The Importance of Effective Contract Organization
Effective contract organization is critical when you consider how much of an impact it has on the business. It not only aids in efficiency and compliance, but also helps with good practices and risk management. Anything that involves money and/or a relationship with another entity should be organized and tracked properly. You need to know what terms and conditions went into how much you are paying for hardware, maintenance, support, services, etc. So having that information organized makes it all a lot easier .
However, there is a key element to contracts that most people don’t think about when they think of organizing them-the need for contract term and renewal reminders. If you don’t have an organized and accurate view of your contracts, you might not know when they’re about to expire. This is necessary for renewals as well as for termination. So having an organized view of your contracts makes it easier to set up alerts and reminders for renewals and terminations.
Selecting an Efficient System
When it comes to organizing contracts, choosing the right system is key to maximizing efficiency. Businesses can benefit from digital systems and traditional methods alike. For example, digital solutions for contract organization range from complete contract management software with built-in workflows to standalone applications for inventorying, reviewing, and amending contracts. Both legal and non-legal professionals need to be mindful of the potential risks involved in using off-the-shelf contract management applications when electronic edit trails are important to prove compliance or to support claims or defenses. Further, digital solutions are only useful if they are used. Firms willing to invest in their contract management approach need to ensure that they have the technical infrastructure in place to support legal department staff in using a digital solution. Finally, staying organized relies heavily on diligence and process. Businesses should make it a priority to keep up to date on contract and workflow changes. Where digital solutions are utilized, having an audit trail in place will enable timely updates. Such diligence will reduce the risk of imprudent or premature contract renewals that can occur where timely contract updates are not made.
Organizing Contracts for Clear Access
In the realm of contract organization, categorization is a fundamental step that should not be overlooked. It serves as the skeleton of a contract administration system and dictates how you will find and retrieve your contracts as needed. There are several different methods for categorizing your contracts, depending on how you plan to search for them in the future. For example, you can group your contracts by type, date, client, geographical location, or specific team, amongst others. This level of organization will allow you to easily identify the information you need from the documents, giving you the ability to make informed business decisions, without having to comb through each indefinite document.
Firstly, categorizing by type of contract provides a clear and straightforward method for retrieval. Whether you have a small volume or vast amounts of contract types, dedicating a separate folder for each type of contract will allow you to drill down into the specific documents you need swiftly. For example, you could categorize by types such as leases, purchase agreements, vendor agreements, employment contracts, and NDAs. Periodically, maintenance should be done to archive old contracts or identify amendments or terminations so that the appropriate version of a contract can be recorded.
Another method for categorizing contracts is by date, whether it be year, quarter, month, week, or day. Depending on the nature of your business, this method may or may not be useful. If you conduct a large volume of contract transactions, then setting up a folder system where you can easily view contracts based on when they were created can come in handy. A central library should house older contracts, accessible by everyone, and archived for historical reference.
Sorting contracts by client is another option and can be helpful when keeping track of your agreements with different customers. This method is particularly useful for service providers who need to quickly access the specific contractual provisions or terms associated with a client. It is also a great way to segment, analyze, and compare the performance across clients, and subsequently identify areas in need of improvement.
Geographical organization is another objective sorting option, especially if you have clients, services, or products offered on a national basis. Grouping contracts by geographical location can help pinpoint the materials you need to effectively navigate the requirements specific to a state, region, or country.
Lastly, there is also the option of categorizing your contracts by a designated team, whether by department or by a specific team within your organization. This option is most useful for companies who have separate divisions for different markets and markets, which requires a tailored approach to each contract. Additionally, it gives the privacy of having individual contracts limited to specific people.
In summary, categorization is a critical part of a contract organization system. The method you select will depend on how you search for and use your contracts regularly. Regardless of the system you choose, it should enable you to quickly identify the specific file or files you need, thereby making it easier to maintain consistent access to important business information.
Leveraging Tech for Contract Oversight
In an era where everything is digitized, technology trends dictate what lawyers do and how they do it. Traditional paper files are time-consuming to update, space-consuming to store, and difficult to access if the files are stored offsite. Technology offers a space-efficient, effective solution. Lawyers can utilize contract management software, cloud storage, and automation tools to decrease the time spent on organizing contracts without sacrificing efficiency, or quality of service to their clients.
Contract management software allows you to do virtually everything from preparing contracts in a document management system, to tracking deadlines, to workflow management, to automating the creation of contracts, and everything in between. By way of example, legal project management software allows you to "intake" new matters by entering an RFP or other client requirements into the system. The matter can then be assigned to the appropriate attorney by the administrator or by the contract management system itself, with all documents, and contracts attached. Every person on the team has access to the documents and can add notes to the matter or contracts under review or revision. Everyone is working within the same platform and within the same system of record. The team can also track deadlines with reminders sent out to the specific members of the team. At our Firm, we have found the dashboards most useful; the dashboard offers a real-time snapshot of contract work, including which contracts are up for renewal, which parties owe documents, upcoming contract anniversaries , and deadlines.
Archiving is another positive result of cloud-based contract management systems, because once executed, the contracts are uploaded to the database with searchable tags. The system makes it easy to locate archived contracts and run reports regarding the contracts.
Automation tools are a favorite topic in recent articles, as lawyers can use them to simplify tasks and become more efficient. Many contract management software programs are equipped with automation features. There are also many apps that streamline certain tasks, such as email reminders to clients to return signed contracts or confirm a meeting. For example, it is not unusual for a lawyer to send a meeting request to a client for a Friday meeting. Sometimes the client is not available on Friday, and asks for a different day, which ultimately results in running back and forth on emails for a few days. Automation tools can send out a tentative invitation to multiple days over the course of a week. Then once the client selects the day, the automated response will confirm the meeting to both the client and the attorney. This ultimately saves a lot of time that can be used to work on client matters.
We are all inundated with constant notifications, reminders, alerts, and messages every day that break our concentration and focus. It is useful to create a "no notification zone" to allow uninterrupted time to focus on work and to think. Automating many of the tasks of contract formation, management, and execution reduces the need for notifications on tasks, whether by email or through your notification center.
Implementing a Contract Lifecycle Management System
Implementation of a contract lifecycle management process allows for the effective development and utilization of draft templates, precedent client forms, and checklists. By adopting this concept a lawyer can reduce the administrative burden by consciously managing the process from The Request phase to The Review and Monitoring phase. Any form should be used only during a phase that involves the creation of a document as prescribed under the adopted contract life cycle management process.
The five phases of the contract life cycle are as follows: Phase 1: The Request – Consider, search, analyze contract requirements, duties and obligations. Phase 2: The Draft – Develop a draft of contract language based on requirements, duties and obligations in Phase 1. Phase 3: The Review — Evaluate the draft contract for legal implications and compliance with laws, regulations, and the policy intent of the legal/practice professional. Phase 4: The Execution – Execute the final draft and file the final completed contract in the system of record. Phase 5: The Review and Monitor – Implement contract provisions and assess compliance. The first two phases are intrinsically connected. The lawyer will not know if he or she has a precedent that is satisfactory without having undertaken a request process. Similarly, the lawyer will not know how to satisfy the request for a precedent if no analysis has been done on what is being requested. These two phases allow us to combine our knowledge into a single document. There are five (5) online tools that further facilitate our approach to manage our documents from concept to completion. We begin with Phase 1: The Request. We have two (2) documents: 1. Contract Request Form: designed to give us a basic idea of what is being requested so that we can determine if our baseline precedent is sufficient. The form is intended to help us "get on the same page" with the individual making the request. 2. Referral Form: designed to give us a basic idea of a referral being considered by an internal person. The form suggests the progression from what is clearly a referral to one that is less certain. Without clarity, we treat every request as worthy of our immediate attention.
Contract Organization Best Practices
Regularly reviewing contracts is a reliable practice that will help identify problems before they become more serious. Contract clutter adds up over time and can go unnoticed by employees. To maintain finding efficiency, do a company-wide sweep and have all attorneys review contracts weekly; spot check random contracts for errors. Contracts should be reviewed periodically and by someone who has expertise in the area that most affects the regulations at hand (i.e., contracts that involve financial services should be reviewed by an attorney who handles most of the banks and investment funds in the regulatory space).
In addition to regular solicitations, the best practice for maintaining a contract organization is having one point-person who is responsible for auditing and maintaining contract documents. Larger firms may warrant multiple people with each a different and defined area as their responsibility. Auditing contract documents for accuracy is tied into company efficiency; if you can’t locate, sort and retrieve files in a timely manner, the workflow is disrupted. This best practice puts the onus on one point person and relieves employees from the clutter of contracts that may not directly affect their department.
An increase in company collaboration encourages employees to share information. By having someone in-house constantly updating staff about terminated contracts and completed projects with clients or vendors, employees will know what contracts are out there and will not risk duplicating efforts or wasting time and resources managing contracts the company no longer has. Having an employee who oversees contract organization will provide accountability and clarity for employees and clients.
Training new hires to contract organization policies and periodically having retrainings with existing employees will ensure all employees know what to do when presented with a contract . Knowing what’s expected of them when it comes to contract organization will make employees more efficient and put them on the fast track to getting their work done.
Having a single contract ISA will streamline the communication process if an employee has questions about specific contracts. It does not make sense for every employee to spend time communicating with multiple departments when questions pertaining to contracts can easily be addressed with a single point person who will know when and why contracts changed.
Having an active contract management system (CMS) will help maintain contract organization. In addition, contract management software includes all the tools needed for auditing, updating and communicating about contracts.
By keeping search tags active, contracts can be preserved for longer. Tags enhance usability by allowing contracts to be located by different keywords. Status search tags are useful for knowing what stage a contract is currently at in the process. Some statuses to include for contracts are: By having a CMS that has a library of email templates, contracts can be consolidated and written more efficiently. Contract templates with predefined clauses and conditions help manage prices and terms. For example, if a contract is a form of general agreement, treat it as a template. The general terms are already written so only the contract relevant to the business need to be filled out.
Being efficient is important to firm satisfaction. Stay organized because sloppy contracts will give your contract organization a bad name. If you provide contract organization tips or have tools that help streamline the process, be sure to share that information with all employees. Make it a point to stay streamlined by keeping each contract file consistent so that they are sorted alphabetically or by number. Take the time to create contracts that are easy to read; ensure complex contracts are explained plainly.