In the private markets space, routine contracts often take up valuable time and resources. An effective contract tracking solution can be a powerful way to let a business focus on the impactful, engaging work that matters.
How can tracking contracts do this? Let’s take a deep dive into where contract tracking fits into an organization’s processes.
What is contract tracking?
Contract tracking is the process of monitoring agreements through the entire contract lifecycle. Contracts go through many stages to minimize an organization’s financial, legal, and procurement risks. These stages include:
- Request and draft: The parties decide to enter into an agreement, and one party offers the initial draft with the necessary clauses, terms, and conditions.
- Review and negotiations: A lawyer or business professional examines the contract provisions to identify any potential risks. Both parties negotiate over the contract’s terms and conditions and make any necessary adjustments to establish acceptable terms for both sides.
- Approval and execution: If both parties agree to the contract’s wording, they approve it and execute the deal via their preferred signing method.
- Storage: Each party should store the signed contract in a secure yet easily accessible location.
- Performance: Each party complies with its obligations and monitors the other’s performance over several months or even years. This stage also usually requires quickly finding, searching, and reviewing contract provisions.
- Reporting and analytics: Both parties can accumulate, filter, analyze, and report on contract data.
- Amendments: Both parties can negotiate addendums to their contracts and use joinders to add a new party to the original contract.
- Expiration and renewals: When the parties reach the end of the contract, they may decide to renew their agreement, negotiate a new contract, or terminate it.
When done correctly, contract tracking empowers stakeholders to execute, monitor, and comply with the agreement’s terms more effectively. Additionally, a contract tracking system makes document processing and the approval process smoother and lets an organization gain valuable insights into its own operations.
Why is contract tracking important?
Here are seven ways contract tracking can give an organization an edge:
1. Frees up time and resources
Monitoring contracts and shepherding them through the lifecycle can take hours of work. Without an automated tool, organizations would manually enter data and set up calendar reminders to follow milestones, approvals, renewals, or expirations. Instead, organizations can ensure time goes toward more valuable and strategic revenue-growing efforts by tracking contracts through a contract management system.
2. Boosts employee morale
Managing contracts can be tedious work, and there’s a greater chance of burnout and turnover when these tasks take time away from valuable employees. With the automated assistance of a contract tracking solution, team members can focus on the high-value tasks they should spend their time on. Additionally, organizations can avoid the expensive chore of recruiting and hiring new in-house lawyers or outside counsel.
3. Keeps key individuals in the loop
When an organization stores its contracts in a centralized location, it allows team members, managers, stakeholders, and legal professionals to access information from anywhere. This eliminates the need for emails or calls to get a contract status update since anyone can quickly sign into the contract management system to see the most recent changes.
4. Helps stay on top of compliance issues
Tracking contracts can help parties remain in compliance. Noncompliance can pose business risks and financial penalties, so effective tracking throughout the contract management lifecycle can allow the parties involved to know what to do and when to do it.
5. Notifies an organization about upcoming renewals
With a contract tracking solution, an organization is alerted to upcoming renewals well in advance. This means businesses may have more time to analyze the contract and decide whether it’s worth renewing or not. Without these notifications, organizations may likely renew a contract they don’t need or lose a key client if it expires.
6. Gives an organization a negotiation edge
When sitting down to negotiate, businesses need every advantage they can get. Contract tracking provides insights and data from precedent agreements to inform the negotiating strategy and improve negotiation outcomes.
7. Tracks the metrics that matter
Powered by AI, contract tracking can provide the data-driven edge an organization needs for efficiency, speed, and growth. Without a contract tracking solution, organizations would have to examine their agreements manually, which can leave room for human error and less efficiency.
Contract tracking best practices
Contract tracking may differ from one organization to another, but there are typically some best practices to follow that make contract tracking much more effective, including:
Know where the contracts are located
Organizations can have many types of business contracts stored across multiple locations, making it difficult and time-consuming to pull up an agreement quickly. Whether it’s physical storage, shared cloud drive, or a contract tracking system, organizations must store their contracts in one centralized location. An organized system makes it easy to quickly find an agreement for review or reference.
Define key stakeholders and assign responsibilities
Determine who needs to perform key tasks and make critical decisions, then develop workflows and hierarchies through the contract management lifecycle. Designate which people in the organization need to do key tasks — negotiations, drafting, revisions, etc. — to move the process along. Also determine who needs to make particular decisions and how stakeholders can escalate questions or concerns.
Stakeholders should be informed about approaching deadlines, deliverables, contract performance, and any other information that may have a financial or legal impact on the organization.
It’s also important to stay proactive during the contract monitoring process. Staying ahead of dates and deadlines, looking for risks and opportunities, setting alerts, tracking contract changes, and operating on the contract’s most recent version can help organizations stay in control of their agreements and obligations.
Monitor and report
Keep track of the contract data, and review it periodically to ensure compliance. An organization can track:
- End dates
- Deliverables and obligations
- Termination notice requirements
- High-risk clauses
- Opt-out and renegotiation windows
- Contract performance
- Compliance requirements
Tracking and monitoring various business agreements becomes much simpler and more streamlined when an organization incorporates contract tracking software. Use robust reporting with insight from artificial intelligence, enjoy easy access from anywhere, and get real-time visibility into the contract management lifecycle.
What kind of contract tracking software does an organization need?
There are plenty of options out there, but make sure to prioritize these features:
Robust reporting with insights from AI: Many solutions might offer AI capabilities. However, the amount of data the software brings in — and the insight it can offer — enables a company to chart a more efficient path.
Human oversight: Remember, AI can only go so far. The best contract tracking software features a human-in-the-loop component to help do everything AI can’t do yet.
Easy integration and access: Contract tracking software should easily integrate with existing systems and be easy to access and use for those who rely on it.
Real-time visibility: An efficient contract tracking system needs to supply real-time visibility into the contract lifecycle, distributing the information an organization needs to keep the process moving.
Contract tracking with Ontra
Utilizing contract tracking software helps save time and resources, facilitates collaboration, and monitors the data that matters most.
Consider Contract Automation by Ontra. Firms get real-time visibility into negotiations for routine contracts, can see each contract’s status, and can take advantage of automated tools to track ongoing negotiations through a user-friendly dashboard. Plus, Ontra’s human-in-the-loop technology includes a distributed network of top-tier legal talent, enabling firms to speed up turnaround times, track key terms and obligations, and benchmark against precedent to negotiate from a position of strength without using internal resources or relying on expensive outside counsel.
This article was originally published on March 3, 2022.