In a previous post, we discussed the challenges of selling virtually (Virtual Selling: The new Norm for B2B Markets?). Here, we consider how this shift in business model presents an opportunity to improve and simplify the legal structures that underpin your sales process and – in doing so – protect and grow your revenues.
1. Time-consuming contracting processes adversely affect customer experience.
Successful selling and customer retention is not only about the quality of and need for your products and services but the overall experience your customer has in dealing with you. And this goes far beyond a successful sales pitch. The subsequent legal contracting process must be easy, efficient and make your customer feel valued.
This is true whether the sale is made in person or by video conference. However, in a traditional sales process, key contract issues and bespoke requirements will usually be raised and discussed in person as part of the process. In a virtual environment, without the ability to interpret their non-verbal communication, it can be difficult to pick up on signs that your customer is unhappy – meaning you are less able to respond and support them through the process.
No-one likes one-sided contracts. But when doing business virtually it is even more important that your contracts are easily understandable and perceived as fair by your customer, while still enabling you to manage risks appropriately.
2. Optimising the contract process
So, how can you ensure that your contract process is not a barrier to sales?
First, you must understand the steps involved.
- How is the contract generated and by whom?
- Are there templates available?
- How are the bespoke terms (pricing, services) reflected in the contract?
- To what extent are the terms negotiated?
- Is it always the same clauses that are amended?
- Who must approve changes?
- Who can sign?
- Is it signed electronically or manually?
- Where is the contract stored after signing?
For most businesses, the contracting process is a combination of system-driven and manual activities with customer administration and legal teams usually playing a key role.
Second, you need to identify the “pain points”, i.e. those parts of the process that take up time without adding significant value or which give rise to unacceptable risk. These are typically found in the document creation, approval and signature steps, but there can also be significant cost and risk in the way in which concessions and bespoke terms are negotiated and reflected in the contract.
A robust approach to contract lifecycle management (CLM) – ideally supported by simple, easy to use systems and tools – is essential in streamlining this process, lowering the overall time to contract, reducing risk and cost and improving the customer experience. Many such systems support automated templates with optional clauses and default fall-back positions, built-in approvals workflow, electronic signature capability and document retention. Using such systems also generates metrics that drive reporting, risk management and continuous improvement.
3. Pre-empting procurement hurdles
Once you’ve made the sale, submitting your invoice and receiving payment may not be as easy as it sounds no matter how smooth your own contract processes are. All organisations have certain requirements that must be met as part of their purchasing process. This can be anything from how purchase orders are raised to conducting comprehensive due diligence on every supplier to identify potential risks in the supply chain (for example, child labour or data privacy breaches). We recommend asking your customer early in the negotiation process what information you need to provide and whom to liaise with in the procurement team, so that you stay one step ahead of the process and avoid delays.
4. Ongoing relationship management
Contracts are also a key component of ongoing relationship management as part of which obligations and renewals should be tracked and managed proactively. When a dispute arises, it is too late to pull the contract out of the drawer. A well-structured contract repository within your CLM system means that you can quickly find documents, key terms and financial information you need.
This is backed up by research from The International Association for Contract & Commercial Management (IACCM), which showed that good contract development and management could improve profitability by an average of 9% of annual revenue.
Think about how your contracts can be used to protect and grow your revenues. Consider replacing a fixed term with an “evergreen” contract, i.e. one that automatically renews for successive periods if termination notice is not received a certain time before the end of the current period. It is also a good idea to include an annual price increase clause (often linked to inflation rates) to protect your future margins. Finally, it should be easy for your customer to buy more goods or services from you without having to negotiate a new contract. So called “framework” or “master” contracts allow this, giving you an immediate advantage over a competitor from whom your customer does not already buy services (and whose contract would have to be negotiated from scratch).
5. Where to start?
What the optimum contracting process looks like will vary from one company to the next. Start by making a strategic assessment of the current state, the problems and the desired outcomes. As with any technology, successful implementation of contract lifecycle management systems depends on the solution effectively solving the identified pain points. Technology alone will not transform your contracting lifecycle if your contracts are not well understood and the contracting process is inconsistent or complex.
If you need more advice on simplifying your contract processes whether with the help of technology or without, get in touch with our CGEM team.
Drop us an email at firstname.lastname@example.org or book your free 15-min assessment call.
Strategic and business-focused general counsel with international advisory experience across industries from global technology, data and consulting businesses to start-ups. Focused on contracting and commercial strategy, positioning legal as a business enabler and transforming legal operations through culture, process simplification and technology.