HOW TO SHRINK YOUR SALES CYCLE THROUGH SMART CONTRACT MANAGEMENT

HOW TO SHRINK YOUR
SALES CYCLE THROUGH
SMART CONTRACT
MANAGEMENT
Best Practices in Contract Management
Table of Contents
The Seven Best Practices of
Contract Management ............................................3
1. Find a Leader .........................................................3
2. Understand the Best Way to Implement ..................4
3. Focus on Quick Wins..............................................5
4. Measure .................................................................5
5. Benchmark ............................................................6
7. Say NO to Managing Technology and
YES to Managing Contracts ....................................6
Compare Cloud Solutions with
On-Premise Software .................................................7
Case Study: Successful Contract Automation .............8
In today’s tough economic times, every
business manager has the same question:
How can I increase revenue without
adding more sales staff?
Every organization today faces a volatile economic landscape. Navigating the twists
and turns of a sale across that terrain can challenge the best of sales teams. What if
you could streamline that often-arduous process? What if you could speed the sales
contract process, track all of the iterations and negotiations, secure signatures, and
book the order significantly faster than you do today? How many more orders could
you book this year?
Would that change your organization’s revenue stream? Would you be better
positioned to weather this economic cycle?
This white paper describes six practical best practices any organization can
implement to close deals faster and more efficiently.
You Have Control of the Sales Contract Process
If you can achieve even
50 percent improvement
in the contract cycle, your
sales cycle time will reduce
by 9 percent. This means
you can close 11 percent
more deals with the same
resources.
Sales contract volume affects not only the sales account executives who are directly
negotiating, and the rest of the sales team (administrators and management), but
the speed and success of the process will be directly impacted by finance and legal
departments. Managing sales contracts properly can help shrink the sales cycle,
improve cash flow and reduce the risk of litigation and penalties.
According to an Aberdeen’s research report, an average 18 percent of an enterprise
sales cycle is attributed to contract creation, negotiation, and approval. If you handle
highly negotiated contracts, the rate could be even higher. The good news? You
control most of the sales contract process because the majority of steps occur
inside your company. If you can achieve even 50 percent improvement in the
contract cycle, your sales cycle time will reduce by 9 percent. This means you can
close 11 percent more deals with the same resources.
© 2012 SpringCMSM
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Common characteristics of a challenging sales contract lifecycle include:
• Contracts are highly negotiated, involving many different terms that make it
difficult to stay on top and strike the best deal when there are many contracts
being processed.
• Many external and internal parties need to interact, creating delays as multiple
people review each change and you wait for the prospect’s team to do the same.
• Contracts are typically closed in a time crunch atmosphere. Despite everyone’s
best efforts, most deals get finalized at the end of the month or quarter. All of a
sudden every deal needs legal review, executive approval, or must be approved by
finance for revenue-recognition issues. How effectively you manage this process
can determine if the key deals get closed and the company achieves its targets.
• Contracts use a manual and cumbersome process to track email, fax, revision,
and signature. Perhaps you rely on emails, faxes, and shared network drives to
manage this complex business ballet. The resulting confusion over the correct
contract version to edit and lack of visibility into the process kills the efficiency.
• Compliance requirements add risk for finance and legal teams. Compliance
requirements require a specific review as well as an audit trail that verifies each
review step. If you use email as an audit trail, this can increase your legal and
financial risk in case of contract non-compliance.
Traditional contract
management software is
expensive to install and
customize and requires
lengthy and expensive
implementation.
Large companies with big budgets have traditionally adopted technology to address
the sales contract process challenges. Analysts have identified some significant
benefits from automation. For example, Aberdeen reports that best-in-class
companies have experienced a 21 percent reduction in Days Sales Outstanding
(DSO) with automation.
However, the real challenge to streamlining sales contracts lies not with technology
but with people and processes.
Traditional sales contract management software is expensive to install and customize
and requires lengthy and expensive implementation. Because these software
solutions are so expensive, companies try to implement the whole process (to get
the full value of their investment) all at once when that process is not well understood
or agreed upon.
The result is poor process automation, not streamlined contract management.
The Seven Best Practices of Contract Management
Fortunately, there is better way. The following best practices for sales contract
management were built using IACCM’s and Aberdeen research as well as practical
real-world success stories from the front-lines of sales and business development
at companies of all sizes. These best practices provide guidance to overcome the
typical sales contract challenges and will put you on the path to success.
1. FIND A LEADER
The first step is to find a home for managing the process. Designate a leader, a
process owner, who keeps everyone on track to ensure success. Decide who should
own the project and who will provide the checks and balances.
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The following chart of roles and functions can help you identify a process leader in
your organization. IACCM created this chart using a case study of a major global
pharmaceutical company. The company addressed the challenge of bringing people
and processes together to streamline contract management. The information below
describes a typical role/function matrix.
Who Should Lead the Sales Contract Management Automation Process?
Owner
Pros
Cons
Sales
Understands customer needs and
has the ultimate motivation to get the
process completed on time.
Inherent conflict of interest as the
rewards for closing the deal quickly may
not necessarily help in striking the best
deal.
Finance
Cares about financial impact of terms
on revenue recognition and meeting
financial compliance requirements.
Traditionally thought of as removed from
customer needs and less sensitive to
sales pressure.
Legal
Understands risk exposures and
importance of compliance issues.
Removed from customer needs and less
sensitive to sales pressure.
Customer Service, Shipping,
Operations
Must fulfill terms of contract. Holds the
product knowledge.
Not close to customer.
2. UNDERSTAND THE BEST WAY TO IMPLEMENT
You already manage contracts in a certain way. How will you create an effective
contract management process and change people’s behavior? In many cases,
change management will become the most challenging aspect of sales contract
automation. Some organizations will want to tackle the process, end to end, all
at once. Other organizations will want to take an incremental approach, perhaps
starting with one aspect of sales contracts and then add functionality.
Contract management solutions range from simple to extremely complex and
sophisticated. Best practice dictates that the most successful implementations focus
on getting started quickly, gaining sucess early, and proving ROI. Then rolling out
further functionality to complete the sales contract automation process. For example,
take a few important contracts that are still in the early stages. Automate these
contracts to start.
Alternatively, you can begin with contracts of one division or one product line in the
company that will champion the cause. This will help you remove process kinks and
focus on the contracts rather than be overwhelmed by the process. Get everyone’s
feedback before you finalize the process. Make sure everyone on the team, including
customers, knows that you are trying a new contract management process.
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Unlike traditional software
implementations, a cloud solution (also
called Software--as-a-Service, SaaS,
or web-based solution) enables you
to begin sales contract automation
with a small department, perhaps
five invidividuals. Rather than spend
excessive cycles on system planning
and testing, a cloud sales contract
solution allows your initial team to
quickly set up the business rules and
process and begin using the solution
in less time than it would take to write
a business requirement for a traditional
software sytem. This enables you to
know within a few weeks how well the
cloud solution supports your needs and
to assess potential ROI of the solution
and how much it will reduce the sales
contract cycle.
As you assess ROI, look for four main
benefits delivered:
Value to Sales: Deals will close faster. No
longer will sales people have to chase
people who have “sent” the document
— everything will be waiting in their MS
Outlook inbox.
Value to Customer Service: Everyone
in the company will be able to locate
the contract and service the customer
accurately as per agreement.
Value to Finance: Reduced DSOs, better
compliance and less scrambling during
the hectic days of audits.
Value to Legal: Better compliance and
reduced risk exposure to the company.
They will be perceived as people who
help make the best deal rather than
paper-pushers who keep saying “no.”
© 2012 SpringCMSM
3. FOCUS ON QUICK WINS
In the initial phases, focus on aspects
areas where you are most likely to
achieve quick wins. These include:
• Ability to locate contracts quickly
- What attributes should you track
on the contract? Should it be terms
under negotiation, contract number,
amount, PO number, etc.?
• Finding standard contracts and
language quickly- Building a library
of standard templates from which
to work and making it easy for
users to get the right one. Training
users to start from the standard
contract template and to create a
new contract with the customer’s
information using simple mail
merge-like capabilities.
• Automatic routing and alerting Avoid missed deadlines by using
automatic routing and approval
capabilities. This will also make
sure that appropriate people in the
company are kept in the loop and
guarantees compliance.
• CRM and ERP integration - CRM
and ERP are important systems
of records for sales and finance.
Integration to these systems is
critical for increasing adoption and
achieving efficiency gains.
• Electronic signature - Close
contracts faster and always stay on
top of which documents are waiting
for signature instead of rummaging
through piles of paper or e-mails.
• Collaboration - Use special
comments to highlight information
that matters to finance, operations
or customer service like a
special billing term or an unusual
shipping requirement. Develop
simple protocols to highlight this
information.
Just doing the above will yield significant
benefits and help you close deals
faster, improve relationships with your
customers.
4. MEASURE
Use the following metrics to find
bottlenecks, to track improvements and
to identify areas for improvement.
• Percent of deals closed on time vs.
those that slip into the next period
and the root cause.
• Reduction in DSO.
• Reduction in time taken to negotiate
and close contracts.
• Number of contracts by status and
by individual.
• Reduction in regulatory penalties,
missed deadlines and lost sales.
These metrics provide a good baseline
for measuring improvement. As you
become more sophisticated with the
contract management process, you can
focus on:
• Finding out terms that are most
negotiated. This can help you
simplify the contracts and reduce
the cycle.
• The number of steps from creation
to close.
• Setting up a process to regularly
learn from all the contracts that
undergo negotiation.
• Pick a solution that will give you
insight into these metrics so you
can share them with different
groups and executives
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5. BENCHMARK
Benchmark your company against the best-in-class to see how you are progressing.
As you can see, the end results can be achieved just through implementing
simple procedures. The following benchmarks were developed by the research
group, Aberdeen, in a study comparing best-in-class sales contract management
automation against other firms with minimal or no automation.
Key Performance Indicator
Best-in-Class
Other
Contracts stored in a repository
82%
33%
Contracts with non-standard
language
17%
35%
Reduction in days sales outstanding
21%
13%
Compliance to service agreements
73%
58%
Given the availability of risk-free, on-demand solutions that are easy to use and
buy, there is no reason why you should hold back. Whether competing regionally,
nationally or globally, your organization needs all the competitive advantage possible.
By using on-demand services, you get to focus on creating better business results.
6. SAY NO TO MANAGING TECHNOLOGY AND YES TO
MANAGING CONTRACTS
If you work for a small- or medium-sized
company or in a resources-constrained
division of a large company, selecting
and managing new technology presents
a daunting task. Not only are budgets
constrained, but today’s economy
also makes adding new software and
hardware difficult if not impossible.
In the past, implementing traditional
sales contract automation software
would have been an expensive, timeconsuming, and painfully complex
process. You would have to spend
countless hours researching different
vendors, putting out an RFP, comparing
products, building an ROI case,
getting IT budgets assigned, and
working through the purchase and
implementation cycle. A cloud software
solution means that you manage the
function, not the technology. Cloud
© 2012 SpringCMSM
enables you to get started quickly,
sometimes within a few days, and
begin to actually use the solution to
automate your processes, without the
capital expense and the time intensity
of traditional software. You can solve
the business problems and to reap the
benefits, while leaving the technology
challenges to others. A cloud solution
offers many key advantages:
• Easy to consider: Cloud requires
no hardware or software purchases,
no capital expense buget. The
solution is made for business users
to use with very little set up needed.
the flexibility to start with only a few
users, keeping the system within
limited budget, making it faster to
get approved. This allows you to
start with a core team and then
scale and expand as you prove ROI
and show results.
• Rapid deployment: Cloud solution
deployment happens in days
or weeks, not months or years.
Unlike on-premises software, you
don’t have to wait for highpriced
consultants to finish writing
complex code. You can focus on
the process and improvements and
less on technology.
• Easy to buy and affordable:
Cloud solutions are offered as a
monthly subscription. That means
no capital expenditure. You have
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COMPARE CLOUD SOLUTIONS VERSUS ON-PREMISE SOFTWARE
Cloud
On-Premise
Easy to Consider
Excellent. Solution can be
configured quickley to match your
business process.
Poor. Usually requires a lengthy
proof-of-concept.
Easy to Buy
Excellent (predictable)
Poor (expenses are up-front)
Affordable
Excellent (pay as you go)
Poor (high up-front costs)
Up-time
Excellent. Software up-time is a
core part of the service, and cloud
companies invest heavily. The cost is
amortized over all users, hence you
get better service at a fraction of the
cost.
Poor. Excellent service is very
expensive for IT. For example, IT may
have to purchase significant hardware
to ensure up-time just for 5-10 users.
Latest Version Availability
Instantly. On-demand companies
upgrade all customers at once. The
features are available instantly after
each upgrade and are free of charge.
Delayed (expensive)
Upgrade Frequency
Excellent (frequent releases)
Years
Vendor Success
Based upon your success
Service revenues
Customization
Fast. In a cloud service, end-users
configure options quickly rather than
IT coding customizations.
Poor (IT-driven, expensive and slow
customization)
Cloud enables you to get started quickly, sometimes within a few days, and begin to
actually use the solution to automate your processes, without the capital
expense and the time intensity of traditional software.
• Pre-integrated with best-ofbreed CRM: A solution that is preintegrated with your CRM system,
like Salesforce.com, facilitates
sales team adoption. With familiar
interfaces, sales needs not time to
train. Integration puts all relevant
information regarding the deal in
one place. The integration with
CRM also helps in measuring the
impact of changes on key metrics
and improving visibility by finding
© 2012 SpringCMSM
how much pipeline revenue is stuck
in contracts by department and
contract status.
• High availability: A cloud solution
is hosted in a SAS 70 Type
II-certified data center that uses
the highest standards of backup,
protection from power outages, and
disaster recovery. Most companies
find it costly to support this level of
availability, which makes cloud even
more reliable than many in-house
systems with much better up-time
than an on-premises solution.
• Access to latest version:
Because all customers access the
same version of the cloud solution,
upgrades are much more common
with dramatically higher success
rates. Should a fix be needed, all
users benefit immediately. This
ensures you are always using the
latest and highest quality version.
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• Fast innovation: Because a cloud
solution uses a subscription model,
as a customer you have immense
leverage. Unlike on-premise
software, where you implement
the solution and perhaps never
see the vendor again until your
maintenance agreement comes up
for renewal. Cloud product releases
are made every 10 - 12 weeks
to accommodate new business
requirements from customers. This
release cycle is critical because a
cloud vendor understands that you
don’t have access to IT resources
but still need innovative software
• Security: A good Cloud solution
that is hosted in a SAS 70 Type
II-certified data center with access
over SSL (the same protocol
you use when accessing online
banking) makes the solution very
secure. Most companies’ IT staff
does not have the budget for such
high levels of security. For a Cloud
company, this cost is shared across
thousands of subscriptions, making
it affordable for all.
Case Study: Successful Sales
Contract Automation
Sentinel Health Group, a Coloradobased medical staffing agency, connects
doctors with hospitals in need of shortand long-term personnel assistance. To
make it easier to meet staffing requests,
Sentinel staff coordinates contracts
between the doctors and hospitals, an
often cumbersome and lengthy process.
Jonathan Charles, senior account
executive for Sentinel, joined the
burgeoning staffing agency and soon
discovered that his employer’s biggest
challenge wasn’t dealing with too few
doctors or overstaffed hospitals. Instead,
the lack of a contract management
system prevented Sentinel from closing
deals quickly and winning more business.
“Nobody stored their templates in one
place,” Charles said. “We wasted hours
searching for templates that didn’t contain
standardized language and required major
revisions for each new opportunity.”
From searching for contract templates to
locating specific contract details, Sentinel
had no automated process. “It took an
hour to find a contract. They weren’t
organized by date, the name, hospital or
any useful criteria,” Charles said.
Sentinel chose Salesforce.com to
organize its database of client and
opportunity information. Next, the
company turned to Salesforce’s
AppExchange to find a sales contract
automation solution that could solve
their most severe challenges. They
found SpringCM’s Sales Contract
Automation Solution.
SpringCM’s Contract Automation
Solution enables Sentinel sales teams
to streamline contract negotiation and
approval without navigating away from
the Salesforce.com integration.The
SpringCM electronic signature feature
delivers approved contracts and allows
clients to e-sign contracts without a
SpringCM or salesforce.com account.
Templates and contract clauses stored in
SpringCM expedite the creation of new
contracts based upon best practices.
BENEFITS: Slashed time needed to
close the average deal by 75 percent.
Request for e-signature shaved days off
the contract approval process.Contracts
and contract templates can be located
in seconds rather than hours.Immediate
access to contracts and CRM information
from anywhere via internet.
With SpringCM’s Sales Contract
Automation Solution, integrated with
Salesforce.com, the mixture of web-based
contract management and CRM has
produced an immediate ROI for Sentinel
“We’ve found an affordable way to increase
customer satisfaction and decrease the
time it takes to close business,” Charles
said. “To me, that’s invaluable.”
SpringCM, as the leader in mobilized business content, provides the freedom, power,
and control businesses need to go beyond simple file storage and document sharing
to connect teams and those they work with to powerful content management
applications that make content available anytime, anywhere and from any mobile
device with complete synchronicity and security. SpringCM unleashes the power of
anytime, anywhere content to change the way you work.
©2012 SpringCM | All rights reserved | www.springcm.com
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