Successful contract negotiation is critical for the long-term success of your business. When big deals are on the line, even a small misstep can lead to financial loss.
But contract management is tough because most businesses have too many contracts to keep up with. PwC found that most companies manage between 20,000-40,000 contracts. With such a high volume of contracts, problems are bound to occur.
It’s important to regularly audit your contract management process. A quarterly audit will help you identify bottlenecks and areas where you may be losing money. And most importantly, it’ll help you maintain strong customer relationships.
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How to Audit Your Contract Management Process
A quarterly audit is the best way to root out any problems in your contract management process. This process looks different for everyone but here are five areas you can start with:
Accessibility
Where does your company store contracts and how easy are they to access? Too many B2B companies still rely on a shared folder in Google Drive or worse, a filing cabinet to store their most important contracts.
The problem is that at some point, one of your employees will need to access a document and they’ll waste valuable time searching for it. You should evaluate how your contracts are stored and how easy they are to find.
Templates
Contract templates make it easier to draft and revise contracts. But if your company is relying on outdated templates, then you’re exposing yourself to possible financial and compliance risks. You want to make sure your templates are up-to-date, accessible, and easy to use.
Compliance challenges
Compliance issues are a common problem in contract management. And they should never be ignored because they can affect your bottom line and hurt your relationships with your customers.
Did you run into any compliance challenges during the previous quarter? Where are these issues occurring and how you can avoid similar bottlenecks in the future?
Chain of command
Most companies have 7-9 steps in their contract management process. There should be a standard chain of command for contract negotiation to ensure nothing gets missed. But nothing disrupts the chain of command like having key employees leave the company.
Have any staff members recently left the company? Have any other significant changes taken place that could affect the chain of command and slow down the contract negotiation process?
Systems
During every audit, you should evaluate whether there are any new systems you can implement. Let’s say you realized during an audit that your company is storing contracts inefficiently. Is there any new software or system you can use to improve this process?
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Final Thoughts
In the past, contract management often varied among departments with different employees following different guidelines. The final contract was usually paper-based and stored in the company filing cabinet down the hall.
If this sounds familiar, then the best way you can improve your contract management process is to automate it. Updated workflows can make your contract management process easier to manage once they’re done.
One of the most painless ways to improve your contract management system is by implementing a cloud-based contract management system. This will make everything from storage to automation easier. Plus, once you have implemented the cloud-based system, auditing your contract management process can be done with less effort and in less time.
