The role of AI

12 Contract Management Best Practices in 2024

Is your organization struggling with the complexities of contract management? Are you finding it challenging to manage contract renewals using spreadsheets? Do you face challenges in coordinating multiple stakeholders within tight deadlines?

Accuracy and efficiency are essential to unlocking the full potential of your contracts. You’ll need a solution that streamlines the entire contract lifecycle management process—from drafting and reviewing to negotiating, approving, executing, and renewing contracts.

Research from McKinsey states that organizations adopting better contract management best practices help to achieve cost savings from 20 to 25 percent. The research states that following best contract management practices helps streamline the process.

In this blog, we will discuss 12 best practices for contract management that can help you establish an effective process for contract administration.

Let’s begin.

12 best practices on contract management for your businesses

1. Centralize your contract repository

Managing contracts properly is only possible with a centralized repository. Contracts undergo multiple stages from negotiation to signing and approval.

Often contracts get handled by various departments, stored in disparate IT systems, or even kept in physical filing cabinets. These manual processes result in inefficiency and also pose security risks.

Having a centralized contract repository:

ensures all stakeholders are on the same page while managing contracts.

enables precise monitoring of amendments and updates, crucial for maintaining contract integrity.

helps maintain an organized and searchable archive of all contracts and related documents, reducing time spent on document retrieval.

incorporates a control system with intelligent filters and search capabilities, making it easy to quickly access specific contracts.

allows managers to update contract statuses in real-time and offers an overview of contract data.

Overall, a centralized contract repository helps improve efficiency and manage contracts.

2. Standardize templates for contract creation

Not having a standardized contract system results in human errors, risks, and a slow contract approval process.

Standardized contract templates streamline the contract initiation process. A template library avoids language inconsistency errors across all contracts.

CLM software solutions like HyperStart help you standardize contract creation with pre-approved templates and a clause library. Our software also allows you to create templates and add custom clauses according to governing laws and business requirements.

3. Customize the CLM solution to fit your specific requirement

Every business has unique processes, compliance requirements, and strategic goals. One-size-fits-all software may not address specific requirements such as unique workflow requirements, industry-specific requirements, or integration with other business software.

Organizations use multiple software such as CRM, ERP, and procurement software, and it can take time to ensure that these systems work well with CLM software.

On the other hand, each organization has a different or unique contract management process that standard CLM solutions cannot support.

Implementing CLM software that offers customization helps adjust functionalities to fit your business processes. This creates a frictionless data flow with a holistic view of contract-related activities.

Manage Your Contracts with HyperStart CLM 5x Faster

HyperStart CLM offers AI to auto-extract metadata from contracts and create contracts in just a few minutes. We have handled 1B+ documents so far.

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4. Assemble a dedicated contract management team

Establishing a dedicated contract management team improves efficiency and consistency for larger organizations. The team helps with complex negotiations, compliance requirements, and ongoing management.

Contracts can be intricate and require a deep understanding to be appropriately managed. Mismanaged contracts can lead to issues such as:

Legal disputes

Financial loss

Reputational damage

So, forming a contract management team allows for more effective contract management on a large scale. This best practice allows an organization to improve operational efficiency and handle contractual obligations effectively.

5. Implement web-based CLM solutions

Web-based solutions offer accessibility and flexibility essential for today’s businesses. Web-based CLM platforms enable teams to access contracts and related data from anywhere.

Fragmented data across different departments leads to inefficiencies or errors. Additionally, traditional on-premises CLM solutions restrict access to office locations.

To resolve these challenges, web-based CLM software ensures that contracts and related data are stored centrally and accessible anywhere and anytime.

6. Establish contract management KPIs

Implementing key performance indicators (KPIs) for contract management helps track performance and identify areas for improvement. For example, measuring the average time to sign a contract, the percentage of contracts renewed versus expired, and the rate of compliance with internal policies and external obligations.

KPIs are a bridge to ensure contracts align with business goals and objectives. Setting up KPIs should be directly linked to critical factors in contract management such as cost savings, faster TAT, and compliance rates.

A modern CLM solution tracks contract performance to identify improvements and provides 360-degree views of your contract’s lifecycle.

7. Enhance contract reporting and analytics

Does your organization need more visibility, the complexity of data interpretation, or contract management risks?

Implementing contract reporting and analytics within your CLM process mitigates risks, drives efficiency, and delivers contract value.

Using the data captured in your CLM solution to generate insightful reports and analytics. These insights include:

Contract expiration reports

Obligation tracking

Spend analysis

Risk assessment

Time taken to review contracts

Regular reporting and analysis can help you identify bottlenecks, risks, and opportunities to unlock business potential.

CLM solutions offer advanced reporting capabilities, dashboards, and data visualization features that help to gain actionable insights from contract data.

8. Automate the contract management process

When contracts are managed manually, there are chances of errors, inefficiencies, and financial repercussions. Contract automation software helps you enhance contracting efficiency and accuracy, eliminate manual work, free up resources from repetitive tasks, and allocate them to higher-order work.

Within your contract management lifecycle, look for opportunities to automate tasks such as:

Contract creation process

Approval workflows

Redlining & negotiations

Obligation & renewal tracking

Contract risk analysis

Augmented with AI technology for automated metadata extraction, redlining, and contract retrieval, you can find tremendous value at every contracting step.

9. Optimize your contract negotiations

Manual redlining and back-and-forth negotiations delay closures. AI-powered redlining replaces multiple email exchanges and calls so stakeholders can collaborate and review contracts 75% faster.

CLM software like HyperStart helps businesses redline, comment, and provide suggestions in real time quickly and faster in a single workspace.

10. Utilize electronic signatures for contracts

Traditionally, organizations relied on wet-ink signatures, which require physical presence and delayed closures. Today’s business environment calls for a more efficient solution.

To resolve these challenges, organizations are adopting electronic signatures. Digital signature solutions like eSign, AdobeSign, and DocuSign allow you to collect legally binding signatures faster. This digital process eliminates the need for paperwork and in-person meetings.

Adopting e-signatures speeds up and digitizes the signing step.

HyperStart CLM, for instance, integrates these electronic signature tools to digitize and automate contract signing. It also offers hand-drawn, Aadhar, and OTP-based signing options. This approach allows businesses to accelerate contract execution and improve productivity while staying compliant.

11. Set up contract approval workflows

One of the best practices for contract management is automating approval workflows.

Automating contract management approvals eliminates email communication and automates the follow-up process. No-code workflows with conditional logic, automated reminders, activity tracking, real-time editing, and e-sign integrations are handy solutions that help you agree contracts faster.

12. Establish better collaboration between all parties

Communicating via email can become tedious and overwhelming. When you are handling multiple contracts, chasing approvals, reviews, or signatures becomes especially cumbersome. Different parties involved may interpret messages differently, which leads to misunderstandings.

With a centralized system, scaling contract collaboration becomes simpler. This software solution helps all your teams stay on the same page without frequent context-switching.

How HyperStart can help with automating contract management

HyperStart CLM software allows you to create, find, track, and agree contracts 10x faster. Khatabook and LeadSquared are some recognized organizations that use our CLM software to align and automate all contract management processes.

HyperStart CLM helps you with every stage of contract lifecycle management, from drafting to signing to storing and tracking.

Here is a list of benefits you get from HyperStart CLM:

2

minute contract creation

2

second contract retrieval

80%

faster contract TAT

Store all your contracts in a single place

Never miss a renewal again

Execute contracts in just 2 clicks

Follow these best practices for contract management

In this blog, we discussed the best practices of contract lifecycle management, such as centralizing contract data, using standardized templates, and automating workflows to streamline contract management. By implementing these best practices, you can minimize risks, improve efficiency, and drive better outcomes from contract agreements.

HyperStart CLM software automates the entire contract management lifecycle. Get a first-cut review of the SLAs, MSAs, or other contract agreements with 99% accuracy within a few seconds with AI-powered redlining. Additionally, you can integrate HyperStart with Google Drive, Salesforce, and OneDrive. Book a free demo with HyperStart.

Create Contracts in Minutes with HyperStart

HyperStart CLM is an end-to-end contract management software that allows you to create contracts 80% faster. With HyperStart, never miss a renewal again and execute contracts in 2 clicks.

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Frequently asked questions

Contract management software organizes and streamlines the entire process of creating, negotiating, signing, storing, and tracking contracts. It acts as a central database, making finding and referring to active agreements simple. This software also helps teams collaborate, ensures legal compliance, and provides valuable insights through data analysis.
Here are the consequences of poor contract management.
  • Financial losses due to missed deadlines, penalties, or overpayments
  • Legal disputes and lawsuits from contract breaches or non-compliance
  • Reputational damage to the company
  • Missed opportunities for a contract renewal or additional business
  • Operational inefficiencies and disruptions
  • Difficulties tracking contract status and critical dates
  • Here are the benefits of contract management.
  • Better control and visibility of the contracts
  • Streamlined contract management processes
  • Enhanced compliance with standard clauses
  • Reduced risk of missed obligation/renewals
  • Cost savings from avoiding penalties/revenues
  • Data-driven insights for contract process optimization
  • The legal team's role in contract management is to draft, review, and negotiate contract terms in the interest of the company and other compliance regulations. The procurement team's role is to find quality vendors, negotiate favorable pricing and terms, and procure quickly and safely while maintaining sustainable supplier relationships. With the CLM system, both teams are empowered to fortify business relationships and realize contract value in both numbers and trust.
    Organizations should review and update their contract management processes at least once a year. However, larger organizations have complex obligations that may require more frequent reviews, such as quarterly or bi-annually. Regular reviews help identify inefficiencies and ensure processes align with the company's evolving needs.

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