When startup business owners are asked about most important business processes, finance, IT and human resource management make the list, but contract management rarely features. However, regardless of the nature of your business, you are most likely to use contracts at some point.
Keeping an eye on your startup contracts is increasingly important because poor contract management can result in loss of sales, penalties and even a lawsuit. The mortgage documentation problem of US Banks in 2010 is an ideal example of poor contract management. The issues that surfaced ranged from missing data on regulatory and contractual forms to questions regarding which company was the actual owner of the mortgage.
Startup tips for effective contract management
1. Keep a standard process
A typical startup’s process of contract management is actually quite lengthy. Usually there is a separate department overseeing the contracts and its procedures, and most of them do in manually.
Meanwhile, suppliers, customers and vendors can ask for status updates. This means that the contract management team has to enter the same information frequently along with correcting any inaccurate information that is identified. All of this leads to wastage of time and resources.
You can avoid the inefficiencies through contract management software. Contract management software will prevent your startup from going through internal and legal complications that arise due to poorly managed contracts. The software can be used for managing all types of contracts, digital signatures, standard reporting and creating unlimited custom data.
2. Integrate compliance management into the process
Compliance management documentation is a hassle for most startup businesses, and they take a great deal of pain to get it done. However, the authority of the policies is often left to manual processes.
Even the most responsible contract management department can overlook compliance issues unless there is an automated system that is self-implementing the policies. With contract management software, your policy will not only be implemented, but it will actually be a part of the process.
3. Make requesters a part of the process
Whether it is the employees, partners or customers who are requesting the contract, let them enter data directly into the software. A particular department doing the job will have to dig deep for the information and can easily type missing information into the system.
Requestors, on the other hand, will provide accurate pieces of information because they will be creating their own credentials. This will save you time and also ensure the contract management cycle goes smooth for all parties involved.
IBM’s EMEA contract management business executive Loana Canescu terms contract management as the ‘central nervous’ system of any organization and states they provide the framework for managing risks and keeping on top of communications. As more complex business relationships are accompanied by higher risk, contract management is a necessity. More startups CEOs are recognizing they need to invest into technology for keeping risks at bay.
Sophisticated software will allow you to transform the contracts into data and provide measurable analytics. Effective management of contracts will also give your company a competitive edge in the industry.
What do you do to manage contracts? Feel free to share your views in the comment box below.