While 65% of registered voters believe we are already in a recession, experts such as Wells Fargo Chief Economist Jay Bryson are saying “not quite”— but we can likely expect a recession by mid-2023.
So, how can you ensure your company stays ahead of a downward economic swing? By getting more value for your dollar.
But it’s not that simple.
With US inflation just passing 9%, it's been difficult for Americans and businesses to get ahead. Coincidentally, 9% is also the average amount of revenue left on the table due to inefficient contract management.
According to Harvard Business Review, poor contract management leads to a 5-40% loss of value on any given deal. This means finance executives are looking to procurement teams and in-house counsel to find ways to cut costs or get more value from a given deal. However, they often overlook contract management as a root cause of thinning profit margins.
Luckily, it doesn't have to be this way. Here are four contract management tips to help protect your company during any economic uncertainty.
- Keep Hiring Processes on Track
- Streamline Department Communication
- Automatically Track What Matters
- Find a CLM Tool That Supports Company Growth
1. Keep Hiring Processes on Track
How does efficient contract management affect your company's bottom line during the hiring process? Probably more than you think.
Maintain your internal hiring processes by ensuring you have a user-friendly and cost-efficient way to bring new people on board. Doing so will reduce turnover, aid the economy, and strengthen your organization.
For human resources departments or hiring managers, having a contract management platform to manage all new hire documentation prior to their start dates is one of the most critical parts of maintaining an efficient hiring process.
Are you hiring multiple people for the same role or in hiring classes? Whether you're filling one or multiple roles, NDAs, employee handbook acknowledgments, background checks, security agreements — all the essential paperwork — is critical to establishing expectations and maintaining compliance. Ensure your team can bulk send documents to save your hiring manager time to focus on more impactful work. Additionally, being able to add attachments such as an I9 or W4 is critical during the hiring process as it offers an efficient way to upload them directly into your company's payroll solution.
To keep hiring on track while keeping an eye on cost per talent acquisition, opt for a platform that offers unlimited eSignatures and document sends. Finding a scalable solution also saves money in the long run because you don’t need to switch vendors or start over as your company grows.
2. Streamline Department Communication
Whether it's buy-side or sell-side agreements, transparency between all departments is vital; otherwise, you can almost guarantee value lost.
For non-legal teams, procurement using buy-side agreements, sales using sell-side agreements, or any other team creating a contract, it’s critical each team communicates with legal to use the latest published and approved templates.
When it comes to buy-side and sell-side contracts on your company paper, the question for in-house counsel often becomes, "How can we involve necessary departments without running into bottlenecks along the way?" Our pro-tip here is automating any approval needed during the creation process.
For example: if you create a contract with non-standard terms, it takes longer to route the agreement manually to the necessary party for approval. Let's say the non-standard term in this case is a net-60 payment term; let’s also say your company favors net-45, and anything higher requires CFO approval. Finding a contract lifecycle management (CLM) platform that automates this approval would save valuable time, productivity, and even help you win more profitable deals.
Additionally, reminding stakeholders of key clauses and dates also mitigates revenue leakage and unwanted services. For buy-side agreements, what if you have an auto-renewing agreement that you want to terminate? Missing the opportunity to terminate leaves your company on the hook for yet another bill. On the other hand, what if you have a sell-side agreement set to auto-renew unless your client notifies your team within 30 days? Scheduling automatic reminders to have a touch point at the 30-day mark gives you the opportunity to check in on your clients' satisfaction, see if there are any upsell or cross-sell opportunities, and renegotiate your rates if needed.
Since the task often falls on in-house counsel to notify respective parties – and managing hundreds, if not thousands, of agreements means your calendar is constantly booked – adding automatic reminders directly in the platform is a great way to keep key parties aligned without disrupting routine processes.
3. Automatically Track What Matters
The higher inflation climbs, the more important it is to pinpoint financial risks and obligations — particularly in contracts.
You're not alone if you’re manually tracking key terms and clauses in Excel, Google sheets, or SharePoint. Over a third of companies still lack a searchable, centralized repository, according to Aberdeen research. However, the next time you’re juggling multiple order forms, provisions, and amendments for the same agreement, you might ask yourself what other high-priority tasks you could focus on if there were a more automated contract-tracking process.
For example, let’s say you have a client refusing to pay a bill because a project deadline was missed, something that was promised wasn't delivered, or for another contract-related reason. The next course of action is to dive into the agreement.
Now imagine having to dig through the details with seven order forms and three amendments; instead of having the answer at your fingertips, you have to spend valuable time reviewing the contract, PDFs, and other attachments to answer the question: "How did we get where we are now?"
Tracking all documents in one system allows your team to monitor critical terms – or “attributes,” as our team calls them – so they can quickly see obligations, milestones, and responsibilities at a glance. Plus, by leveraging a system with optical character recognition (OCR), you can automatically track attributes in contracts your team creates or imports – so the next time the finance team drops an unpaid bill on your desk, you’ll know exactly where to look.
4. Find a CLM Tool That Supports Company Growth
The key to cutting costs by streamlining contracts is finding a CLM tool that scales as your company needs change.
Particularly in times of uncertainty, you want viable and functional software regardless of whether your team downsizes or grows tenfold. Instead of juggling multiple tools for your day-to-day contract management processes – like collecting eSignatures – opt for an end-to-end CLM solution with these capabilities built in, from contract creation to redlining to signatures. Also, ensure your solution integrates with the tools you use daily, such as Microsoft Teams and Outlook, to streamline your tech stack. Your contract management tool should work for you — not the other way around.
Lastly, if your CLM tool charges per number of platform users, eSignatures, storage, contracts, and templates — find another solution. What makes a solution scalable is being able to add more users without additional operating expenses or maintenance.
With these four contract management tips, you’ll be able to keep your team ahead of any economic uncertainty. Want more cost-saving contract management strategies? Check out our blog for more contract lifecycle management insights, tips, and trends.