Our experts have composed a simple list of a few practical approaches you can take that will help you to make your company’s contract management a bit smarter and a whole lot easier.
This list gives you some ideas on how to proceed towards better contract management, and furthermore, towards better corporate governance. The more complex processes related to Contract Lifecycle Management (CLM) naturally form a much broader entity than this list presents. However, this five-point list is a good starting point for any Contract Management project, and a task list for you to follow if this is your responsibility.
1. Identify: First, identify and list all the different contract types that you have
The common types are the following: Sales, Purchase, Co-operation, NDA, Service, Consultancy, R&D, Subcontracting, Distribution, Agency, ICT, License, Lease/Rental, M&A.
2. Trace and collect: Where are these contracts now located?
It is very common to have contract silos, meaning that the sales team will manage the sales contracts, HR will carefully shelters all the HR contracts, while the CFO sits on the financial contracts, and so on. To effectively operate and manage contracts in silos is impossible. Something needs to be done and you need to start by identifying the different contract types.
To trace all of these might take some time, but it is definitely worth it. A company that has its contracts in good order is usually a more valuable company in the eyes of any investor or tax auditor. If M&As are happening in your business, well-organized contracts and legal documents are a must.
Think carefully about where all these different contract types could be located. You will most probably need to go through the numerous possible locations, from the classic filing cabinets, to various personal inboxes, specific software modules (such as ERP or CRM or Document Management), to the most common location, i.e. your computer’s hard drive or your personal cloud drive.
Do not get too anxious, but take a pragmatic approach: what are the most important contracts for your daily business? Start with those.
- If those contracts are on your computer, you can utilize ContractZen’s Multifile Dropzone and drag and drop all of the contracts into the service simultaneously. This is very easy to do, and, furthermore, some of the key metadata fields will be automatically filled in. Just click the Plus-sign in the header or go tho whatever document category and you will find the dropzone.
- If the important contracts are you in your inbox, you can send the emails containing contracts or any other documents or meeting materials to your own ContractZen inbox. Just send the email to firstname.lastname@example.org and the email will appear in your inbox (just click the inbox icon in the header). Then you can import that email and document to your account (Note: If you have multiple accounts, just choose the account you want to import those documents from the upper right corner of the screen, where the account name stands). Note, ContractZen identifies that it is you sending this info by your unique email, so it must be the same as you used to register with ContractZen.
3. Set up user rights: Decide who is allowed to see the different types of contracts
It is good to have basic governance in place. List the key people who will manage contracts in your organization and map the contract categories with these people. There are six main categories within ContractZen: Contracts, Finance & Admin documents, HR documents and contracts, Transfer Pricing, Company Register and a general category for Confidential content. It is easy to carry out a corresponding user rights mapping in the system.
Naturally there will be some confidential contracts and also some, for example, HR contracts will not be for everyone’s eyes. In ContractZen, you can easily categorize and secure these types of contracts, while the rest of the basic contract base can be accessible for your selected employees in sales, marketing, customer service and so on. See how the access rights are managed in ContractZen here.
You’ll find instructions on how to invite colleagues to your account and give them access to these categories here.
4. Utilize reminders: Manage and add contract reminders
A forgotten contract end date can be costly for your organization. We have all heard sad stories about forgotten termination of a contract, and the resulting unnecessary costs that have then occurred. This is one reason why automatic reminders are important and helpful.
Your contracts can be divided by the validity type, for example, either a fixed period or valid until further notice. Both types need specific reminders so that you can, in time, check out a certain contract and its terms, and then decide what to do with it: terminate, continue or perhaps re-negotiate.
It is wise to set up an automated reminder a couple of months before the contract period ends. In ContractZen, a default, automated reminder is available 42 days before the contract end date. You can set up as many additional reminders as you wish.
Below you can see an example of a contract's metadata. On the right side you can see files attached to this document
5. Complement information: Add other corporate legal documents for audit purposes
After storing your basic contracts into one single repository, why not add the following documents as well:
- Your board meeting material and
- Shareholders’ meeting documents;
- Key financial documents.
If you have both contracts and the above-mentioned legal documents in one secure storage, your company will be ready for any external or internal audit. Whether it is tax audit or due diligence audit before an M&A, you will be safe, and you will be able to carry out a simple search to gather all the relevant material for the auditors. This can be done in minutes instead of the normal painful search procedure that takes days!