Your contracts are the language of your business, so don’t be surprised if your professionalism is evaluated on them in the first place. So – they need to be perfect. In this blog post, we have prepared ten tips to keep your contract quality at a high level. Keep reading to learn more about efficient contract management approaches and elements of a high standard contract.
Main approaches and elements of high-performance contract management
Often, business units prepare contracts instead of legal teams, and since they obviously lack fundamental legal qualifications, the foundation for functional contract performance is needed. Here are the main steps you should take to manage and track the efficiency of your contracts:
- Provide your employees with pre-approved templates and playbooks with clauses to build contracts from.
- Validate the required fields and pull data from databases to repurpose it across departments.
- Have dynamic contract metadata for searchable contract organization, storage, and data distribution.
- Equip the business team with enhanced analytics to measure and scale contract performance, with built-in data drill-down.
Generally, three approaches make contract quality assurance possible: manual, automated, and post factum. A manual approach presupposes employing someone from the legal unit to step in and oversee contract quality at the production stage. This is effective but requires extra routine workload from the legal team and is not very healthy for job satisfaction.
The second approach harnesses software that is pre-configured to cover all the steps mentioned above. Gartner predicts that the adoption of AI-based contract analytics solutions will reduce manual effort for contract review by 50%. AXDRAFT does it all, and it is a one-time investment of time and resources to get things up and running.
The adoption of AI-based contract analytics solutions will reduce manual effort for contract review by 50%
As a result, you get a centralized hub where you can store all the required documents, collaborate with your team in real-time, and track contractual obligations. Don’t be afraid to transition to new technology and adopt new solutions to increase your team’s productivity.
The third one, similar to the first, implies quality assurance after the contract is produced. A legal professional makes sure that the contracts are within the analytics system, assigns the metadata to all key deliverables, and manually works with the database. Effective? Very much so. But also time-consuming.
Any of the three ensures that your contract quality plan is not compromised and the customer experience is uninterrupted.
Also, there are four main elements you should consider that either signal the contract quality or help you manage your in-house resources.
Lack of typos and grammatical errors
This should go without saying, and yet some businesses still disregard the visual aspect. Your contracts need to be stylistically refined, identifiable and branded, and become a visual representation of the value you put in the partnerships with your clients and vendors. Sloppy contracts with errors damage your reputation, while flawless ones help build trust.
Your contracts need to be logically structured, broken into coherent sections, and understandable for the counterparties. While this is easier for lawyers when you have non-lawyers as clients, it may cause confusion and communication pitfalls. For instance, AXDRAFT helps improve your contract’s readability by employing the simplification functionality that utilizes AI and GPT-3 to transform the legal text into its simple version that is easier to understand for non-legal teams.
The retrievable and obvious value
It’s all about metadata. As a business asset of ultimate value, your contracts need to be subject to measurements. Assigning metadata to key contract points is vital for building a contract ecosystem that lays the foundation for predictive analysis, allows you to identify opportunities on time, and makes sure contract value is communicated.
Flexibility in contract changes
It is not uncommon to make changes when reviewing or renewing your contracts. The flexibility of this process contributes to the overall efficiency: you need to be able to modify the contract quickly, and all changes need to be recorded across the entire contract if they are duplicated.
Securing these things will guarantee the high quality of your contracts and help you avoid a lot of business risks. But there is more. We have outlined the following main elements of both internal and external contract experience, as well as the ins and outs of contract automation.
Major elements of the flawless contract experience
In 2021, your contracts’ quality transcends the document’s mere text and reaches beyond the hard copy you deliver to your counterparties and the system your contracts function in.
The real quality of your contracts lies in the overall contract experience, both internal and external – the workflows, the usability of your contracts and legal templates, and the flexibility they allow for.
The real quality of your contracts also lies in the overall contract experience, both internal and external – the workflows, the usability of your contracts and legal templates, and the flexibility they allow for. Not all of these things are visible to your clients, but they shape your company’s overall customer experience and make you stand out from your competitors.
- Value-to-time ratio: measurable performance. Every time you prepare a contract, you need to track the time it takes you to draft, negotiate, and sign it, calculate the costs of this process, add the costs of the contract upkeep, and then run it against the value of each contract. You may want to make sure the ratio is at least 1:10. This would signify that the contract is viable and clearly communicates the business value. It also implies the fact that you should be able to measure the performance of each of your contracts against KPIs.
- Contract delivery method: secure, convenient, and flexible. The quality of your contracts is implicitly defined by the convenience of their access and distribution. Not only should you be able to locate the contract and retrieve the data in under two minutes, but also deliver it to your customers in a way that makes it easy for them to access. This implies having several delivery channels to choose from. Also, you need to make sure that each of these channels protects data integrity and is secured against data breaches.
- Expectations vs. reality ratio. When you start using new contract management software, you learn to trust it by default, as you expect that it will run without errors, and support you where human factors could cause the quality to drop. And yet, no software is perfect, so you need to run assessments of your software and evaluate its performance like you would a team member. You should double-check the software for errors every so often to make sure it keeps up with your expectations.
- Risk management. 2020 has shown the real value of risk management and the price of neglecting it. Your contracts need to include any number of possible risk scenarios.
- Comprehensive AI usage. In 2021, the legal industry is expected to maximize AI usage, as many software applications are powered by AI and ML algorithms. From your side, it is better to streamline the contracts and have unified distinct patterns across document types and the company as a whole. Not only does this make contract work easier for your team, but it also helps AI to understand and learn better, and to supply your teams with appropriate suggestions for document automation.
- Less routine. In addition to the previous section, with all the software at hand, the value of redundant and routine work is dropping. To ensure a top-notch contract experience, you need to define the patterns and set up the recurring elements to be utilized in a few clicks to avoid doing the same work repeatedly (and hence, making more mistakes).
In 2021, your contract quality will be defined by more factors than are contained in the text of your contract per se. Tools like AXDRAFT are essential for creating the experience to wow your customers, communicate your business approach, and secure you from contract risks. Drop us a line to find out more about our legal innovation.