How Good Contract Hygiene Can Simplify Your CLM Implementation

Posted on November 19, 2024 in Blogs, Contract Analysis Services

If you’re thinking about migrating your contracts to a software platform, you already see the value of automated workflows, streamlined processes, and centralized contract authority. Yet whether you achieve those results depends on the quality of your contract hygiene before migration.

Maintaining contract hygiene is like bike chain upkeep: it’s essential if you’re going to keep your legal department riding smoothly down the road. When you neglect steps or fail to keep your contract base polished, you might need to pedal harder to catch up with competitors or risk unwanted expenses from unplanned renewals.

So, how do you verify that you are practicing good contract hygiene before transitioning over to a new platform? Start by taking these critical steps.

1.) Define Good Contract Hygiene

First, let’s define our terms. What is good contract hygiene? In a nutshell, it’s the ongoing process of maintaining the organization, accessibility, and up-to-date accuracy of contracts throughout their lifecycle.

Not surprisingly, contract hygiene only happens through an intentional process. Organizations that embrace the right processes, standards, metrics, tools, and champions are more likely not only to cultivate an environment where users can trust contract data but also transform those documents into valuable assets.

More than just creating a framework, that framework needs to be communicated to everyone involved in the contract lifecycle to ensure that quality is never sacrificed.

2.) Consolidating Your Contracts

Scattered contracts offer inconsistent value. Just like a bill buried under a messy pile of papers, obscured or accidentally hidden contracts can come with a hefty price tag. Unless in-house attorneys can actively monitor the obligations of their legacy and current contracts, legal departments face a roulette wheel of unintentional expenses and consequences.

Before moving to a new platform, attorneys need to put the odds in their favor. That involves conducting a comprehensive audit of any possible contract repositories. Check any CMS, ERP, email accounts, cloud storage, or even physical file folders (if you still have them). In-house counsel needs to properly map out all the nooks and crannies where contracts live, either creating a master list of data sources for future integration or consolidating them in a temporary repository before the migration.

3.) Cleaning Up Contract Data

Just because contracts are now digital doesn’t mean they’re all accurate. Attorneys need to review documents to ensure both human input and automated digitization resulted in accurate contract data that reflects the reality of the document.

By addressing inconsistencies and removing outdated or irrelevant contracts, organizations set the stage for seamless data migration and a smoother implementation of the new system. Often, preliminary stages of a contract management software implementation involve managed document review services to determine accuracy, compliance, and defensibility.

4.) Classifying and Tagging Contract Data

Good contracts are searchable contracts. All the pertinent information–agreement types, dates, term types, renewal clauses, termination clauses, legal jurisdiction, signatories, and other key contract data–needs to be quickly identifiable through effective categorization or metadata. Structuring contracts into data elements that reflect your industry, geographical operations, and business needs will maximize the usability of your contract management system.

It can also be beneficial for your organization to create a template of standardized data points that must be included before any document is uploaded into a platform. Clear and defined expectations on contract completeness can limit future issues with contract hygiene.

Plus, your contract management platform can likely automate the extraction of these vital data points to make ongoing management, renewal, analysis, and tracking simple. Moreover, it’s important to make sure the metadata across contracts align with existing or anticipated workflows, especially if they’re going to be automated in the new system.

5.) Standardizing Your Contract Clauses and Templates

Consistent templates across routine contracts not only streamline operations but can also allow attorneys and other employees to create contracts without as much need for negotiations or lengthy approval. They’re standardized so your organizations can yield predictable and favorable terms every time. Yet the dynamic nature of any organization makes it so that different iterations can crop up as attorneys, salespeople, and procurement teams make their adjustments.

By identifying and then migrating contracts drafts into your single source of truth, you can create traceability as well as define the gold standard for each contract type. By standardizing your contract clause library in this way, you can prevent the proliferation of contracts that deviate from organizational standards.

6.) Delineating Contract Access and Permissions

Contracts should be editable and readable by authorized personnel only. With that in mind, it’s important for leaders to create an access management policy that grants access to necessary parties for specific contract types without greenlighting excessive permissions.

The key is to set role-based access. This breaks down who can view, edit, or approve contracts depending on their responsibilities. Salespeople might need to view and propose changes while management and attorneys might be necessary to authorize the final contract approval. You know your own contract approval needs best.

Establishing these standards before transitioning to a new contract management system can improve your ability to maintain quality once the tool is live.

Uncovering Contract Data Insight

If you’re not sure how to structure your data or what to prioritize in your parameters prior to your implementation, it can help to collaborate with the right Contract Analysis Services partner.

Legalpeople has developed a contract review methodology that helps to identify what criteria are critical to your industry and organizations, making the process of management and analysis simple. If what you need is transactional assistance rather than an all-inclusive solution, we can point you in the direction of our Smart Contract Repository to accelerate the delivery of clear and structured contract value.

Whatever your needs, the Legalpeople team can contribute to your contract hygiene, so you can derive consistent value from your contract data.