With 2020 beginning, you may have a number of new goals for your business. Some businesses use the arrival of the new year as an opportunity to change directions and focus on new aspects of their business. Others want to see increased profits or to decrease their frustrations (or their customers’ frustrations) in specific areas of the process. In order to meet your 2020 goals, use our guide to give your current contract management system a complete assessment. In particular, take a look at your contract scoring schema and refine it so that it reflects your goals for the coming year.
Step 1: Clearly Define Your Goals for 2021
In order to change your contract scoring schema to reflect your new goals, you must first know what those goals are and how they have the potential to impact your business for the coming year. Your goals might include:
- Better understanding the needs of your customers.
- Marketing more effectively to increase your sales.
- Reaching a specific segment of your market.
- Reducing your overall business expenses.
- Increasing productivity across your business.
- Bringing in more return business through customers who renew their contracts with your company.
When you have a solid understanding of how you’re approaching your goals in the coming year, you can then ensure that your contract scoring reflects those goals.
Step 2: Consider How Your Goals Impact Your Contracts
Take a look at how your business goals have the potential to impact your contracts and the way you deal with your customers. How much your business goals will impact your existing contract management processes depends on your specific goals for 2021. So consider some of these important questions before altering your contract scoring schema:
Are your priorities changing in 2021?
Your business’s priorities likely determined the weight you placed on each element of your contract scoring schema. For example, if you’ve always focused on customer service in the past, you might have put more weight on a contract that allowed customers to make changes to their existing plans. If, in 2021, your priority is shifting to cutting costs, you might put in more penalties for customers who change direction or make alterations mid-contract. Evaluate how your priorities have shifted. Also, note how that changes the weight you have placed on different attributes of each contract.
Do you need to change the options available on your contracts?
If you’re using effective contract management software, you’ve probably created several basic contract templates that allow your sales team to easily put together contracts for new customers. In some cases, as your business priorities and goals change, you may need to change those templates and options. Consider:
Do you need to add new options or services?
As you expand your business’s offerings, you may need to alter the face of your contracts. Make sure you include those options in your scores as you evaluate potential risks for your business. This includes potential compliance changes and how much those new options will cost.
Do you need to remove existing options or services?
You may choose to no longer offer options that have posed too much risk to your business in the past. If you choose to continue to offer those options, you may want to increase their risk score. Alternatively, you can change the way you approach your contracts to help minimize that risk.
Have you changed your prices?
Scoring your contracts often includes the price as well as the risk. Have you made changes to your pricing in 2021? You may need to change the prices available on your contracts and shift your risk scores accordingly: as your prices change, it will take a higher dollar amount to make up for the same risk you would have accepted at a lower cost before those changes.
Step 3: Determine an Acceptable Level of Risk for 2021
At the core of your contract scoring schema is how much risk your company can handle at any given time. Every year, the level of risk you can comfortably accept for your business can change. This is due to past performance, the economy, and your goals. For example, you may have had some very good years or you have several long-term clients. Then you might be more comfortable accepting a higher level of risk in other areas of your business. However, some risks you should avoid include:
- Clients with a history of backing out of contracts.
- Companies that were late making payments.
- Clients that demand complex interactions or cause other problems for your business.
- If you’ve faced regulatory or compliance changes.
You may need to dial down the risk you’re willing to accept if your company faces these hazards repeatedly. So make sure your contract scoring matrices and KPIs reflect these changes quantitatively. Then, you can ensure that your business makes it through 2021 more effectively.
As your goals for your business change and grow, so does your contract tracking and scoring system. Evaluate your contract scoring system at the beginning of every year. Because of that new insight, you can ensure that your business does a better job of meeting its goals and providing a high level of excellence. So contact us today for the tools you need to make it happen.