A guide to contract management processes in 2024

Contract process
February 24, 2023
9
min

What is contract management?

Contract management is the process used to create, review, negotiate, sign, store and track contracts throughout their lifecycle. It describes the way that businesses tackle their contracts before and after they are signed. 

But what does this contract management process look like in detail, and why does the way you manage contracts matter? Read on to find out  

Why is contract management important?

The way you manage your contracts is important because it determines how much revenue your business captures, and which resources you need to do so. 

The WCC estimates that businesses lose up to 9% of their annual turnover due to poor contract management processes. There are a few reasons for this. 

Firstly, inefficient contract management processes can create more administrative work for businesses, meaning they have to pay to hire more people to help manage their contracts. 

Businesses also waste time managing contracts ineffectively, and this time could be spent on higher-value tasks that capture and protect revenue for the company.

But that’s not all. Bad contract management processes can result in increased contract risk. It can mean value leakage from the contracts you don’t get over the line, and a risk of breaching the contracts you do. This is a common problem for businesses without post-signature contract management processes in place. 

Who is responsible for managing contracts?

If businesses are lucky enough to have a contract manager or a contract specialist, that individual will be responsible for overseeing the way the business manages their agreements.

However, many businesses won’t have a dedicated manager for their contracts, so they’ll have to rely on the in-house legal team to manage contracts instead. 

Other businesses will have a tool like Juro in place that simplifies contract management and enables commercial teams to self-serve on contracts. This, in turn, frees up legal’s time and enables them to focus on more urgent, higher-value work. 

What does the contract management process look like?

The contract management process can vary between businesses and some processes will be far more manual and complex than others. In fact, what the contract management process looks like can vary wildly based on:

  • The size of your business 
  • How many contracts you create and sign 
  • Which type of contracts you use 
  • Which tools you have in place

For example, enterprise contract management processes will naturally be different from contract management in a small business

This is because enterprise companies manage more contracts and have more resources to do so. Meanwhile, smaller businesses often have lean legal teams so need to find ways to manage their contracts more efficiently with the resources they do have. 

The contract management process will also differ based on the types of contracts being managed. 

A sales contract management workflow will typically involve more back and forth between parties during the negotiation stage than an HR contract management workflow, for example. Similarly, SaaS contract management processes place a big emphasis on tracking contract renewals, which isn’t always necessary with other business contracts

That said, the stages of a contract lifecycle are broadly the same for most businesses and contracts, so let’s run through a typical contract management process now.

A typical contract management process

A typical contract management process involves the following steps: creation, collaboration, approval, negotiation, signature, storage, and renewal. We’ll cover these in more detail now. 

1. Creation 

The first stage of the contract management process is contract drafting. This is where the contract is created, either manually or through templating and automation. 

If parties choose to create their contracts manually, they’ll usually be tasked with drafting the contract terms from scratch, or copying and pasting them from an existing contract template. This task can take a lot of time and is usually reserved for in-house legal teams since they have the expertise required. 

But other businesses choose to automate their contracts instead. This is called contract generation and it can be achieved by implementing contract management software like Juro, or contract drafting software

Rather than spending hours drafting a new contract, Juro users can create contracts in seconds using automated templates, drag-and-drop fields, and conditional logic

Alternatively, businesses can generate contracts in a different business system altogether by integrating a tool like Juro with their CRM, HRIS, or finance platforms. This enables businesses to create contracts in Salesforce, Hubspot, Greenhouse, Workday, Monday.com, and more. 

It takes the sales team four clicks to generate and approve a contract in Juro - Callum Hamlett, Senior Rev Ops Analyst, Paddle

To find out more about these features and how they work, check out our guide to contract management software, or hit the button below to book a personalized demo. 

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2. Internal collaboration

Depending on the nature of the contract being agreed and your company’s risk appetite, you may also need to share the draft of the contract with other stakeholders in your business. This is known as contract review

At this stage, the contract is shared internally, usually via email. Colleagues will download a version of the contract and add their own comments or redlines to it before sending it back. The discussions usually happen in email chains or during calls.

Although, more sophisticated contract workflows will use a tool like Juro for internal collaboration since Juro captures all of the comments and edits in one workspace, with a detailed audit trail to track granular changes. 

Keen to see Juro’s internal collaboration workflow in action? Book a demo with our contract management specialists today. 

3. Approval 

Depending on the risk involved, contracts may even need to be approved internally before being sent out for negotiation and signing. 

This is usually an extension of the contract review process and senior stakeholders will give their approval via email or through another communication channel, like Slack

The problem with this is that different people will often need to approve different contracts at different stages, or if they meet certain conditions. 

This means parties have a lot of freedom over which contracts are shared for approval and when. It also means that some contracts get sent for approval unnecessarily, which can waste time and slow down sales cycles. They can even be sent to the wrong person altogether.

There is a solution, though. Businesses with a contract tool like Juro in place will be able to automate their approval workflows.

This means that they can set up approval workflows so that contracts will only be shared with the relevant approver if they meet certain criteria. This could be anything from contracts over a certain contract value to contracts based in certain jurisdictions. You can even set up certain templates to require approval, and others to not. 

To find out more about Juro’s contract approval workflows.

4. Negotiation 

Once your contract has been reviewed and approved internally, it’s ready to be shared with the counterparty. At this stage, the counterparty will have two options. They can sign the contract, or they can negotiate the terms first. 

Most commercial contracts will be negotiated, though. This is because they are competitive contracts and both parties want the most favourable terms for their business. 

This means that the contract negotiation process can quickly become long and tedious, with lots of new versions of a contract being created. Counterparties usually redline the contracts in Word before sending them back. Contracts are then sent back with revised terms and this back and forth continues until all parties have agreed to the final terms. 

This process is streamlined in Juro, though. Parties can add their comments, suggestions and redlines to a contract in real time with all changes captured in a detailed audit trail.

Want to find out more about contract negotiation? Check out these resources:

5. Signing 

Next, the parties need to sign the contract. Traditionally, this is done using wet ink signatures. However, as technology has evolved businesses have started to sign contracts online using electronic signatures instead. 

There are plenty of eSignature providers on the market that allow you to do this, and you can compare some of them using the guides linked below:

6. Storage and tracking 

Once your contracts are signed, you’ll need to store them somewhere secure. You’ll also want to track the contract’s status and the data within it. There are a few ways to do this. 

Lots of businesses will store their contracts in local drives or shared drives like Google Drive or Dropbox. They then manually record any key contract data in a contract management spreadsheet of some sort which they update regularly. 

However, contracts stored in this way aren’t easy to search through or find, so it’s common for some businesses to use a contract tool with a contract repository for storage instead. Tools like Juro will even offer contract reporting functionality which makes it quick and easy to track important contract management KPIs.

7. Renewal

Some contracts will also need to be renewed. This is usually the case with SaaS contracts that operate on a subscription basis, but it can apply to other contracts too. 

Contract renewals will often be managed by recording the upcoming renewal date in a spreadsheet of some sort. But it’s common for businesses to use contract reminder software to automate this process and receive automated reminders for renewals ahead of time. 

For more advice on managing renewals, check out these contract renewal best practices

Want to find out more about contract management?

If you’re looking to build a contract management process, or improve on the one you have already, check out the resources below for tips and advice:

But if you’re looking for a contracting solution that can streamline your contract management workflow, fill in the form below to book a personalized demo of Juro. 

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