The 10 Key Elements of Contract Management
If you are dealing with contracts on a regular basis, then you have a contract management system. It may not be automated, searchable, or even electronic, but, technically filing cabinets and sticky notes still constitute a "system". We're guessing, however, that since you stumbled upon our ULTIMATE CONTRACT MANAGEMENT GUIDE, you know that what you've got isn't working for you. Well, we'd love to help. Here you'll find the 10 key elements every contract management solution ought to have. We cover it all: the repository, authoring, clause library, redlining and review, e-signature, commitment tracking, security, contract insights, integrations, and artificial intelligence (AI). You can read ahead, or, if you prefer, download the entire guide as a pdf for easy reference.
The Contract Repository
Oh so much more than storage
The repository, a place to store your contracts, is the most foundational element of any contract management solution. Right now you may be storing them in hard copy in a filing cabinet or electronically on a share drive. We've even talked to those who were storing their contracts in email. Besides the obvious security issues, these make-shift storage options make it really hard to find your contracts when you need them. In fact, did you know that over 70% of companies can't find at least 10% of their contracts?
Contract repositories and robust search functionality are like peanut butter and chocolate or kids and summer vacation. They just go together. Without the ability to search the repository, the contents of it are practically useless. We all know the frustrating experience of trying to find one piece of information in a single email in Outlook. Maddening! Imagine searching for a specific clause from a contract 4 years ago among hundreds, if not thousands, of other contracts. Talk about searching for a needle in a haystack!
Ask yourself these questions:
- Is my contract repository accessible to all the right people?
- Can I easily search my contracts to find the information I need?
- How much time is being spent searching for contracts?
If you're not satisfied with the answers you came up with for these questions, know this. At Malbek, we believe searching for contracts should be as simple as doing a Google search, and we built our repository with that level of robust search capability.
Contract Request and Authoring
How to get the deal started
A second critical element of any contract management solution is the ability to simplify the contract request and authoring process. It’s not uncommon for contract creation to be a clunky, error-prone process done outside of the contract management solution, often requiring redundant data entry. This only introduces risk and inefficiency, causing time delays that impact the business. Using MS Word offline to create and iterate a contract via email exchanges and then bringing it into a contract repository to manage it introduces discontinuity and gaps in visibility of the evolution of the contract. Version control, auditability and appropriate tracking are all missed.
Ask yourself these questions:
- Are any parts of my contract management process done outside of the system?
- How much redundant data entry occurs every time you initiate a new contract?
- At any given time do you know where the contract is in its authoring process?
A high-performing contract management solution, like Malbek Contrax™, streamlines the end-to-end contracting process from initial request to final signature. It includes native authoring tools with tight integration with MS Word that make it easy to initiate and edit a contract. This includes the ability to append supporting documents to the contract, keeping all relevant materials in one location, having a full audit history of changes, enforcing review and approval based on predefined rules, and more. The same applies to amending active contracts and ensuring that you always have the latest visibility into contractual terms for the life of the agreement. This type of functionality reduces duplication of effort, streamlines the authoring process, and mitigates any risk associated with multiple parties working on contract documents.
The Claus(e) Library
Let's not screw this one up...again!
One of the most common pitfalls with contracts is introducing language or terms that negatively impact the contract outcome. This can happen inadvertently by copying and pasting from a previous contract without a solid understanding of how that contract’s terms actually performed. Sometimes regulatory changes occur and contract language needs to reflect those changes. In such situation, copying and pasting from past contracts will only introduce legal risk.
Ask yourself these questions:
- Do I have an up-to-date clause library that streamlines my contract authoring process?
- Do I have insight into how certain terms perform compared to others?
- When legal language needs to change, am I certain I am using the latest version?
Rather than starting every contract from scratch, the Malbek Contrax clause library provides a selection of pre-approved language and terms that can be automatically included in contracts. Authorized users can swap to pre-approved alternates and also have visibility into how often preferred vs. alternate clauses are being used with or without changes. This is a very powerful way to gauge whether you are creating contracts close to your preferred terms or straying far away from them. A clause library also reduces template proliferation and consolidates redundant templates where only small clause variations exist. The clause library greatly simplifies and expedites the contract creation and approval process, while mitigating compliance risk from rogue contract terms. Over time, unfavorable language or terms can be removed from the clause library, safeguarding profitability, reducing compliance exposure, and making successful contracting a more easily repeated process.
Redlining, Negotiation, and Review
Where the rubber meets the road
MS Word Outlook (email) are the most common negotiation and approval methods used by contracting professionals. Today with technology evolving so much, it’s shocking to see such manual processes when it comes to the most important artifacts (i.e. contracts) that an organization relies on to conduct business. This method causes delays, overwriting changes, versioning issues, rogue contracting, and more. Redline and negotiation with external parties can be a long and painful process full of tedious back and forth. It’s way too easy to lose sight of where a contract is and who has touched it last. Contracts can go dark, be lost entirely, or have multiple parallel versions floating around, making it almost impossible to know which one is the latest and most accurate, not to mention the metadata within the contract is out of sync, thereby losing touch of the contract terms.
Ask yourself these questions:
- It's 3am. Do you know where your contract is right now?
- Is it possible that multiple version of your contract exist at the same time?
- Has someone in you organization ever accidentally overwritten important contract data?
Automated workflow is the obvious answer to these problems. Malbek Contrax™ provides role-based hierarchies and permission levels for approvals to ensure that the right people are included in the internal review process at every level of change. In addition, automated redlining and version control make it easy to clearly identify contract modifications, preventing edits from going unnoticed and safeguarding the integrity of each version in the approval process. The ability to exchange emails with external parties directly from the system with tight integration with MS Word facilitates the redline and negotiation process.
Signature
Let's get this deal done!
Not that long ago, contract signatures were still handled manually. In fact, many organizations still do. This involves physically printing the contract, signing, scanning, and faxing or emailing it back. Then repeat this for the second and subsequent signers. Depending on the quality of scans, the final signed copy often becomes hard to read, faded and unsearchable. However, today this too is automated and an indispensable capability for today’s fast-paced world. Paper-based, hand-delivered systems for obtaining signatures are slow and provide no real security or auditability.
Ask yourself these questions:
- How many manual steps are involved in signing your contracts?
- Can you sign contracts on the go regardless of where you are?
- Are you still relying on fax and email to get contracts signed?
By contrast, Malbek Contrax™ with its built-in electronic signature integration with the leading e-sign solutions, is a tool that securely facilitates obtaining authentic signatures. We make it easy, as well as convenient, for the signers no matter where they are, further shortening the contract lifecycle.
Contract Commitment Tracking
It's only just begun
Milestone management is essential to the contract once it has gone live. Shared repositories, manual processes, or basic systems do not proactively track upcoming key events on active agreements to keep the responsible parties informed. A contract management system that only focuses on contract authoring, editing, and approvals is short-sighted. The reality is that contracts are living documents that must be actively managed. The signature is just the beginning of the contract lifecycle. Crucial milestones and obligations must be adhered to long after contract signature. The long-term benefits of a contract will amount to nothing if obligations are forgotten or ignored.
Ask yourself these questions:
- Have you ever missed an important contract milestone?
- What are the financial and regulatory consequences of not fulfilling a contract commitment?
- Do you get enough advance notice when a contract renewal is coming up?
Renewal and obligation tracking is a key component of effectively managing the lifecycle of a contract. Malbek Contrax ensures that key events, such as payment milestones, are followed with proactive reminders. It also triggers appropriate notifications for expirations, renewals and other key events. This arms companies with control over contracts so that they are not caught off-guard or hit with unexpected consequences, like unwanted auto-renewals. Missed obligations or opportunities end up costing a significant amount, impacting the company’s bottom line.
Security
Keep the creepers away
It’s a dangerous world out there and contracts are not immune to the perils of security breaches. They contain some of the most sensitive and mission-critical information about a company, but unfortunately, contract safety can be compromised within an organization simply by someone gaining access who shouldn’t. It is paramount that contract data is safeguarded and the individuals within a company only have access to what is relevant to them.
Ask yourself these questions:
- What type of contract security do I have in place right now?
- Can I guarantee that only the right people can access any given contract?
- When contract changes are made, is there an audit trail?
The Malbek solution takes data security very seriously. Contract data is secured in the application with encryption to prevent unauthorized access, as well as user permission-based access to authorized end users.
The most effective contract security makes it possible to set permission levels at individual business units and departmental levels to protect sensitive information. Malbek security rules at the application level enforce the segregation of information as needed according to role or division. In addition, to minimize audit risks and regulatory exposure, every change during contract authoring, editing, approval, and signature, is tracked along with fulfillment of contract obligations.
Contract Insight
Make your contracts bad a**
The information contained in contracts can be the key to understanding the success or failure of your business. Unfortunately, many companies have limited ability to analyze that data and make informed decisions based on it. How did a vendor contract impact the bottom line? Were the terms of a sales deal favorable and worth repeating with other customers? Or it could be something simple to track for quarter-end cycles, such as “how many contracts are currently with customers for signature having a total value over $100,000.” This type of insight is invaluable for propelling growth and future strategy, but eludes many. And even when companies do have a contract management system, it likely only includes rudimentary reporting capabilities and requires custom builds for every new report.
Ask yourself these questions:
- How hard is it to search my contract data?
- Can I easily access information about contract performance?
- Do I have to contact IT every time I want to do a new contract report?
It doesn’t have to be this way. You don’t need to be a report writer or hire one full-time. In fact, one of the ways progressive companies can set themselves apart is by choosing a contract management solution, like Malbek Contrax™, with robust yet easy-to-use reporting capabilities. Creating reports and searching for data should be as simple as finding products on Amazon using their filters, and with Malbek Contrax™ it really is that simple. You shouldn’t have to wait for a custom built report or try to manually track the information you need. When companies have the deep insight they need, they can make better decisions and maximize future contract strategies.
Integrations
No contract is an island
One of the biggest challenges companies face today is data silos. Too often data exists in systems that are disconnected from one another even though they should have important touchpoints. Manually processing and rekeying information introduces errors and is inefficient. This is especially true with contracts, which draw on data points and departments across an organization, such as sales, legal, finance, procurement, and more. A contract request and associated data often originates from CRM, ERP, CPQ and other solutions.
Ask yourself these questions:
- Are data silos making your job harder?
- How many different systems in your organization use the same data found in your contracts?
- Do you or others have to re-enter information from contracts to be used by other software systems?
Malbek has addressed this problem by developing a robust integration marketplace – Malbek Konnect™ – which enables Malbek Contrax to connect with popular applications, such as Salesforce.com, Microsoft Dynamics, Oracle, SAP, DocuSign, Adobe Sign, and many more using our productized, predefined connectors available out of the box. From CRM to ERP and everything in between, Malbek’s flexible APIs mean that the critical data and execution of its contracts can meaningfully occur and live beyond the confines of the solution itself, making it a powerful driver of business success.
Artificial Intelligence
The future is now
These days AI is everywhere. It’s in your home, in your office, on your smart devices, and in places where you don’t even know it exists. AI is changing the way we interact with technology and how we consume information. Contract management is experiencing similar changes. There are many point solutions that provide specific contracting use cases using AI technologies, such as metadata extraction or contract analytics. But, these point solutions only address the specific use case by itself and the AI is only as powerful as the data it has access to. Think of an Alexa device in your home where you ask specific questions. What’s the weather like? Or, what’s the score on the latest football game? But now imagine having Alexa on an automobile platform. In your car, it has context around it, allowing Alexa to provide much higher value. It can assist you with car controls and settings. It can guide you through your drive in traffic to your destination following an optimal route.
What if you could:
- Assemble the ideal contract with the best terms and language based on customer segments, regions, etc.
- Identify the bottlenecks in the approval cycle and recommend optimizations and steps to accelerate approvals
- Mitigate risks based on language and terms from external party redlining changes
- Recommend prices for products or services based on historical contract performance
- Track commitments and milestones automatically based on variable terms in a specific contract
Malbek Contrax is a robust contracting platform with AI capabilities built on top of it made even more powerful by its access to the entire repository of contract lifecycle information. The possibilities for AI in a CLM platform are endless, and Malbek has the vision to take this part of the solution beyond imagination and help users across the organization – from sales, legal, finance, procurement, and beyond.
