How to use contract planning to your advantage

Contracts are a vital tool businesses use to extend, negotiate, and accept business deals.

As such, contract management and planning plays an essential role in the execution of deals and is more than just drafting and signing contracts—it encompasses the entire process of contract creation, analysis, negotiation, and implementation.

By giving businesses a clear understanding of each stage of the contract lifecycle, contract planning helps reduce risk, boost productivity, and ensure that your contracts deliver optimal value and results.

Read on to learn more about how you can use contract planning and management to your advantage.

1. Organize your ecosystem

Before designing and implementing a contract planning workflow, you should develop a map of your contract ecosystem. Your contract ecosystem refers to the kinds of contracts you use, how often they are used, and which require the least (and the most) amount of work.

Separate your personalized contracts from your standardized contracts. Personalized contracts are agreements that require you to make actual and significant changes to templates. Examples include mergers and acquisitions and enterprise agreements.

Unlike personalized contracts, standardized contracts don’t need to be individually edited or reviewed, as they typically use similar or even the same language for all signers. As such, you can mass-produce them using templates with only a little manual tweaking.

2. Design a workflow with the right approvers in place

After you’ve mapped out your contract ecosystem, the next step is designing a workflow that automatically assigns certain types of contracts to the right approvers.

Note that only some contract types require approvers. You’re more likely to need approvers for personalized contracts or standardized contracts that have been redlined or edited with terms that are outside of the scope of the basic contract. This usually happens:

  • For contracts over a certain amount
  • When the signer, partner, or client wants to switch out terms that weren’t previously approved

Here’s how you can assign these contracts to the right approvers:

  1. Look at the way you’ve organized your contracts. Note which types of contracts are personalized.
  2. Put your standardized contracts in your CLM’s automated workflow. Your CLM should have a self-serve workflow creator that anyone in your organization can use, regardless of department. Ideally, it should work right out of the box, without the need for technical expertise or long implementation times. Users should be able to build and launch contracts from templates in minutes, not days or weeks.

Since Legal only has to edit the contract types that require approvers, they will have more time and energy to focus on contracts that require their expertise. This, in turn, will enable your organization to accelerate the contract management and organization process.

Your CLM’s workflow creator should also:

  • Have a centralized hub for all contracting requests, whether the contracts are on third-party or company paper
  • Empower users to create contract workflows by simply uploading a template, tagging fields that need to be provided, and adding signers and approvers
  • Let users add conditional approvers and contract clauses as needed
  • Let users adjust approval routing, modify contract template language, and send instant updates
  • Provide guardrails to ensure 100% automatic compliance

These functionalities will further empower your business to turn contract planning from a barrier into an enabler.

3. Increase efficiency through collaborative contracting

The next step is to boost efficiency through collaborative contracting tools, such as a real-time editor. This editing tool should help Legal manage the revision and redlining process in one place without forcing others to do the same.

Specifically, it should let users from all departments edit, comment on, and track changes in files while staying connected to stakeholders and colleagues. This will:

  • Give Sales insight into where their contracts are
  • Let Finance know the costs of contracts moving through their system
  • Give company executives insight into the overall performance of contracts

All in all, this will make contract planning much easier for everyone in your organization.

Many companies use Google Docs as their real-time collaborative contracting solution because it allows parties to comment on and track changes on contracts in real-time. You can also send contracts by simply tagging or adding users to the document, which is much simpler than saving the contract, attaching it to an email, and waiting for responses.

4. Design your contract planning process according to departmental KPIs

Finally, you should design your contract planning process with departmental key performance indicators (KPIs) in mind. A KPI is a measurement of your organization’s performance over time for a specific objective. KPIs help a particular department track particular goals.

Let’s suppose Legal’s goal is to reduce the negotiation or redline rate. In that case, the KPIs you should focus on are:

  • The number of contracts that are redlined
  • The number of turns it takes to come to a final agreement
  • Which contracts are redlined the most often

By looking at these KPIs, you can discover whether you’ve been wasting too much time and money on standardized contracts like NDAs. If these metrics are indeed too high, you can plan your contracts to pre-empt frequent negotiation or set up processes in place to handle this.

One of the ways you can reduce spending on standardized contracts is to adopt user-friendly templates and terms that you know the signing party would be amenable to. This could reduce the number of hours spent on these simple contracts from 10 hours per week to one or two hours per week.

Choosing the best CLM software for contract planning

Contract planning and management can make or break your organization. If your contract planning is successful, it will help you reduce risk, boost productivity, and ensure that your contracts deliver value.

Use contract planning to your advantage by:

    1. Organizing your contract ecosystem
    2. Designing a workflow with the right approvers
    3. Increasing efficiency through collaborative contracting

 

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