Contract Management Best Practice: What It Is, and Why You Need It

Contract Management Best Practice: What It Is, and Why You Need It

The term ‘best practice’ is something we hear a lot in business. As a concept, it serves two purposes. It is a claim that can reassure customers, shareholders, and investors, and it is a standard to which businesses can strive to adhere. Both purposes result in forward-thinking policies and governance, and progress toward continuous improvement.

The important thing about best practice is that it generally comes from learned experience. Best practice is a set of professional-standard procedures that are considered to be the most effective, or the correct approach. These conclusions can only be drawn through trial and error, so the setting and achieving of best practice as a goal means to take the lessons learned by others, and apply them to your own business model.

Best practice is relevant in all business areas, including all administrative procedures. It is particularly relevant to Contract Management, though, because your business agreements intersect with all departments – from employment and premises, to your supply chain. Best Practice in Contract Management is therefore a fast route to improvements right across your organisation.

What is best practice in Contract Management?

In Contract Management, best practice is the core set of steps you should be taking to ensure that your Contract Management System is optimised, and that your team is in compliance with standards set in governance policy. In adopting and adhering to these Contract Management processes, you are disseminating improvements throughout your operation.

  1. Centralisation -Times have moved on from the days when contracts were managed on paper, using filing cabinets and manila folders. Times have even moved on from Contract Management conducted through spreadsheets and unconnected databases. In today’s business world, the most effective Contract Management results from the creation of a centralised Contract Repository. This ensures that all agreements – from every department, and including legacy data – are stored in one, central location. The very best Contract Management Software packages ensure that this storage location is within a cloud-based service, so that all authorised personnel can access the entire Contract Library from any internet-connected device.
  2. Standardisation - The simple act of creating a centralised Contract Repository means that you can implement standardisation of contract language, terms and clauses. This is a fundamental move in streamlined efficiency, because it means that language is pre-determined through collaboration with legal departments and senior leadership, so time is saved in the negotiation process. Saving personnel time means that staff are available to work on a greater number of things, and productivity is therefore also boosted. Once the contract has been created, standardisation allows for easier and more accurate data analysis, because it is simpler to compare standardised language than those with varied and unique terms and conditions. This speeds up the monitoring of contract performance, and makes the process of risk mitigation much more thorough.
  3. Setting Key Performance Indicators - You cannot determine whether a contract is proving its worth without first having determined the Key Performance Indicators against which that metric will be measured. The setting of KPIs is a careful balancing act between specificity and manageability. While it is vital to have KPIs set, it is important to select the KPIs that will deliver the most useful data with the least amount of work. This means they must be highly focused, results-oriented, smartly targeted, and designed to capture a specific snapshot in time. The implementation of standardisation means that broad spectrum KPIs can be set and applied to large numbers of contracts, reducing the need for resetting with every new contract negotiation and creation.
  4. Permission-Based Access - Adopting Contract Management Software that uses permission-based access solves three problems with one process. It keeps your contract data secure, while allowing authorised personnel to access it from any internet-connected location, through any internet-connected device. It also creates an audit trail, recording every action and change made by personnel in a comprehensive activity log. Version changes can be monitored, and traced back to the team member that implemented changes. This ensures transparency and accountability, while retaining a high level of data security.
  5. Risk Assessment - One of the most effective ways to reduce costs is to mitigate risk, and this is achieved through accurate and thorough risk assessment. It is vital, with each new contract, to identify all the risks associated with that agreement, in order to apply mitigation strategies. These may include adjustments to language, which can then be standardised across your Repository, or the renegotiation of particular points. The goal of this risk assessment process is always to limit the risk exposure of your business, for the purpose of protecting your operation, your stakeholders, your supply chain, and your customers.
  6. Automation - Effective Contract Management involves a number of processes that are time consuming, and therefore costly. These processes can be automated by Contract Management Software, though, and this delivers a number of important benefits. Firstly, staff time and skills can be redeployed to other tasks, boosting productivity and cutting timeframes. Secondly, the risk of human error is removed. Thirdly, automated processes can deliver a far more detailed, granular level of actionable data for use in contract performance analysis. This range of data analysis is made possible by customisable, automated reporting, while automated alerts and notifications ensure that deadlines, milestones, and opportunities for renegotiation are never missed. Automated workflows also ensure that documents move to the right department and team member at the right time, while the e-signature facility allows for approval to be issued quickly, and contracts to be activated on time.
  7. Scalability - Business agility is vital for organisations that wish to thrive in today’s volatile commercial markets, which means that scalability must be at the forefront of all decision-making processes within your enterprise. It is vital to keep the long-term flexibility of your business in mind when creating contracts, which means factoring in scope for possible fluctuations in service level and market access. This kind of forward-thinking is reassuring to both customers and stakeholders alike, which builds confidence in your brand. But, more importantly, it allows you to future-proof your commercial activity as much as is possible – ensuring that you meet your risk mitigation targets, and consolidate your plans for future development.
  8. Compliance reviews - Businesses are subject to both external and internal compliance requirements, so it is important to include compliance reviews in all best practice targets throughout your organisation – but particularly within your Contract Management System. Your contracts intersect with every business area, from sales to administration, so compliance levels within these agreements is a good indicator of compliance rates across the board. Compliance reviews should be conducted at regular intervals, and should tackle:- Regulatory compliance – at federal and industry level;
  9. Auditing - Just as you measure the performance of individual contracts against pre-determined Key Performance Indicators, and the rate at which your business meets various compliance requirements, it is important to measure improvement over time, throughout your Contract Management System. This is achieved through regular auditing. This type of auditing provides you with the ‘big picture’ in terms of Contract Management within your organisation. It delivers actionable data in vital areas of system oversight – informing you of processes that are particularly successful, and areas that are problematic. This means you have the tools to undertake the necessary remedial actions that will increase the overall efficacy and efficiency of your Contract Management System.
Why do we need best practice in Contract Management?

All things in business are defined by the bottom line, and best practice in Contract Management is no exception. By ensuring that these processes are adopted as a matter of course within your operation, you are taking a proactive approach to compliance, efficiency, and risk mitigation – all of which have a positive effect on revenue levels. Most importantly, however, you are laying the foundation upon which confidence is built, and confidence from stakeholders and customers is what will help your business to thrive in the years ahead. Now, more than ever, you need to future-proof your enterprise in this way.

The simple solution

The best Contract Management Software packages, such as Symfact, are designed with best practice in mind. This means that the system makes the adoption of these processes easier, by having them built in as standard. The implementation of Contract Management Software sets you on the road to best practice, and equips you with all the tools you need to achieve optimal efficiency and productivity throughout your organisation.

The centralised Repository is at the heart of the software, and features built around it provide the added value. These include automated workflows, notifications, and alerts, standardised language libraries, and customisable reporting. This powerful combination means you can increase streamlined efficiencies, and build productivity through real-time insights into customers, vendors, suppliers, and agents. Contract Management Software allows you to harness the full potential of your Contract Library, tighten control of all aspects of your operation, and meet the standards of best practice in Contract Management.

Call Symfact today to discuss your best practice goals, and arrange a software demonstration.