Contract Management and the Sales Process: Problems of Convenience

Sales relies on momentum to succeed. When a customer shows buying signs or gives verbal confirmation of his or her intent to purchase, sales needs to seize the moment and guide the customer quickly – and carefully – through to the end of the funnel and the signing of the contract. Unnecessary delays introduce a variety of self-inflicted issues: budgets are reviewed and reduced, champions change positions, and new initiatives may trump a predecessor. The longer the closing process is, the greater the chances that a verbal confirmation will not move forward to actual closure.

Delayed closures = delayed cash collection, revenue recognition and commission payments.

Contracts are the very place where a significant portion of these delays occur. Every extra moment spent searching for the correct contract or template, reviewing the contract, and discussing alternative language provisions slows down your sales process and impacts your final sale. Even if the sale does go through, longer contract resolution intervals could mean delayed revenue recognition and fewer sales over time. That’s because time is wasted pushing an existing deal through, instead of finding or processing a new one.

Inconvenient contract management practices hinder sales

When an opportunity progresses to the contract stage and your team needs to present the customer with a contract, what’s the first thing they need to do? Do they grab a contract from your library? Build one from scratch? Escalate to their Sales VP for direction? Contact the legal team and hope they respond quickly?

Far too often, sales reps are slowed down by awkward and inefficient contract creation and approval processes. Contracts that aren’t readily accessible or don’t address the current sales situation cause unnecessary red tape and lost time.

I recently negotiated a deal with a reputable agency. Not only was the contract they sent unnecessarily lengthy and arduous, it didn’t address the situation at hand. The result? An apologetic and embarrassed sales rep, a frustrated buyer, and weeks of time spent reviewing and updating an ill-fitting form. Not only was I unhappy; the process brought into question the vendor’s credibility and delayed my signature of the contract, my payment to vendor, and their ability to recognize the sale. What should have taken a day or two of reviews and updates took several weeks of unnecessary time and effort. If, during that process, my focus had been directed elsewhere, this deal likely would have been shelved entirely.

All this unnecessary back and forth also wasted a fair amount of manpower and money in legal costs associated with drafting and reviewing a contract. More often than not, contract changes, language changes and final review are performed by senior members of the legal staff. Indeed, assigning the right work to the right people can help, but this doesn’t address the larger problem of inefficient contract management practices hindering sales and increasing overall legal expenditures.

Lax contract management puts the company at risk

At the other end of the spectrum are contract management processes so lax that they barely qualify as a process, or those that are entirely circumvented by the sales rep himself in the name of convenience.

If the contract drafting or review process is too onerous (or is non-existent), a sales rep may simply utilize local copies of the contract which he has kept on his own computer. While this might not seem such a big deal at first glance, this practice carries a lot of legal risk. For example, the contract he uses may not be entirely appropriate to the current sale. Or it may include irrelevant or inappropriate information. Also, the official company contract might have been updated without the rep’s knowledge, and he may find himself using outdated paper.

Lax contract management processes also present themselves during the contract negotiation process, where the rep or his manager push the sale through without informing Legal. Have you ever been involved in a negotiation where you wonder if the other party even read your contract changes before agreeing to them? While the contract may close expeditiously, the company is now exposed to future legal risk from terms and conditions to which they had inadvertently agreed.

Balancing convenience and security

The ideal situation is to establish a streamlined process for drafting and reviewing sales contracts. The company needs to establish a standard contract templates for multiple scenarios, and to store these in a location easily accessible to sales. For companies with contract automation solutions, it is possible to have the contract assembled based on the rep’s response to a few basic questions. If or when negotiation occurs, the rep or his manager should be able to easily swap approved relevant clauses in and out of the paper, which can also be readily facilitated by a contract management automation solution. The same goes for the contract review process. Any new contract wording should be first approved by legal prior to actual signing. It would be best to track each version of the document separately, just in case there is a dispute later and the history of the transaction needs to be reviewed.

As you establish your contract management process, keep the sales rep’s user experience in mind. What would make the process easier and more convenient for him, while not sacrificing the steps necessary to ensure your business is protected? Doing so will result in a more streamlined and effective setup that will result in more sales and better terms for your company.

Jasmin Steely is COO of Corridor Company. Jasmin has spent the last 15 years of her career helping software companies achieve operational excellence.