To keep your contract database healthy, you need regular audits. These projects are comprehensive reviews of your system. Why shouldn’t you just leave this up to your internal audit system or an annual review? Because you need to be sure that you aren’t missing any of the important details when it comes to your contracts and your clients. You need to have your finger on the pulse of your database so you know that:
- The terms of your contracts are being met properly.
- There are systems and notifications in place that trigger when those terms aren’t met.
Before you begin any projects, see how auditing fits into your contract management process as a whole. Auditing and correcting records should be standard practice so there are no unpleasant surprises. Creating quarterly projects or making time for creative improvements will make the general day-to-day auditing easier. Ready to improve your system? Include these projects in your audit system.
Project #1: Check Your Storage and Filing Systems
Take a look at your filing system. Can every member of your team who needs to be able to access your contracts access them easily? Does your filing system make logical sense? Ask a member of the team — or another team, if getting rid of silo mentalities is a priority — who does not often open your contracts to find a specific contract. If they can’t find it easily, you may need to revamp your storage system to make it easier to locate contracts at will. Keep in mind everything that the team may need to be able to access, including:
- Past versions of contracts
- Standard contracts
- Terms you’re willing to negotiate
- Lists of non-negotiable terms
This is also an excellent opportunity to collect final documents that never made it to your repository. Some companies require manual signatures, and those PDFs might be in someone’s inbox.
Project #2: Evaluate Your Contract Templates
Chances are, most of your contracts meet the same basic standards. You may have variations for specific customers, but you likely do not deviate much from those standards. This is a great idea, but even those core documents should be improved over time. Your jurisdiction, your business demands, and even the laws that apply to your industry might have changed, and it may be time to write up new contracts altogether.
Using contract templates can make it easier for your negotiation team to put together contracts that will satisfy both your team and your clients. It’s important, however, to periodically audit and evaluate your contract templates to ensure that they are still meeting your current needs. Are the terms you include in your contracts still relevant? Do they still meet industry compliance standards? Remove any templates that no longer meet your needs — and alter your existing ones as needed.
Project #3: Examine Your Reporting System
Do you have a system in place that will automatically report any potential issues with your contracts? Ideally, you want your contract management software to flag any potential problems, including:
- Industry compliance issues, including potential problems with payments, OSHA regulations, or anything else that could fall back on your company
- Terms your company cannot meet due to insufficient funds or personnel
- Any potential terms your company has not met as you execute your contractual responsibilities
If your contract management software isn’t set up to flag potential problems, consider how you’re currently identifying them. In some cases, that system may be inefficient. In others, you may need to completely revisit it — especially if you’ve missed out on important problems with contracts in the past.
Project #4: Audit Your Approval Process
When you’re in the middle of auditing your system, take the time to audit your contract approval process, too. Your contract approval process can make or break your interactions with many of your clients. A too-long process can slow down interactions with your clients. That will make it difficult for you to move forward with the work you need to perform. Ask:
Does every department that needs to look at a contract look at it before it moves forward?
Teams involved in complex projects may need to sign off on contracts, but this should be a rare occurrence. If this happens because you haven’t standardized terms for a specific area of your business, consider standardizing them. Then you take that department off the list and shorten the long-term workload.
Is it necessary for everyone in the contract approval line to look at your contracts?
You should only need manual approvals for concessions that deviate from your business norms. As you audit your contract approval process, consider removing anyone who is not actively benefiting the process. Even if you need that approval process, consider spreading out the approval responsibilities. A financial director can approve deals below a certain dollar level, for example, so the CFO only sees big-ticket items.
Is there anywhere that the contract approval process routinely bogs down?
Is there a specific person or department that takes too long to sign or approve a contract? Do you frequently find your team waiting on one individual? Take a look at what you can do to streamline the contract approval process. That may mean lightening that individual’s workload or setting key deadlines.
Do you always know where your contracts are in the approval process?
Knowing where your contracts are and who needs to approve them next will make it easier for you to keep up with all of your contracts. It will also prevent them from getting lost. At the end of the day, knowing where every contract is at a moment’s notice will help ensure that you don’t miss out on customers because it takes too long to move a contract through.
Regular audits of your contract database can help streamline every aspect of your contract management system. You can’t afford to leave your contracts to chance. Instead, implement frequent audit projects, look for areas you can improve, and make your software do the heavy lifting.