Ever heard of contract lifecycle management (CLM for short)? If that answer is “No,” you’re not alone. You’d even be forgiven if you thought it was just another convoluted business term with an accompanying three-letter acronym (Why are the acronyms always three letters long?).
But, in this case, you’d be wrong.
Many business owners, managers, and sales reps think contract management is just a matter of getting a signature and storing the contract away in a CRM.
The result for the vast majority of businesses? Lost leads, sales, and revenue.
The reality is that contract management is a fundamental part of the sales cycle. Implementing well-tested processes around the creation, approval, and renewal of contracts can dramatically boost your sales while cutting costs.
In this guide, we’ll cover two things: how to streamline and improve your contract management process, and how to enhance the effectiveness of your contracts with templates and tips just for you.
A sales contract is a legal document that signifies a business exchange between two parties. This exchange may be for several goods and services spanning packages of products, consulting, freelance work, development services, and more.
In essence, a contract contains the names of the parties involved, the goods or services being sold, and any additional terms.
A sales contract is usually sent towards the end of the sales cycle. It comes after sales-focused documents like quotes and proposals have been sent. When a client agrees to receive a contract, they’re usually ready to start a business relationship.
Sometimes, contracts are included as part of a broader proposal or quote, depending on the needs and expectations of the recipient.
What is Contract Management?
“Contract management” refers to the set of processes and guidelines companies use to create, send, store, and review contracts.
There are four critical stages in a contract’s lifecycle:
1. Request for Contract
The “request stage” occurs when a potential buyer agrees to purchase and asks to receive a contract. Usually, buyers will have a specific set of requirements depending on their industry or sector, and contracts should be tailored to meet them. Government contracts, for example, typically come with numerous stipulations.
Creation involves the writing and sending of the contract. Because contracts are primarily legal texts, legal teams will have a high degree of involvement in this business process. Usually, lawyers must approve the final version of a contract, especially if a salesperson is responsible for putting it together.
3. Approval and Storage
Once a contract is finalized, it is sent to the recipient for signature. It’s common to receive feedback from potential clients at this stage. You might need to amend parts of a contract. If using a paperless workflow, contracts will be stored digitally.
4. Review and Renewal
Periodically, contracts should be reviewed to ensure that both parties are acting accordingly. As the contract period ends, renewal may occur.
5 Proven Tips for Writing Better Sales Contracts
Before we look at some useful templates, here are five general ways to improve your contracts and your entire contract management process:
1. Use Contract Management Software
Implementing contract management software as the basis of your operations will almost certainly save you significant amounts of time, workforce, and money.
And it’s not just about removing the hassle of paper contracts, with the continuous printing, scanning, and hand signing they require. Paperless proposal and contract solutions provide a host of powerful features for streamlining everything from contract writing to client follow up.
Contract management software makes it dramatically more accessible, for example, to consistently create high-quality contracts with the use of pre-built templates, ready to use content libraries, drag-and-drop electronic signature and payment blocks, approval workflows, and more.
What’s more, automation and tracking features enable salespeople to improve outcomes beyond creating and sending. Analytics tools, for example, clearly show when potential clients open, read, and respond to proposals, allowing you to tailor your email responses accordingly.
2. Automate Work from a Proven Template
Most salespeople and lawyers aren’t natural writers. So how can you ensure high-quality contracts without the need to hire people with strong writing abilities?
Templates eliminate an array of errors. They provide tested structures for writers and ensure all necessary legal texts are included.
What’s more, improving in-house templates based on testing and data from recipients is one of the surest ways to boost your close rate.
3. Include eSignature and Payment Options
The manual printing, signing (often by multiple parties), and scanning of contracts are one of the biggest hurdles to approval.
Adding electronic signature and payment options to contracts, which allow multiple recipients to sign with only a few clicks, can significantly boost conversions by removing this unnecessary friction.
Electronic signatures are fully secure, often more so than handwritten signatures, and it’s becoming increasingly common for decision makers to use them.
4. Adhere to Any Industry Requirements
Sometimes, contracts are only accepted if they meet specific requirements.
Some industries have regulations surrounding quality assurance and delivery of service that must be adhered to and specified in the contract. Government agencies, for instance, will often have strict stipulations demanding high levels of transparency.
Equally, it’s essential to ensure that legal allowances are made for areas that are often problematic, like intellectual property rights for freelancers or accident liability in construction.
5. Provide Important Legal Documentation
One of the biggest reasons for slow contract creation is a legal team that takes weeks to amend essential documents. A simple way of overcoming this problem is to create reusable content that contract writers can access during the contract creation process.
Content protection features in online software ensure that text is not tampered or edited. Communication tools in a central dashboard enable the legal team to make any necessary changes quickly.
Content libraries also provide writers with the ability to drag-and-drop relevant sections like Ts&Cs, warranties, payment contract terms, and so on.
6. Prevent Errors with Accurate Product and Pricing Data from CRM Records
Pricing mistakes are prevalent in business documents. If a recipient signs a contract that’s priced in a particular way, only to be told that a mistake was made, it can cause an utterly unnecessary holdup. It doesn’t look too professional, either.
It’s good practice to have a standardized set of prices that managers, salespeople, and others can consult. And one of the easiest ways to do this is to integrate and sync your CRM (like HubSpot) with your contract creation software.
Whenever a rep or manager is putting together pricing information, they can automatically request information from the CRM, where prices for goods and services are stored. They can then select the appropriate pricing with virtually no margin for error.
What Should You Include in Your Contracts?
Most contracts follow a similar general template. Irrespective of the recipient’s industry and unique needs, certain elements should always be included.
Here’s a quick rundown of the essentials:
Names of both parties - Use a cover letter that displays the name of the client and the name of the recipient.
Scope of work - The “scope of work” describes the goods or services exchanged.
Delivery method - How and when will the goods/services be delivered?
Terms of payment - This section should include the price of the goods/services along with any payment methods, timeframes, etc.
Additional legal items - You may also wish to include confidentiality agreements, quality assurance, compliance processes, termination rules, force majeure (unforeseen circumstances), and so on.
Sales Contract Template
Sometimes, a standard sales contract will do the job. Other times, it won’t.
It’s important to recognize when to tailor contracts to specific industries. And it’s worth having dedicated templates for each of those sectors.
Here are the main contract types and the more substantial differences between them:
1. General Business Services Contract
Business contracts usually cover multi-faceted deals that include a mixture of goods and services.
For this reason, it’s vital to include a detailed section that outlines the scope of work along with a specified timeframe that informs clients about when they can expect to reach individual goals. You might wish to attach specific quality criteria to outcomes so that recipients do not doubt what constitutes a satisfactory outcome.
It is also essential to include a section that covers liability and indemnity (compensation). Many recipients will want to know they are not liable for any mistakes on your part.
Goods contracts are usually more straightforward than service contracts, which tend to cover broader projects with more terms attached.
The detail is essential when it comes to goods contracts. Along with an exact item-by-item breakdown of the goods sold (or reference to an order form), you should also provide specific information about delivery, potential changes, and quality assurance.
Buyers may also want to inspect products on arrival, so include any terms relating to this activity.
Clearly outline any payment stipulations, like when invoice payment is due and what happens in the case of faulty items. Make sure you include information about taxes if they are not already shown in the pricing.
The word “consulting” covers an array of activities, everything from one-off training events to long-term positions on company boards. Because of this, it’s crucial to outline the exact terms of engagement. Stipulate what will be provided, for how long, the amount of compensation, and which fees, such as travel and accommodation, will be included.
It’s usually also appropriate to include a section about confidentiality, intellectual property, and personal liability (as you won’t be an employee of the company).
A well-written contract is a cherry on top of your delicious “business deal sundae.”
Contracts cement all the hard work of engaging, persuading, and closing deals. So it’s vital that you include all the appropriate information and remove all friction. What’s more, a proper contract management solution will ensure that you won’t lose repeat customers.
A host of tools enable you to streamline and improve your contract lifecycle, often at a fraction of the cost of using legacy processes. As a business owner, manager, or salesperson, there’s no excuse for not taking advantage of them.
Now, time to get to work on your first template.
Originally published Jun 17, 2019 4:26:00 PM, updated June 17 2019