What would you think about a baseball manager whose only accomplishment is getting all his players into the dugout before the game? You’d probably think he isn’t a very good manager—and you’d be right. Getting everyone to show up is just the first step in managing a team, not the entire job.
Then why do many companies think of contract management as getting all their contracts into one place? Building a place to store your contracts—usually called a repository—is important, but it’s only the first step. To truly manage your contracts, you need to do more.
At Apttus, we see five stages of a complete contract management solution. Beginning with a repository, you can take contract management from a check-off handled in the back office to strategic driver of your business. Here are the five building blocks to making your contracts a key accelerator of sales, efficiency, and bottom-line savings.
1. The Repository
The first thing you need to do is build a repository, a digital storage place for all your contracts. A good repository is more than a digital filing cabinet. It should capture and store metadata about each contract, track key information about the contents of each contract, and allow full text to be searched. A repository should meet high standards of security, uptime, access speed, and capacity, and be available to those who need to use contracts.
If your contract meets these standards, if can be considered a high-integrity repository. If your repository doesn’t meet these standards, the first thing to do is improve it. Throw out the shared network drive or mainframe and get a high-integrity repository.
2. Reporting and Analysis
Once you’ve built a high-integrity repository, the next step is reporting and analysis to create daily value for your business. You can manage obligations, set up renewal alerts, identify risks that can slow deals and procurement agreements, and much more. With this building block in place, the value of your contracts begin to flow out of the legal and finance teams to impact sales, supply chain, operations, and other teams in positive ways.
Many companies believe this is the pinnacle of contract management. If you achieve reporting and analysis, you will have gained substantial cross-functional value for your business. But there are still three more stages to go, which can enable you to realize even more ROI.
3. Authoring and Negotiation
Now that you have full control of the contracts themselves, next it’s time to take control of the contract creation process. At this stage, you are not only creating a place for your final contracts, you’re also creating clause and template libraries. You’re using the power of technology to more effectively manage how you create contracts, how you manage approvals, and how you negotiate. With authoring and negotiation tools, you’ll accelerate deals and capture more deal value.
Most attorneys draft contracts in Word, so to get the most advantage, you want your contract management system to allow you to stay in Word and seamlessly sync to your templates, clauses, and approvals.
The fourth building block of contract management is system integration, in which you contract management system becomes a seamless c part of your CRM, ERP, and Quote-to-Cash processes. You can gain a jump on this stage by using a contract management application built alongside an existing CRM system, such as Salesforce or Microsoft Dynamics CRM.
The contract is the center of your commercial relationships, so if your contracts speak to these other systems you can maximize the value you gain from each contract. When your systems flow together, you can offer an end-to-end customer experience based on your contract language. You can provide seamless supplier management virtually free of errors.
The pinnacle of contract management excellence is adding machine learning. Only once the earlier stages are complete can you take the next step to make your contracts a true competitive advantage.
With intelligence, you can set a goal and guide your contracts toward achieving that goal more completely than previously possible. You can determine the best uplift to build into your contracts to maximize revenue. You can understand what contract terms are associated with the most customer lifetime value. You can maximize revenue, or maximize profit, or improve customer retention—whatever goals you set, and you can improve those metrics over time.
Intelligent contracts could, in time, contribute to measurable bottom line results. At this stage, contracts have long ago ceased to be a back-office afterthought dealt with as quickly and cheaply as possible. Your contracts have taken their rightful place as the drivers of your business.