What is Contract Management?
Effective contract management helps establish a path to increase revenue and strengthen reputation
What is Contract Management?
As long as there have been agreements between two parties, there have been contracts. From stone tablets to scrolls, to paper, to digital documents, contracts have been drawn up, negotiated, stored, and executed for millennia. What we’ve learned over time is that there are always improvements to be made in the way we manage contracts.
Contracts aren’t just an administrative necessity; they are a strategic one. Contracts are essential in minimizing financial, legal, and brand risk. When they are managed correctly, a contract will help establish a path to increase revenue and strengthen reputations. But, when they are mismanaged, whether, by missed renewals or broken obligations, the result could be lost revenue, potential fines, and unhappy customers.
We are fortunate to do business in the era of digital transformation. Efficiencies inherent in digital contract management yield many benefits, including fewer errors, accelerated negotiations and approvals, and a shorter sales cycle.
Contract management is the business process of creating, executing, and analyzing contracts to reduce financial risk and maximize operational and financial performance. Included in contract management is the process of negotiating terms and conditions, ensuring legal and regulatory compliance, documenting changes or amendments, and storing contracts in a central repository.
Business relationships are built on contracts, for the protection of all parties. Rights and obligations between businesses and their vendors, service providers, and partners, are clearly defined and provide a guidebook for fulfilling those obligations. Though often thought of as a necessary evil, contract management provides an opportunity to strengthen business relationships and avoid revenue leaks.
The Importance of Contract Management in Business Operations
Contracts dictate business strategies and relationships between organizations and vendors. Therefore, a considerable amount of time is spent ensuring they reflect corporate policies, fulfillment capabilities, regulatory requirements, and financial interests. Once the contract is signed and the products or services are procured, the contract must be monitored to ensure obligations are met to avoid litigation and penalties, and damage to business relationships. Contract renewals are an opportunity to continue those relationships and sell additional products and services.
With so much at stake, contract management plays a vital role in business operations. Contract management aligns the needs of Revenue Operations, Finance, and Legal functions to contribute positively to business growth. An efficient contract management process ensures contracts are created, negotiated, approved, and carried out in a way that mitigates risk and builds strong relationships that serve the needs of all parties.
What are the Stages of Contract Management?
An effective contract management process ensures business needs are met while providing a positive experience for the buyer. The easier you make it for your sales, legal, and financial teams to create and approve contracts, the faster you will be able to send those contracts to customers for their signature. Below is a streamlined contract management process that all parties will appreciate.
- Contract creation. Contracts are created as part of the sales process, reflecting agreed-upon pricing, product configurations, timelines for fulfillment, and legal requirements.
- Contract negotiation. Upon drafting the contract, it is delivered to the buyer for review, redlining, and negotiation.
- Redlining. Allow buyers to provide feedback and amend critical issues.
- Internal approval. Bottlenecks often occur at this stage. Approval workflows and progress tracking keeps things moving forward.
- Contract signing. All parties sign and then begin executing the contract. The contract is stored in a central repository for project management and future access by departments.
- Execution of the contract and obligation management. Project management ensures the contract is being fulfilled and is not leaking revenue. Regular audits determine compliance with contract terms and catch problems as they occur.
- Contract termination and renewal. Contracts are monitored for termination and renewal dates to identify renewal opportunities and create new contracts.
- Sync back to CRM. Signed docs and data sync back to the CRM. Get access to relevant contract records directly within CRM.
Contract Management Pain Points
Viewing the infographic above it may appear to be a smooth process, but there are potential roadblocks that can derail potential deals and result in missed opportunities. Poor contract management can also result in under-performing contracts that negatively affect annual revenue.
“Many contracts do not deliver against forecast or expectations – and it is this under-performance (causing a potential impact on the bottom line equivalent to 9% of annual revenue) that is gaining increased management attention.” – Tim Cummins, IACCM
When looking at your contract management process, you may recognize these obstacles that are hindering your workflow or causing revenue leaks:
- Misalignment between Sales, Finance and Legal
- Manual processing errors
- Inaccurate pricing
- Errors in contract terms
- Issues with product configurations resulting in performance failures
- Lengthy approvals and negotiations
- Disagreement over contract scope
- Fulfillment issues
- Missed renewal opportunities
How to Improve Contract Management
For many organizations, improving the contract management process and increasing revenue can be accomplished through automation and digital transformation within their sales operations. By eliminating human error, aligning all stakeholders around one streamlined system, and keeping deals on track, contract management software ensures contracts perform as expected while solidifying business relationships.
What are the Benefits of Contract Management Automation?
An Aberdeen study shows that about twice as many Best-in-Class organizations report automating their contract management processes than do other organizations. These organizations prioritize saving time and money by using technology to streamline their contract process.
Best-in-Class organizations understand that moving the cumbersome, manual contract management process to an automated platform improves efficiency. Contract management software frees up resources from sales, finance, legal, and operations that were once spent on tedious and costly contract creation, review, approval, and retrieval.
It’s also worth noting that the Best-in-Class in Aberdeen’s study had an annual contract renewal rate of 56%, which is more than twice that of all other organizations. A contract management system triggers renewals and helps organizations keep the customers they have, which is a critical KPI for all organizations.
Take a look below at the rate at which Best-in-Class organizations use an automated contract management solution.
In addition to the efficiencies inherent in an automated contract management solution, there are additional benefits including:
Reduces the Sales Cycle
Streamlining the contract generation, negotiation, and approval stages of the quote-to-cash process shorten the sales cycle. We explore this advantage in more depth in the section below.
Ensures Legal and Regulatory Compliance
Digital contracts built from templates go through an approval workflow that includes redlining.
Eliminates the Possibility of Rogue Changes
Changes are visible in real-time to all stakeholders, and alerts can be set up to notify stakeholders when changes are made.
Increases Revenue Through Time Savings and Increased Productivity
Using templates, a redlining tool, an approval workflow, and a central contract repository all save time, reduce errors, and increase productivity around the contract generation, negotiation, approval, and fulfillment process.
Reduces Revenue Leaks in Contract Fulfillment
Improved visibility into performance against contract terms resulting in faster adjustments.
Increases Renewal Rate
Alerts of milestones and renewal dates create stronger relationships and opportunities for growth.
What is Contract Management Software?
Contract management software is comprised of a set of tools that streamline and manage the entire contract lifecycle, giving sales, legal, financial, procurement, and contract administration teams the ability to execute their role in the contract process effectively. Contract management software replaces manual contract management processes such as using shared folders, tracking contract details and status in spreadsheets, and using email for contract review, edits, and approvals. It automates contract creation, negotiation, and approval while mitigating risks and accelerating the sales cycle. A secure contract repository stores contracts and keeps them organized for review and retrieval.
How does Contract Management Software Accelerate the Sales Cycle?
Consider these five ways contract management software helps sales teams accelerate the sales cycle:
Simplifies Contract Creation
Creating contracts manually requires back and forth emails between the sales and legal departments. This time-consuming and error-prone process is fraught with risks and version control issues.
A contract management solution automates contract creation according to the Legal department’s requirements. Updated templates, automated workflows, redlining, and e-Signature minimize errors and reduce the time it takes to create contracts, share, edit, and sign.
Standardizes Organizational Collaboration and Approvals
Automated workflows ensure sales reps follow a structured approval, adding the right stakeholders to keep everyone in the loop. Triggers and notifications keep deals moving forward.
All internal departments work from one digital environment that’s updated in real-time. Centralized conversations and contract documents are located in one place. This transparency places guardrails on contract creation and ensures Legal compliance as well as profitability.
Streamlines the Negotiation Process
Deals typically stall during contract negotiations. Contract management software implements online contract redlining, real-time status tracking, and contract visibility in a collaborative digital environment. This minimizes the back and forth of emails and revisions and hunting down who has approved and who needs to approve next.
Creates and Stores Contracts Directly from your CRM
How easy is it to locate contracts when your staff needs them? Faulkner Information Services estimates that nearly 10% of all signed contracts are irretrievable.
One of the primary bottlenecks in the sales process is the creation, negotiation, and approval of contracts. Manual contract management processes are inefficient and prone to errors and oversights. Deals often stall during the negotiation and approval stages due to a lack of collaboration on contract documents.
Contracts should be monitored to ensure compliance and must be available for review again when renewal time comes around. Contract management solutions include a repository that keeps contracts organized and readily available through your CRM. Signed agreements can be viewed at any time to confirm all the deal terms.
Deal Progress and Approvals Tracked in your CRM
Contract management software frees your sales team’s time and energy to focus on working with new customers, rather than constantly following up on deals already in the pipeline.
Real-time tracking and notifications on customer engagement, including contract views and edits, approvals, and signatures enable your sales reps to respond quickly to buyers and move deals forward.
Further Reading: How the Right Contract Management Software Helps Close Deals Faster
Contract Management Essentials
As organizations grow, so do the number of contracts they need to create and manage. Manual contract management is difficult to scale and is fraught with risks. When you digitally transform your organization’s contract management system, the contract management solution must support these essential business needs:
Creation and Collaboration
Contract creation following a guided workflow, using templates and pre-amended agreements, and providing real-time updates and collaboration across teams.
Online redlining and negotiations, capturing data and auto-syncing into your CRM, and enabling your sales team to create, manage, track, sign and store contracts without leaving their CRM.
A central, digital contract repository provides one source of truth about contracts and eliminates the issue of version control.
Tracking and Analysis
Real-time notifications on customer engagement, including views and edits, and data on the performance of the contract process and individual deals.
A contract management system must integrate fully with an organization’s ERP and CRM. To be most effective, it should be part of an integrated deal acceleration platform that includes Configure-Price-Quote, Sales Proposals, and e-Signature.
What is the Role of Contract Management in the Sales Proposal Process?
The sales proposal process involves many steps: generating the quote, creating and sending the sales proposal, creating and negotiating the contract, signature, and storage of the proposal. Contract management plays an integral part in this workflow and should not be seen as a siloed function.
When contract management is part of an end-to-end sales process supported by a unified Deal Acceleration Platform, all parts of the contract process are tied to a single solution which creates efficiency and accuracy in your quotes, proposals, and contracts. A deal acceleration platform that includes Predictive Sales Playbooks, Configure-Price-Quote, Sales Proposals, Contract Management, and e-Signature, enables sales teams to work faster and smarter, eliminate errors, accelerate negotiations and approvals, and increase close rates.
Who Benefits from Contract Management Software?
Sales teams experience greater efficiency, shorter sales cycles, and higher revenue when the contract management process is automated and integrated with their other sales tools and CRM.
Legal teams appreciate the ability to lock certain contract blocks from being altered so compliance is a non-issue. The redlining feature allows stakeholders to negotiate while all recommended changes and amendments are tracked before final approval.
Finance teams benefit from easy access to contracts to ensure they meet financial requirements. Syncing with CRM and ERP triggers accounting and invoicing processes associated with the new contract.
Customer Success Teams
Customer success teams never miss an opportunity to renew or upsell since the contract management system triggers their CRM upon important deadlines and milestones.
Customers experience a smooth contract negotiation process and faster response to their requests for changes. Deals close faster when using contract management software, so customers can begin reaping the benefits of their purchase sooner.
What are the Must-Have Features of Contract Management Software?
The requirements for a good contract management solution, according to G2 include:
- Document repository
- Customizable templates
- Ability to internally and externally collaborate and create, edit, and share documents
- Meets all legal requirements and internal business rules
- Notifications when changes are required
- Tracking and monitoring every step in the process
How to Find the Best Contract Management Software for Your Needs
Contract management should be integrated with your CRM and be part of a larger platform that unifies all parts of the buyer’s journey (rather than a stand-alone tool). These integrated systems will keep deals moving smoothly through the pipeline and ensure there are no gaps in collaboration among departments and communication with buyers.
When searching for the right contract management software for your needs, look for these value-adding features:
- Easy to use and fast implementation time
- Real-time data and analytics
- Contract redlining and e-Signatures
- Works seamlessly with other tools in your Sales workflow
- Approval workflows and deal tracking
- CRM integration
What Does DealHub’s Contract Management Solution Offer?
DealHub Contract Management solution helps you move contracts and negotiations forward. You’ll close deals faster when all contract generation, tracking, approvals, contract redlining, and e-Signatures are managed within one easy-to-use solution.
Key Advantages of DealHub Contract Management Software
Easy to Use
DealHub streamlines contract creation using Predictive Sales Playbooks, which enable salespeople to effortlessly generate the right agreements that fully adhere to Legal’s guidelines.
Uncovers real-time insights on buyer activity to keep contracts moving and track where things stand in the contract negotiation process with your customer.
A Single Engagement Interface
DealHub provides a consistent customer experience with all deal interactions in one place.
Quickly facilitate obtaining signatures.
Oversight and workflows ensure all necessary departments are signing off on contracts before they are sent out.
Combined Document Generation, CPQ, Contract, and e-Signature all in one solution.
Seamless CRM Integration
Easy implementation and seamless integration with your CRM, including all the relevant fields pulled from the CRM and all the information automatically synced back to the account.
Review contracts and manage contract redlines while providing real-time status and visibility to all.
With DealHub all Teams are Aligned
Simplified Collaboration and Approval WorkflowWe’ve taken the complexity and wasted time out of the contract management process. The collaboration and approval workflows in DealHub are streamlined and efficient compared to other solutions. We’ve eliminated the need for email chains and numerous phone calls between the salespeople and the legal team. DealHub gives the right people permission to see sections of a document and make edits, including legal and finance, simplifying the internal contract generation processes.
A Transparent ProcessEliminate delays and create visibility into the sales process. Need to obtain a few signatures on a complex contract? No problem! You will know exactly who has read the document and who still needs to sign.
Generate All Your Legal Documents in One PlaceDealHub helps you quickly generate all the documents you need, from NDAs, MSAs, and Agreements to Quotes.
Re-use Previously Amended AgreementsDealHub’s Contract Generation and Contract Repository enable sales reps to re-use previously amended agreements. Our streamlined and organized approach to contract management increases efficiency and minimizes delays throughout the entire contracting process.
DealHub is Designed for Business LeadersUnlike many solutions, DealHub was designed and developed to be configured by business people – not developers. It’s easy to set up and customize – your team can be set up and using DealHub’s contract management software in a week. Would you like to reduce the time your sales team spends on administrative tasks so they can focus on doing what they do best – selling? DealHub helps reduce the load on your Legal team while facilitating faster sign-off on deals. Learn why we’re the highest-rated Contract Management software on G2. Take DealHub’s contract management software for a test drive. Contact us today for a demo to learn how DealHub will help your sales team close deals faster.
Free Guide: How to Consolidate Your Sales Stack
Consolidating your sales stack enables you to reduce training time, cut administrative costs, and focus on effective sales tools that tie directly into your deal stages.