Top 5 Contract Monitoring Practices You Can Implement Today
Contract monitoring allows you to gain oversight into the performance and progress of your company’s agreements. Some businesses rely on outdated methods to track their agreements, but many automate this process, allowing for easier monitoring, boosted productivity, and improved risk mitigation. There are some monitoring practices to adopt that will help you ensure that the process is seamless.
What is contract monitoring?
Contract monitoring is the practice of ensuring that your agreements perform as you intended by tracking various metrics such as KPIs, deadlines, contract compliance monitoring, and more. Effective monitoring requires discipline and organization since the agreement’s actual performance needs to be compared to the deliverables established in writing. You must monitor each contract throughout its entire term to reduce risk and maximize the benefits of your business partnerships.
The contract monitoring process includes:
- Keeping track of vital dates such as terminations and renewals
- Identifying risks and alerting relevant stakeholders
- Comparing the contract against the agreed-upon obligations and outcomes
The importance of monitoring contract performance
Contracts are the key to obtaining your desired results from your company partnerships. A high-volume contract portfolio is difficult to monitor without the right processes, people, and technology in place. Many businesses have a manual and fragmented monitoring process, leaving them open to risk and poor agreement performance.
To maximize the value of your agreements, you’ll need to focus on more than just the contract itself, which is where monitoring comes into play. While well-executed and properly written contracts are still crucial, a streamlined monitoring method is essential to ensure that obligations and deliverables are reached.
The top 5 contract monitoring best practices
As mentioned above, contract monitoring is a critical component of your contract lifecycle management process and should be optimized to ensure that your agreements meet their KPIs.
However, a lot of companies push tracking to the side, resulting in financial losses and high-risk deals. If you want your agreements to be beneficial and meet your performance goals, it’s imperative to implement these best practices as soon as possible.
When reviewing your contract monitoring checklist, you should:
1. Make sure you can easily locate each contract and any related documents
It’s important to be able to identify where each of your contracts is located before you can monitor and track them. Storing all of your business’s contracts in a secure, cloud-based repository allows you to access your documents at any time and any location on a mobile device. This makes it much easier to monitor and track the performance of your agreements since you can quickly locate and retrieve them on demand.
Essentially, you want the way you store your documents to support easy retrieval since you never know when you’ll need an old agreement to assist you in processes such as authoring. Quickly locating your documents is crucial and will impact the rest of your contract lifecycles.
2. Decide which metrics are most vital to monitor and make monitoring-related tasks part of your schedule
After contracts are signed and executed, you should note any critical data points that must be monitored for the rest of the agreement’s lifecycle. Doing this allows you to plan throughout the agreement’s lifecycle until its termination.
The most commonly monitored contract metrics include:
- Expiration dates
- Auto-renewal dates
- Compliance policies
- High-risk clauses
- Opt-out windows
- Agreement status
- Contract performance
3. Keep key dates and deadlines top-of-mind
Using a contract management platform, you can leverage automated alerts and notifications to keep your team on top of expiration dates, auto-renewals, and opt-out periods. Monitoring deadlines gives your team an adequate amount of time to familiarize themselves with the agreement, allowing them to make well-informed decisions about termination, renewal, or renegotiation. By proactively tracking critical contract dates, you will reduce risk while boosting the benefits and opportunities of your contracts.
4. Communicate with your stakeholders
It’s important to communicate and share the metrics you monitor with key stakeholders. You should inform them about upcoming due dates, contract performance, and deliverables. Potential risk and the impact of each contract could benefit or harm each party’s company, meaning each stakeholder should have the information necessary to make decisions that are in their best interest.
5. Create a scorecard to compare actual performance against expectations for each new contract
A scorecard is a quick and easy way to measure the performance of your agreements by giving you a frame of measurement to compare the actual performance of the agreement with your expectations. The scorecard provides both sides with insight into the deal’s progress and performance, allowing them to be on the same page and make well-informed decisions.
To create a scorecard, your team should start by listing its strategic goals and then organize them into key areas, including KPIs, monetary performance, and overall outcomes. You can then use the scorecard to identify red flags that fall outside of your criteria for adequate performance and look for trends that show poor performance over time.
How to monitor contract performance with CLM solutions
Optimizing your monitoring process with contract monitoring software saves your team time, improves collaboration, and mitigates overall contract risk. Contract monitoring tools automate each contract lifecycle stage, providing greater control and visibility for monitoring contract milestones, performance, and milestones.
Digital contract management solutions help companies execute a successful contract monitoring plan with:
A centralized contract repository
Contract management software gives you a secure platform to store all of your contracts and related documents, establishing a single source of truth for your agreements. This gives you oversight by allowing you to view risks, key dates easily, and expiring agreements.
Secure access controls
With secure access controls, you can share data with relevant team members and stakeholders to boost collaboration and visibility of the contract’s lifecycle. Sharing important information also shares the responsibility of contract outcomes across all parties.
Alerts allow monitoring to be a proactive process by giving your suppliers, stakeholders, and contract owners prompt when action is required. Digital tracking tools will alert you of critical dates such as expiration dates, renewals, and opt-outs.
Dashboards and reports
With CMS, you get visual representations to streamline the process of data gathering and monitoring. You can easily identify which agreements are coming up for renewal, the status of each contract, and overdue events that require attention. This saves valuable time that your team would spend on manual data collection, reporting, and monitoring.
Contract workflows give your company immediate oversight of where each contract is in its lifecycle, making it easier to monitor them throughout each stage and identify and resolve bottlenecks.
Contract management platforms improve monitoring through artificial intelligence, automation, and increased visibility of your repository. This allows you to mitigate tedious manual tasks, paving the way for a more valuable monitoring process in your company’s operations. Implementing contract management software is an easy way to increase the value of your agreements through the optimization of the monitoring process.