Contract Management

Part
01
of three
Part
01

Contract Management - Hardships Large Businesses Face

Contract management hardships faced by large businesses are overall in the area of not being centralized which exasperates the sheer logistics of mail-execution of contracts, maintaining contracts that are not in writing, inabilities to track key dates within contracts, and also calculating and tracking contract costs. They are also influenced by the human element such as the use of boilerplate language, the business's ability to adhere to business rules, the operational effectiveness of the business structure and the challenges of compliance performance and the resulting reporting challenges. The variety and amount of contracts being generated can cause difficulties in developing a centralized, logistical infrastructure for making, executing, recording and recalling contractual information. Other issues involve the business operational behavior and performance, as well as the boilerplate language used to convey the contract information.

Lack of Centralization

When asked to rate the extent to which certain contract management issues present a challenge within their organization’s management of contracts, 61.50% of respondents put having to deal with scattered contracts as one of the most pressing issues. (Note: the percentages cited throughout this article don’t add to 100% because respondents were allowed to select multiple answers.)
65.15% of respondents used paper in the process of managing contracts.

While all the respondents didn’t use contract management software, those focusing on paper were the ones citing a lack of centralization the most. When contracts are sitting in a filing cabinet, they’re holding back contract managers for two reasons. First, a delay in access to contract data leads to slower decision-making. Second, a paper-based contract management system doesn’t provide insights as to how existing and new contracts are interconnected, which can lead to missing out on critical information.

Executing Contracts Via Regular Mail

Talking about unnecessary delays in contract management, contract execution can be a major pain point in any contract life cycle. Printing out and mailing out a contract so that the other party reviews a contract, only to send it back with revisions, is a very inefficient process. Emailing out contracts so that the other party prints the contract out, either to mail back or email back a scanned copy is also not efficient. A company should leverage e-signature capabilities of contract management systems to execute contracts faster.

Keeping Track of Contract Costs

Cost efficiency is another major issue in government contracts. For example, the Pentagon held back $5.2 million in payments to Boeing after a crackdown on a regulation that took effect in 2011 and required contractors to meet standards from internal reporting systems. Several government contractors have been slow to adapt digital systems to keep track of costs. Manual systems for record-keeping and cost-accounting are ineffective because they never allow the client or contractor to have a real snapshot of a project’s budget due to the inefficiency of systematic human data entry.

Maintaining Contracts Not in Writing

As contract managers, nothing can be more frustrating than something you can’t control. While verbal contracts are supposed to hold up just fine in court, the reality is that verbal contracts are open to interpretation from each party. However, there are certain “agreements” that may be older that the enterprise itself.
Things are even more complicated when those verbal agreements depend entirely on the good relationship between two people. If the relationship were to go sour, what would happen to with the agreement? It goes without saying, any contract needs to be inside of a contract management system in order to have no doubts about the terms and conditions.

Inability to Track Key Dates Within Contracts

One of the key pieces of contract data often being missed in the business services' industry is the schedule within a contract. 61.2% of respondents reported an inability to track key dates within their contractual relationships. 71.88% of individuals in a purchasing or procurement role are the ones that most frequently cited this concern.

A good example was the lack of good quality data on the MoD’s portfolio of non-competitive contracts created challenges for MoD in achieving savings. For example, as its contract database contained out-of-date information, the MoD struggled to identify the contracts due for renewal or amendment and that may fall within the scope of the Single Source Contract Regulations.

Dealing with Boilerplate Language

One of the benefits of boilerplate language is that it speeds up the execution of contracts. However, boilerplate language should be reviewed on a regular basis to make sure that it meets internal and external compliance requirements. A rule of thumb is to review standard contract language every 6 to 12 months. One important benefit from a robust enterprise contract management system is the ability to handle several contract templates.

Unlike paper-based contract management systems, a company is limited to a single template. The digital system allows for several templates to be implemented. Even more, the system allows managers to assign access to certain templates to specific individuals. This way, any doubt about what is the right template to use is prevented.

Lack of Standardized Language

While only 54.1% of respondents to Contract Logix’ survey singled out a lack of standardized language as a challenge, this issue shouldn’t be taken too lightly. Information asymmetry is a serious issue because it creates risks that are taken into account in any contractual relationships.

Inability to Adhere to Business Rules

When examining the relationship between the roles responsible for contract management and the challenges experienced in managing, the most frequently cited challenge by experts in contracting is the inability to adhere to business rules.

Operational effectiveness

Operational effectiveness includes whether contact information is stored in multiple locations, inconsistent terms and conditions, lack of consistent use of standard templates, and contracting decisions that are not aligned or centralized. Regular assessment of operational efficiency of contract management provides a clearer path to having an effect management of contracts.

Compliance performance and reporting challenges

Challenges related to compliance performance include lack of a performance goal, measures, metric and tracking mechanisms of contracts compliance, and absence of performance management, resulting in increased cost compliance with contract terms. If reporting doesn't occur, large business can fall out of compliance and be liable for penalty.

CONCLUSION

To wrap up, the ten areas of contract management listed above allow any large business to find their own focus points in order to stay on top of and ahead of contract management. It is key that the logistical infrastructure of handling a contract is correctly addressed in order to allow for centralizing contract information and digitizing execution to be effective. Another infrastructure to modulate for greater management is human resources. This includes using clear and standardized language, refining the boilerplate language, writing out the verbal contracts made, regularly assessing compliance performance, and being operationally effective.
Part
02
of three
Part
02

Contract Management Software - Important Features

Introduction

There are a set of 11 distinct features that constitute an efficient contract management software, which have been listed below. The features were selected based on the recommendation from industry experts and the frequency of their appearance. These are general features, applicable for software targeted at any industry.

For the specific industries stated in the request i.e. staffing, financial, real estate, and event management, we searched for the best industry-specific contract management software, based on user ratings. These software systems were studied as ideal examples for contract management systems in the particular industry, and key features were extracted for your consideration.

Important Features

1. Content Creation
The content management system should have a feature that guides a business through the process of drafting a contract for the party they are working with. The software should enable open communication and collaboration between all parties involved in the contract, in order to create a contract that each party will be content with. Also, keeping an electronic copy of the contract makes it readily accessible for reference, while maintaining a soft backup in case the original version is misplaced. This would be most applicable for real estate and financial institutions.

2. Examination
To avoid the high risk of errors in paper contracts, an effective contract management system examines the contract for quality and feasibility, in order to ensure that no logical gaps emerge during the execution of the contract. This is done to make sure that appropriate contract life cycle management protocols are followed, due to which, this part of the software is accessible solely to identified business personnel in charge of negotiations. This particular feature would be most useful for businesses operating in real estate, financial institutions, staffing, and event management.

3. Compliance
A contract management software allows both parties involved in the contract to accept or deny terms and conditions asserted by the client. In this way, the software ensures that both parties finalize a version of the contract that clearly states the requirements of the client. This would applicable for businesses operating in real estate, financial institutions, and event management

4. Workflow tools
An essential part of every contract management system, integrated workflow tools enables users to easily interact with the software for every command or query related to contracts — whether it is creating and storing a contract, or visualizing timelines for tasks that need to be completed by the contractor. This feature saves time and money for the business by allowing for easy interaction with the software. This would applicable for businesses operating in real estate, financial institutions, and event management

5. Electronic storage
The ability to collect, arrange, and store contracts into a centralized electronic system that can be easily managed through the contract management software is a key feature to be considered. Greater the size of data that can be stored in the system, greater will be the operational efficiency of the organization (as the need for hard copies of contracts can be eliminated). Making modifications or signing agreements is easier with electronic copies, saving the space and costs of maintaining hard copies. This feature would be extremely useful for businesses operating in the real estate and financial sectors.

6. Corporate governance and compliance
According to a study by Fulbright & Jarowski, about 60% of corporate litigation in the U.S. and U.K. is caused due to contract breaches. Tracking down contract history for communications and documentation to enable auditing can be a cumbersome task if done manually. Therefore, a contract management software should provide a full audit trail for each step of the contract creation and execution.

7. Access restrictions
The database of contracts should be adequately secured i.e. accessible only to qualified personnel of the organization, or other specific permission-based roles as decided on the discretion of the database administrator and negotiators. A contract management software with this feature will be able to prevent unauthorized modifications to any contract, and ensure that the data is not compromised in any way.

8. Activity tracking
Every contract management software must provide an activity tracking feature, also known as an audit log, which captures and records any and all activity that occurs in the database. This means the database administrator will be able to see all actions performed when they were performed, and who conducted the task among other factors.

9. Customizable alerts
The users of the software should be able to automate processes related to any contract. This includes features such as email reminders of tasks to be completed, or configurable settings for budget forecasts.

10. Tech Support
This is not a feature integrated into the contract management software but should be provided by the software development company to ensure the smooth running of the software.

11. Coordinate processes across different platforms
The software should work across every platform, linking each contract to the related vendors, tasks, products and more. Users should also be able to configure templates, workflows, fields and rules as needed.

Industry-specific features

1) Financial firms
The features that a contract management software must have for a financial organization include corporate governance, strict compliance of contract by all parties involved, and provision of workflow tools.

Examples -

LaserFiche software
LaserFinche’s software protects business organizations from compliance infractions through large-scale governance and compliance feature.

Selectica software
Because Selectica’s customers come from a wide variety of industries (including financial services), they provide an industry-specific contract creation process that adheres to strict legal mandates. Their entire software is automated to produce smooth creation and execution of contact processes.

ASC Contract Management
ASC is adept at creating, storing, tracking and reporting on contracts, all conducted through Salesforce software. They provide a variety of workflow tools including delivering notifications for important contract dates, as well as ensuring each contract meets specific compliance regulations.

2) Real estate and Staffing (HR)
Note: Specific software sources could not be found for the event management and staffing industries. We did conduct a study for HR software systems, to be considered in close relation to staffing, which is presented below.

For real estate and staffing, contract management organizations must be able to guide business users through the contract creation process, provide electronic storage and workflow tools, while coordination processes related to each contract in the database.

Examples-

ContractRoom Software
The software helps the user through the entire process of creating a contract and enables collaboration on paperwork to execute the contract. Contracts can be signed and stored electronically, while workflow tools allow the creation of timelines and task execution. The system can integrate across several email service providers such as Outlook, Gmail, and Calendar.

Agiloft Contract Management Software
Agiloft enables users to map business processes, as well as link contracts to related accounts, vendors, opportunities, and products among many others. Contract expiration and renewals are automated processes, and customized alerts through email and notifications can be configured based on preferences of the user.

Conclusion

The above findings provide a broad set of features to be considered while building a contract management software solution for businesses. Out of the 11 key features, some features could be considered particularly important based on the type of industry it is targeted for.



Part
03
of three
Part
03

Best Practices - Selling Business Software to Companies

Through our research, we were able to identify common best practices in selling software to a wide range of businesses. Specifically, these practices work well for enterprise selling, which focuses on high-volume/dollar sales to businesses. These methods include ROI pitches, communication of long-term benefits, and understanding your client's problems. More importantly, one should focus on establishing credibility with buyers. Below we will elaborate on these points.

Best practices

Most businesses will be wary of buying relatively expensive software. Of course, in order to effectively alleviate a client's doubts, it is imperative that one fully understands the scope of their business problems. Thus, a sales pitch should highlight how the proposed software-solution will meet the client's challenges and how it will create savings; this is an approach focused on return on investment or ROI. To further corroborate a solution's effectiveness, case studies detailing how previous customers benefited from the solution can be provided.

A pitch must also explain to the buyer how the software-solution will remain advantageous in the long-term. Essentially, this would answer the question of how the solution would promote overall business efficiency and continue to do so.

Perhaps less intuitive is the notion of selling the solution instead of the product, but it ties in directly with the previous points. This comes back to understanding the issues the business faces and offering a solution that directly targets them. Moreover, one should highlight key differences between the proposed solution and competing ones.

Credibility and relationship building

Establishing credibility with prospective clients is possibly the most important factor in successfully selling a software-solution. To do so, one must communicate directly with the decision-making person(s) in a business. This will help to target the buyer's criteria throughout the sales pitch. On top of this, building a close rapport with the client will solidify their trust in the solution. Sending personalized gifts and keeping a professional form of communication, such as through LinkedIn, are valid options.

After the sale, buyers often need additional support and want to know that it is accessible. As such, remaining present during the transition phase is another critical practice. This can include supplemental training to ensure that the client's staff can fully operate the new software. In general, being available to handle any difficulties a buyer may have with implementing the software-solution is conducive to building credibility.

Conclusion

Targeting the client's needs and explaining how the software-solution addresses them, understanding the client's business pains, highlighting long-term benefits, taking an ROI-focused approach, and differentiating the solution from competing ones are all effective practices in the sale of business software. As well, sustained communication with decision-makers, sending gifts, and providing post-sale support are fundamental ways of establishing credibility with buyers. These practices are not particular to any industry, hence they are fundamental in enterprise selling to any business.



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