Q&A from our “The Holy Grail of Contract Management: Harmony Between Procurement, Sales and Legal Teams” Webinar
Recently, JAGGAER and Consilio hosted a webinar examining how organizations handle contract management within and between their procurement, sales and legal teams. Our speakers, John Lawlor, general counsel for JAGGAER, and Robin Snasdell, managing director for Consilio, discussed solutions for this difficult process to increase output while decreasing risk. Below, our speakers answer a few lasting questions from the session:
1. In your experience, who typically owns the Contract Management process? A) Procurement, B) Finance / Accounting, C) Sales or D) Legal?
Robin Snasdell: Consilio has seen an increase lately in the Legal Department taking ownership of the Contract Management process with the support of Procurement. We have observed that Finance/Accounting is satisfied with having visibility into the process that affects their processes, such as payment conditions or terms, but may not have the resources to own the entire contract lifecycle. Legal taking greater ownership of the process is usually governed by the risk appetite of an organization. If an organization is in a vertical industry where regulations and compliance requirements change often, or if they offer services or a product that would be considered in a high-risk category, such as data being exchanged, or banking/investment services, then Legal having more control over the contract process may be warranted and a good step towards mitigating potential risk.
On the sell side, there are parts of the process that Sales can certainly own, but not the entire contract generation from beginning to end. Organizations do not find that very practical.
2. Is the system you are using capturing and allowing you to report on new FASB rules regarding capturing revenue as it relates to leases?
John Lawlor: To help enable an organization to have the appropriate controls to ensure compliance with this change in accounting standards for certain of its contracts, Total Contract Manager could, through use of mandatory workflow, require users to identify these types of contracts at the time the contract is added to TCM, in addition to enabling users to quickly and easily run a report of all these contracts, including any applicable sub-categories of affected contracts.
Additionally, TCM could be used to notify individuals in the finance department to provide different accounting for the affected contracts, whether on a one time or recurring basis. Though we are not currently using the system to address that, it certainly can be accomplished.
3. Aside from the technology and contract templates, what strategic or tactical approaches are there to decrease contract cycle time especially for statements of work where legal and/or procurement need internal customer input for requirements?
RS: Consilio has addressed this in a few ways. The first is, if at all possible, to create base language that would work for specific Statements of Work (services? Rented products? A certain widget?) and create a template where the customer input is minimal. For instance, we do this at our own company for two different service offerings, one a current state assessment and another a system selection. We have enough base language written in the template that the input only needs to be the counterparty and their information, dates of the contract, and details that are specific to that engagement (resources, name of system).
Another way is to send frequent reminders via automated email that their contract is delayed due to information that is missing. One of our clients actually kicks the contract out of the system until the customer fills in the necessary information.
4. Contract data and content is critical for any technology to drive accurate reports, alerts, renewal alerts, obligations, etc. How do you ensure that the data is consistent and accurate to the physical contract and who is accountable for this effort for best practice?
Both: Many organizations pull the basic fields that they need for reporting from a CRM system, so they know it is correct. Otherwise, they make sure that fields that need populating for accurate results for reporting are assigned as required fields during the contract creation. Procurement typically owns the checks and balances for the contract data, preferably before final execution.
5. What do you see as best practice for approvals on base agreements that are unchanged?
RS: In order to expedite contract execution, we have worked with some organizations that have certain conditions written into the process that if the base agreement is unchanged, only the approval person associated with the amount of the contract (for example, the approver that has to sign off on a contract >$500K) has to sign off. Legal does not have to weigh in if there are no deviations from their required legal and business terms. Perhaps a risk analysis on the variation of approval processes would prove useful.
Don’t forget, if you missed the webinar, you can view it here!