Contracts aren’t just designed to legally bind parties to commitments. They are also designed to deliver value for your business. Stakeholders - often the Legal team - are responsible for ensuring the agreed outcomes are achieved and that contract performance is achieved as expected.
Where businesses are still married to manual processes, contract performance can often suffer. This can be due to:
- Slow, manual internal processes increasing time-to-contract
- Unexpected overheads occurring due to poor contract renewal tracking
- Poor performance going undetected until business operations are disrupted
- Non-compliance resulting in fines and business disruption
To resolve these issues, many businesses seek to automate and streamline their processes by using contract management software.
How to improve contract performance
But how can your business truly know if the system they have implemented is improving contract performance? Below, we outline some key areas where you should see a significant difference when you have the right solution.
1. Time-to-contract efficiency
Elongated time-to-contract is a common symptom within businesses still using manual contract management methods. The time taken to execute an agreement can depend on how complex negotiations are, how many stakeholders are involved and how highly the signing process is prioritised.
Time spent back and forth between each party, redlining and renegotiating terms and chasing stakeholders for signatures all contribute to contract inefficiency when done manually.
When too much time is taken between agreeing on contract terms and signing a contract, relationships between the parties can easily become frustrated.
This may lead one party to apply additional pressure to speed up the process. It could lead to a decrease in quality at the negotiation stage for the sake of achieving operational status more quickly.
To achieve optimal contract performance, time-to-contract requires the right balance between speed and quality.
This balance is provided when businesses use a contract management solution to automate significant parts of the pre-execution process such as:
- Automatically extracting key metadata and clauses so obligations can be easily seen
- Setting SLAs for approval, reviews and other lifecycle stages, with visual representation when the SLA is exceeded
- Automated workflows that streamline and standardise processes such as contract reviews
- The use of eSignatures so contracts can be signed anywhere, anytime and from any device.
Create internal efficiencies with automated workflows
2. Increased contract value
Once an agreement is executed, it still requires the attention of internal resources. Activities can include keeping the contract metadata up-to-date, revising the contract to review it periodically and ensuring vendor information and documentation is complete.
Manually handling day-to-day contract administration isn’t just cumbersome. It’s also typically left up to in-house Legal teams which overburdens a strategic team.
High volumes of contract administration can distract Legal teams from specialist activities. While the existing in-house counsel spend their time inputting, updating and chasing data, additional hires may be made in order to manage the strategic areas of litigation. In some instances, external resources may also be hired.
The cost of doubling the headcount and paying for external help will decrease the overall value of your contracts - even if all obligations are fulfilled on time and to the agreed standard.
If managing a contract is eating into your business’s revenue rather than increasing it, its overall performance needs to be questioned.
Implementing a CLM solution automates administrative work and increases contract value by:
- Automatically extracting metadata to give all stakeholders visibility of accurate information
- Offering Global Search functionality to save Legal hours of valuable time usually spent trying to find contracts, terms and clauses
- Providing self-serve options for all stakeholders, including the creation of NDAs, allowing Legal to remain hands-off and focus on higher-value activities
Automatically extract contract metadata with Gatekeeper
3. Improved Contract renewal management
Sometimes a contract’s performance can take you by surprise. Mainly because you don’t expect to see that contract still in action. This is the case for many businesses with poor renewal management who still use manual methods for tracking key dates.
Keeping key dates in spreadsheets, shared drives and inboxes cloaks visibility, hiding critical information that needs to be acted upon. If an agreement auto-renews without your knowledge, it could cost your business an unplanned and significant amount.
If you can’t see your key dates easily, you can expect to see deviations in contract performance when you least expect them.
Poor renewals management can see you paying for duplicate services, services you no longer need and, if you’re not tracking expiry dates, the loss of a key supplier that could disrupt your operations.
A CLM solution can help you to make gains in contract performance by improving your visibility of key dates and the accuracy of the information you’re working with.
Use key dates to trigger notifications to stakeholders, prompting a contract review ahead of time Assess the contract’s performance before the renewal date and make an informed decision about whether to renew, replace or consolidate the service.
Easily search through your contracts to identify which ones contain an auto-renewal clause so you have complete visibility.
Receive automated reminders well ahead of renewals so you can review the agreement
4. Fulfilled contract obligations and maintained compliance
Storing contracts in different places, manually tracking contract obligations and relying on a single custodian to know what’s going on with each contract at any given time is a road best travelled if your business wants to leave itself vulnerable to unfulfilled obligations and increased contract risk.
Monitoring obligations requires time, total visibility and a stakeholder who can drive remedial action if the contract performance isn’t as expected.
Obligations compliance is varied. It relates to terms set out in the contract, such as payment and delivery dates. It relates to governing laws, internal codes of conduct and any international security standards.
Manually tracking each of these areas, especially for multiple contracts, can quickly become too much for a sole custodian to handle. With new agreements being made, work on existing ones may be deprioritised - risking poor performance at best and non-compliance at worst.
Using a CLM solution puts your business one step ahead of contract performance and compliance by simplifying obligation tracking. This is achieved by:
- Centralising the information that needs to be monitored and providing secure access to approved stakeholders
- Assigning a RAG Status to each agreement to prioritise remedial action if obligations are missed
- Visualising obligations fulfilment and compliance with customised dashboards and reports
- Using automated surveys to monitor performance and identify areas for improvement
Contract performance correlates to the strength of your contract management processes.
If your business is using manual processes, taking too much time to review contracts and not getting them executed quickly enough, it’s unlikely to achieve the expected outcomes.
It can face issues such as slow time-to-contract, expensive auto-renewals and unfulfilled obligations.
Manual processes lend themselves to poor contract performance. Centralise your contracts and metadata and automate manual processes that are costing time, money and success.
A contract management solution can help you to identify areas of improvement, so you can start realising greater value from your existing agreements.
It will also help you to drive greater performance from the outset of any new agreements by streamlining the pre-signature processes and setting the pace and expectations for everything that follows.
If you want to know more about improving contract performance or you’re ready to see how Gatekeeper can help, contact us today or book a demo.