contract terms.

They are quickly coming up with the correct contract terms. Legal has to make sure that the terms are complete and correct. But contracts need to be made quickly so they don’t slow down the progress of a deal. You have to work hard to keep these two goals from clashing.

2. Making sure that business and legal rules are followed.

They are making sure that business and legal rules are followed. Even though these laws and regulations are constantly changing, management and senior leadership teams must reflect the most recent versions in the contract terms.

3. Making the most of cross-selling and upselling by bundling.

Making contracts that offer the right mix of products to maximize income opportunities is complex and prone to mistakes. It’s also easy to forget about because of the tight time frame when making a deal.

4. Getting approvals and communication between offices in order.

It is getting approvals and communication between offices in order. It’s hard to get approvals from various departments and work out disagreements. It’s hard to keep a single source of truth that correctly shows how the contract works. At the end of a negotiation, there is often more than one “final” contract form.

5. Making it more accessible for prospects and leads to work together during talks.

During talks, prospects may also change contracts and need approval from their company. It’s hard to keep the conversation open and smooth so it doesn’t get in the way of moving the deal forward.

If these problems with contract management aren’t fixed properly, they can make it much harder for businesses to run and, as a result, lose their income. According to research, fourteen percent of businesses lose money because they can’t improve their internal processes to deal with these problems.

Dealing with contracts and the sales cycle

Companies should also know that one of the main ways they lose money during contract management is because of slowdowns and mistakes made earlier in the sales cycle. Executive leadership teams that want to stop CLM processes from leaking money should consider how they make sales quotes and proposals.

If sales teams quote by hand, they can’t stop CLM from leaking out. It wastes a lot of time for sales reps to review prices and product information and ask for discount approval. A lot of the time, people miss chances to upsell and cross-sell packages. Sometimes, the final quote is wrong, so reps have to spend time making changes even as the process moves on to the sales proposal stage.

When the quote is accepted and the deal moves to the contract management phase, Legal must make a sales proposal with terms and conditions that align with current policy. This must be done during the negotiation period. Keeping track of accuracy and versions as changes are requested and accepted adds to the administration’s work and causes more money to be lost.

Also, it’s essential to know that these inefficiencies don’t just cause companies to lose money due to rough income leakage. They also stop them from getting the most out of the sales lifecycle. Another essential thing is speed.

Half of the time, the deal goes to the first company that responds to a client. Companies take much longer to reply to buyers when they have to do things by hand during a deal’s quoting and CLM stages. That gives competitors a chance to answer first, which lowers the number of finished deals.

During the subscription process, another area where poor contract management can cause money to be lost is. Now and then, contracts and payments change. It is essential to let sales reps see historical subscripts on your CPQ data. Seeing subscriber history (like how many times the subscription has been renewed if the subscription tier ordered has changed, etc.) helps sales reps make intelligent pricing decisions for each customer and monitor subscription trends.

In short, companies that can successfully improve their sales processes and link making quotes to managing contracts will make more money. That needs to be automated. Because of this, the best sales teams today use sales technology to eliminate human tasks that slow down or don’t work as well as they could.

Automating the workflow for contract management

Automating the steps in the lifecycle of a contract, from signing to ending, is called contract management process automation. Companies can be more productive, make fewer mistakes, and make decisions faster by automating chores and processes related to contracts.

You can use workflow automation to do many things connected to managing contracts, such as

• Making contracts and getting them approved
• Keeping track of contract responsibilities
• Taking care of changes to contracts
• Generating reports on contract performance

If used correctly, workflow automation can help businesses save time and money, be more compliant, and see more clearly through the hiring process.

What does software for managing contracts do?

A good contract management program helps sales teams at all stages of the contract management lifecycle by automatically taking care of some tasks. Not having it makes stakeholders lose time doing things that can be done automatically. Here are some of the most important things you need to know about contract management:

• You are managing the duration of a contract. The quote, contract, and proposal steps of a deal are the most important ones to know the difference between. All of these steps are what most people mean when they hear the word “contract”: first, you get the price and terms of the product; then, you add the legalese; and finally, you put it all together in a proposal.
• The way you understand “contract” here is neither too broad nor too narrow. It’s too broad because it doesn’t include sales quotes, which are price lists and pairings of products. And it’s too narrow because it includes all of the workflows it makes for redlining and approval, all the way up to using an e-signature to close the deal. Contract engagement software includes making the contract, adding it to a complete plan, keeping track of changes during negotiations, and signing the final agreement.
• They are setting up. Companies often have standard business or legal language in all their contracts. The software that manages contracts instantly adds this language to the contract. Advanced contract management software can also add clauses and terms unique to a deal, such as those based on goods, countries, or other factors.
• They are drawing lines. Stakeholders make changes during talks. A new agreement would not be applicable for every change to this process because it is dynamic and often changes over time. Users of contract management software can suggest changes to certain parts of the agreement without affecting the rest of the deal. This is called “redlining.”
• They are making copies. Versioning is a way to keep track of changes made to the original contract. Stakeholders will make changes during the bargaining process. When things are done by hand, there is often more than one “version” of a contract because different parties will make changes independently. Software for managing contracts will keep track of all the changes made by all parties during the discussion process. It keeps track of all changes in a single place, so the document you see in the software is the most up-to-date contract copy.
• Electronic signature. Software for managing contracts makes it feel like you’re accepting a paper contract. With e-signature, you can sign an agreement electronically, but it will still be legally binding, just like a contract made with pen and paper.

Who uses software for managing contracts?

There are a lot of moving parts that need to work together for contract management to work. So, it shouldn’t be a surprise that many different people in a business use software for managing contracts. Each stakeholder has duties and tasks that can be improved and streamlined with technology to make things run more smoothly and bring in more money.

Here are some good things about having different jobs and departments in a business:

1. Leadership at the top

By automating contract management, leaders in the C-suite can ensure that strategic choices are made at all levels of the business. In addition, giving workers the power to cut down on their administrative work lets them spend more time doing their primary duties.

2. Managers of operations

Operations managers can make moving work between and within processes easier for teams. Teams can replace time-consuming human tasks within the company with automated ones that are easier to use. Automatic notifications and version control make communication between departments much more efficient and successful when looking at it from the outside.

3. Sales groups

There are many ways that sales teams can improve. First, it gives them peace of mind that the contract terms they send to prospects reflect their present strategy. Second, they can discuss terms using a single source of truth, ensuring no misunderstandings cause problems. Third, the ability to e-sign makes it simple to close the deal as soon as the buyer is ready.

4. Customer Happiness

Streamlining processes makes things better for customers and prospects. There is a lot less friction, which speeds up the process. The fact that the information in the contract is always correct builds trust in the business. And the way contracts are received, negotiated, and finalized is well organized, which makes the whole process less frustrating.

5. Cash flow

Finance teams can correctly understand how a deal will affect their money by ensuring the proper legal and business rules are included in the contract. Version control also ensures that the final agreement’s financial terms accurately reflect both sides’ agreement.

Almost every part of a business can benefit from using software-handled contracts. It’s one of the best moves leaders can make to make it easier for departments to work together, make sure things are done correctly and quickly, and give customers a great experience.

What are the pros of using software management contracts?

Different parties’ benefits from contract management software add many benefits for businesses. Here are five of the best things about contract management tools for businesses:

1. Lowering the risk and making compliance better

Contract management software ensures that the most up-to-date versions of liability-limiting clauses are included so there are never any situations that end up causing unexpected legal problems. Stakeholders can also quickly monitor changes and spot problematic words because they can see the revision process.

2. Productivity and the efficiency of operations

Getting rid of manual tasks and replacing them with contract management software speeds up every part of the contract management workflow. More visibility also makes contact between departments more accessible and accurate, meaning fewer mistakes must be fixed.

3. Contracts are now more accurate

Contract management software gets rid of mistakes made by hand. It ensures that the language used in contracts is correct by automatically creating a language that considers business and legal issues.

4. More information about discounts

Along with the general terms, contract management software lets leaders see the discounts that sales reps are giving. This way, a rep can’t “go rogue” and offer a discount that severely cuts margins or makes a contract unprofitable.

5. Alerts for Engagement

Many departments must work together to maintain the contract while talks occur. Software for managing contracts can automatically let stakeholders know when they need to give feedback. By eliminating the need for manual email delivery and sending alerts right away, projects will continue to move forward.

6. Customization of contracts for prices

The CPQ contract management software lets you use custom fields, set up line item types, and even make rules to ensure that your contracts are exactly what you want them to be. Customizing your contracts during the quote process speeds up the contract cycle and keeps the review and approval process from getting stuck.

Best Practices for Contract Management

Use the list below to ensure that your company follows the best practices for contract management and that the process is as simple, quick, and effective as possible.

Come up with pre-approved contract wording.

It shouldn’t be necessary for departments to waste time writing the exact words repeatedly for all contracts. ‘Boilerplate’ words like this should be made and kept up-to-date by Legal. Then, our contract management software can immediately add any needed agreement. Legal can now work on more complex or unique rules since this is a more efficient way to do things.

Create KPIs.

Managing contracts is the same as managing any other business task. Businesses should make their goals clear and then hold everyone responsible. By monitoring KPIs, you can find issues with accuracy and efficiency that you might not have seen before. Some examples are how long it takes to make a contract, how accurate it is, and how long it usually takes for approvals.

Do audits of contracts

Contract management auditors should look for accuracy problems and follow the rules frequently. Ensure that all contracts follow the law and have the correct wording that protects the parties from being held responsible. Make sure that the business terms and conditions match the present strategy. You could face fines and lose money if you don’t keep checking for mistakes or oversights.

Also, make sure that it is executed. Are your partners following the rules and terms you agreed to? Do you contact providers when they don’t do what they’re supposed to? Are you taking on too much (“scope creep”) of your responsibilities?

If you let signees slip under the radar while not meeting their responsibilities or force you to do more than you agreed to, you’ll lose the money you’ve already made.

Take the lead.

Many think managing contracts is boring or gets in the way of finishing deals. But it plays an important role. Things need to be fixed quickly. Please don’t give in to the urge to use one-time fixes or wait until there’s a problem to fix it.

Businesses are constantly changing. Look over your provisions and processes. Early detection of issues prevents you from being surprised by subpar performance and the need to make costly corrections.

The ways that DealHub makes managing contracts better

It’s essential to keep track of contracts during the sales cycle. The DealRoom from DealHub is a cutting-edge new technology that helps businesses streamline the contract process.

Our DealRoom gives businesses the tools they need to make more money from their contract management:

• Make it easier to make contracts by making NDAs, MSAs, agreements, quotes, and other types of paperwork. Make papers in Word, PDF, or on the web.
• Use pre-approved templates to reduce mistakes, easy-to-follow guided creation to ensure accuracy and compliance, and change tools to make changes when needed.
• Make approval processes consistent so people from different departments can share and work together; start multiple approval processes simultaneously based on user-defined criteria.
• Send notifications straight to your CRM in real-time
• Redlining contracts makes changes more accessible, and you can access contract records straight from the correct account on your CRM.
• Keep the momentum going with real-time notifications about customer involvement, and be notified when the contract is shared with more stakeholders.
• Integrations with e-signatures that make it simple for buyers to sign contracts
• Keep contracts safe so they’re easy to find and have signed documents synced immediately with your CRM.
• Work with big CRMs like Microsoft Dynamics 365 and Salesforce.