Things to consider when choosing contract solution
Are you considering starting to manage your contracts completely digitally? Your own, or perhaps corporate?
Here we give some tips on things you should consider.
Introduction - think through how your contracts are created
We often enter into agreements, both as private individuals and in our professional roles. Many times the agreement itself is of such little value or valid for such a short time that we do not care about it.
Some examples of contractual situations:
• Buying an ice cream on a hot summer day means that you enter into an agreement with the ice cream seller. The receipt may feel less important. A possible complaint about the product should still be made within a few minutes.
• If you go to the electronics store and buy a mobile phone, you want to keep the receipt ready. The Consumer Purchase Act applies and regulates obligations for the retailer for 3 years. There are probably also guarantees from the mobile phone manufacturer that apply for one or a couple of years. This is part of the agreement that is entered into, although it is not usually documented on the receipt. In this context, the receipt is more of a proof that an agreement has been concluded regarding e.g. be, time and price.
• If you buy the phone for the company, there is a little more to keep track of. The invoice (ie the receipt) must be submitted to book-keeping and live it's life there. At the same time, the company should keep track of the contract that the invoice represents. There are supplier guarantees that may be needed at later times.
• Contracts are entered into in various forms. In the example with the mobile phone, it may be just an A4 paper or an invoice in a PDF - as well as obligations that are regulated even if they are not documented. The ice cream purchase was oral. If your company is using insurance solutions, that contract spans many pages of text. And probably several different documents, or attachments. The written contract and the oral are perhaps the most common forms. Video and above all audio recording is of course nothing new but more industry-specific.
• Reality offers a mixture of paper contracts, electronic documents and, where applicable, other media. Collected or divided into several parts. Even over time if we consider call-off contracts, supplementary contracts, etc.
The desire is to be able to handle all contracts via computer or telephone. Search, sort, set alarms and retrieve reports. Especially for companies but also for private individuals.
Map out existing contract flows
A good way to get an overview of the company's contracts is to look at incoming (IN) and outgoing (OUT) contract flows.
• Probably all departments within your company buy goods or services. They are thus possible channels for incoming supplier contracts. The human resources department buys insurance solutions (IN) and generates employment contracts (OUT). Sales and delivery create sales-related contracts (OUT) and purchase materials and CRM services (IN). The finance department purchases accounting consultants (IN).
• Map the formats in which contracts are saved. Personal mailboxes, mail handling, paper and supplier web portals are common sources. Consistent contract management requires that contract information belonging to one and the same contract can be kept track of. Before you start looking at contract systems, you should be clear about which contract formats can be handled.
Decide how the contracts are to be registered
Is it best to register the contracts centralized, decentralized or a mix? Registration of a contract means registration in a contract system or how one otherwise keeps track of the contract in question and what status it has. Registration can be done in many different ways. Listed below are some options and its pros and cons.
• The technology allows a completely decentralized management where whoever triggers a contract in some form must also register it. The argument for this solution is that the knowledge about the contract is probably greatest closest to the "source". At the same time, it is rare for staff to demand more administrative work to fill their working day. The risk is that the contracts are not registered in time. Lack of time, knowledge or scanner are some reasons.
• Centralized management is also technically reasonable. A designated group of employees ensures that the contracts are registered in the selected system. The advantages are, of course, that knowledge of processes and how contracts are to be registered is easier to administer. Also access to scanner. At the same time, it can be a little more difficult to capture data that is unique to the contract, ie based on the information that only the source of the contract has.
• We suggest that you look for for a hybrid, provided that there is technical support in the contract solution you choose. With support for workflows, you can ensure that the contracts are registered without delay, and at the same time enable supplementary information to be added afterwards. The invoice for the purchase of a telephone should perhaps first go to finance for accounting. At the same time, they can enter the invoice in the contract system with a mark that the buyer may complete the registration.
List which of the company's processes affect or are affected by the agreements
List processes for both incoming and outgoing flows.
• If e.g. the sales department has a rule that customer contracts over a certain amount require some form of approval - is it then desirable that such an approval is handled within the contract solution or alongside? That is important for when a contract needs to be registered, and it also affects what functions the contract solution should offer.
• Another example is whether the human resources department requires approval from the next manager before an employment offer is sent out. If such approval is to be handled by the contract system, this affects the registration of contracts.
• For new suppliers, the purchasing department may be required to carry out a credit report and a supplier evaluation before the agreement may be concluded. If both the credit information and the supplier evaluation are to be carried out in the contract system, the registration will be affected and the contract system must have functionality to handle this type of approval and evaluation.
Analyze which types of contracts that require reporting or monitoring
Start from the different types of contracts that you have. What contract information is used by different departments in your business? Perhaps the hourly rate for a consulting contract should be used for invoicing and the same consulting contract should be extended regularly. How is reporting and monitoring handled for this?
• Supplier contracts that expire, or roll out with regular renewal - how do you want to monitor these? A missed extension or renewal can incur costs for your business.
• Customer contracts that entail a commitment or risk exposure - is there reporting or monitoring to be setup?
• Probationary appointments that are transformed into permanent employment if no active decision is made within 6 months. Being able to set a watch on a date with an automatic reminder some time before the decision must be made makes it easier for the responsible manager.
Create an access and security plan
Access and security are fundamental to the efficient and secure handling of contracts. It can also be decisive for which contract system is to be used. The fact that individuals and groups only have access to a subset of contracts reduces the "noise", ie that they need to manually filter out uninteresting contracts. This is of course good for efficiency. At the same time, security increases, ie keeping sensitive contract information confidential.
• The simple solution is of course that everyone within your company has unlimited access. And if only a few people are affected, it can be a good solution. Security involves administration and requires ongoing maintenance.
• The most common, however, is that there is a need to regulate access. Employment contracts stay within the personnel department, only company management and the board have access to certain strategic supplier contracts, the sales manager can see all sales contracts with the respective salesmen only see their own contracts. Each organization has its own wishes and requirements.
The balance between security and access can be difficult. It is also not uncommon for this to change over time. When choosing a contract system, you should include this in the requirements picture.
Ready for the next step?
The survey as above can take less than 1 day for smaller companies. For larger companies, this is of course a more extensive task.
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