How to Use Kpis for Successful Contract Management

For example, if a contract`s page number contains a general guide on the duration of contract revisions, a relevant KPI can be defined with different review time targets for small, medium, and large contracts (determined by different page count limits). With the advice of your legal team, contract managers spend a lot of time creating the most appropriate clauses to minimize risk. However, all this hard work is thrown out the window when an employee intentionally or unintentionally fails to insert the appropriate clause or modifies a clause beyond the acceptable ranges. The total value of managed contracts will always be an interesting data point. Although it can be cut in different ways, it is not a valid KPI in itself. In some industries, it may be acceptable for a certain percentage of contracts to expire without renewal. However, this percentage has a threshold that you must set to take corrective action. One way to keep this percentage within an acceptable range is to reach customers more proactively as renewal dates approach. Instead of waiting a few days before the contract expires, a contract manager could be informed of the renewal date a few weeks in advance through automatic notification and invest time in preparing a case for renewing the contract and adding other services. If you have contract management software, the access levels of the person creating the KPI report may not have been set correctly, and data collection can become confusing when it goes through multiple touchpoints. Customize these access levels for data-driven dashboards that give a clear picture of performance. Once you have a complete list of phases and their SLAs, you can determine how long a particular contract should last to get through the appropriate phases. The era of remote work has been productive thanks to the e-signature functionality in terms of contract execution.

The number of companies that decide to execute electronic signature contracts is constantly increasing. With this KPI, the management team can assess the number of upcoming customers/suppliers who electronically sign the documents to execute them immediately. Early execution reflects the interest of the partner invested in the organization. Key performance indicators (KPIs) are needed to compile evidence of meaningful results, but in the world of contract management, this may seem easier said than done. Therefore, the three kpIs most commonly used to measure contract management success are contract efficiency, contract effectiveness, and contract risk. Under each kpi example of contract management, there are certain areas that need to be used to measure your contract management ROI: All stakeholders who have invested in contract management processes or solutions want to know that they are generating favorable returns and that there will be a positive impact on the entire company. Another important measure of contract performance is the annualized contract value, which is the average annualized revenue per customer contract. This is considered essential as the revenue from the contractual agreement and the requirement for timely renewal are analyzed as part of this KPI. The total profits realized in relation to all agreements concluded each year by an organization are evaluated here.

You can easily compare this annual contract value with the organization`s revenue data to calculate the impact of the company`s total revenue. In this way, ACV is advantageous for comparing recurring contracts with lost contracts and new contracts. Once you have that, you have all the tools and processes needed to capture and optimize the signing time of your incoming contracts. To keep your company`s contractual risk within acceptable ranges, you need to track deviations from pre-approved clauses and areas. Contract management software allows you to customize automated email notifications that notify the appropriate team member when a discrepancy occurs. This allows for quick and quick action to remedy the situation or allow for a one-time exception. In addition, the person causing the deviation can be notified the next time they log in to the software so that they become aware of a possible and unintentional omission. Whether your business processes some important contracts at once or has a library of contracts with thousands of agreements, the fact remains that these contracts need to work well for your business to thrive. Your contracts facilitate the flow of information and revenue throughout your operation, so it`s important that you confirm that they are working optimally. Successful contract management processes vary from company to company, depending on their size, industry, and overall maturity level. Ultimately, this PERFORMANCE INDICATOR is a risk management measure that demonstrates whether contract management activities and resources are properly aligned with the most important contracts.

Poor contract execution compromises compliance in your organization and can cancel budgets if the execution of those contracts is not in accordance with due process. To what extent is it a planned administration (e.g., quarterly reviews of activities) and how much one-time avoidable work (p.B. smaller contract requests)? The time required to complete the overall contract lifecycle management measures differs depending on the type of contract, scope, requirements of both parties, negotiation phases, contract design and execution. The sooner you can conclude a contract, the faster the income will be repaid. To this end, a satisfactory period between the start of the contract and the signing phase must be determined in advance by the stakeholders. If your approach to contract management doesn`t deliver the expected value, leading contract management software can streamline how you measure contract management success and help you achieve your KPIs through risk mitigation, increased productivity, increased visibility, and contract monitoring. CobbleStone has helped thousands of companies better manage their contracts with Contract Insight®, a scalable solution designed for businesses of all sizes and industries. This KPI is best calculated at a high level by considering the volume of contracts with atypical clauses as a percentage of the total contracts signed. Key performance indicators should be used tactically based on the nature and objectives of the contract. While the purpose of KPIs is to drive development towards achieving the goals for each agreement, the provision of these metrics must take into account the overall business objective so that your contract management strategies are fully aligned with your business goals. It also helps ensure compliance with internal and external regulations and governance.

This is another efficiency measure to determine whether contract management resources are being used appropriately after signing. Automated reminders for contract renewals can help your business prepare in a timely manner and create opportunities to find more cost-effective alternatives. Here in this blog, we`ve discussed the top 3 contract management KPIs that you can`t miss when calculating your contract management ROI. With these results in mind, it is important that the definition of each contract management KPI covers exactly how it relates to a particular outcome and how it contributes favorably to its improvement. Similar to the KPI for signing time, it is necessary to determine what is an appropriate level of commitment for each contract and then what is the actual level of commitment. As noted above, examining the desired outcomes of contract management is an important first step when it comes to establishing meaningful performance measures of contract management. The above KPIs should provide a solid foundation for improving the performance of contract management over time. Specific examples of contract management performance measures include: How a company defines « active management » depends on the maturity of its contract management processes. Considerations include things like whether he has been assigned to a designated contract manager and the regularity of formal reviews of contracts. This KPI can simply be expressed as a total number, with the aim of keeping it as low as possible. However, this could mask differences in the types of contracts processed. Use your contract management system to find out how many days have elapsed to complete contract lifecycles and determine an acceptable range.

By having a number to reach, contract managers can track whether they are sticking to the schedule and processes they may need to speed up or eliminate. Contract managers face the challenge of monitoring the contract lifecycle from application to renewal, while demonstrating to stakeholders the importance of an often complicated and undervalued process. .