How to Reduce Your Contract Cycle Time?
Almost every business has some kind of contract cycle time, whether it’s for new customers, renewing existing contracts, or invoicing. Reducing contract life cycle time can save your business time and money. Besides, it frees up time from low-value activities so that you can focus on your core business functions. So, how do you go about lowering your contract cycle time? Keep on reading to find out.
What is a contract cycle time and why is it important to shorten it?
A contract cycle time is the average time it takes to process a contract from start to finish. This includes creating the contract, getting approvals, and executing the contract.
It’s essential to calculate your average contract cycle time so you can track your progress and identify areas for improvement. To do this, add up the total time it takes to go from proposal to signature for all of your contracts and divide by the number of contracts you have closed in that period.
The results of any business endeavor rely on several factors, with cycle time being one of the most important. Reducing your agreement cycle time means you can get products to market faster, leading to increased sales and customer loyalty.
Besides, reducing your contract cycle time can also help improve your bottom line. Also, by speeding up the contract life cycle process, you can save on manufacturing and labor costs.
What factors affect contract cycle time?
The time it takes to get a contract signed and in effect can be affected by many factors. The most common factors include:
- The complexity of the contract
When it comes to determining the contract cycle time, the more complex the contract, the longer it will take to negotiate and finalize. Some contracts may require input from different departments or outside legal counsel, adding time to the process.
- Parties involved
Another factor contributing to the length of the cycle is the number of parties involved. The more parties needed to sign off on a contract, the longer the process will take. To speed up the contract signing process, try to limit the number of people who need to approve it.
- Geographic location
Another essential factor that may affect the contracting time is the geographic location of the contracting parties. If they’re in different time zones, that can add to or delay the process.
- Previous agreements
If your company has a history of working with a specific supplier or customer, they may have already established timelines and processes that need to be followed. Trying to change these could add time to the contract cycle. It is essential to discuss previous agreements with all stakeholders to ensure that everyone understands and agrees to the new process.
- External dependencies
Any external dependencies, such as regulatory approvals or outside counsel reviews, may slow the process. If possible, try to schedule these reviews early in the cycle to avoid delays later.
Ways to reduce a contract cycle time
Now that you understand the key factors that can influence your contract cycle time, it is crucial to understand how to reduce this duration.
Here are five tips that will help you get started:
- Evaluate your current process and make changes where necessary
It is essential to take a step back and evaluate your entire contract life cycle management process before making any changes. Make sure you consider all critical factors that can influence your agreement cycle time. Once you clearly understand what is causing delays, you can make specific changes to improve efficiency.
- Streamline communication between departments
Communication breakdowns are one of the leading causes of contract cycle time delays. By streamlining communication between departments, you can avoid many of these delays. Ensure all parties are aware of their role in the process and have access to the necessary information.
- Simplifying contracts and making them easy to understand
If you want to reduce the time it takes to get your contracts signed, you need to simplify them and make them easy to understand. This means getting rid of all the legalese and making sure that everything is clearly explained.
- Consider adopting the IACCM Contracting Principles
When it comes to contracting principles, the International Association for Contract and Commercial Management (IACCM) has a few that can help reduce your contract cycle time. They are:
If you adopt these principles into your contracting process, you’ll see a decrease in the time it takes to get contracts finalized.
- Identify methods to eliminate or reduce the need for contract review
At times, contract reviews can feel like a never-ending cycle. You submit a contract to legal for review, receive feedback, make the changes, and then resubmit, only to start the process over again. This back-and-forth can slow down your agreement cycle time and impact your business operations.
Fortunately, there are ways to eliminate or reduce the need for contract review. Here are a few tips:
– Use standardized contracts whenever possible
– Incorporate contract checklists into your contracting process
– Use e-signature technology
- Use contract life cycle management software
Last but most important is to invest in contract life cycle management software. CLM software will automate many processes, making it easier and faster to get your contracts through the cycle. It can also help you track data and performance, so you can continue to make improvements.
There are many contract cycle management options on the market, so do your research and find one that fits your organization’s needs. The investment will be worth every dollar in the long run!
Why is reducing contract cycle time essential?
Reducing your contract cycle time is essential for some reasons. It makes your venture more efficient and saves you money, but it can also help you win new contracts and keep existing clients happy. As explained above, there are several ways to reduce your contract cycle time. Using some or all of these methods can streamline your process and get contracts signed and delivered faster than ever before.