From the get-go, the primary goal of a startup is to scale the business as quickly as possible. Unlike large corporations that do not have investors and VCs to worry about, startup founders scramble to increase sales and expand to attract investor dollars. With effective contract management, startups can get an edge in the market and accelerate their growth.
Initially, when there are few contracts, it is easy to manage them manually. But when business partnerships multiply, the contract management process often gets put on the back burner. Investing in a contract manager, legal counsel, and dedicated software takes time and money. Early-stage startups are already bogged down in other, more pressing matters like hacking growth to raise venture capital. Therefore, they disregard contract management because there is no immediate impact on their workflow without it.
But the truth is: startups risk high fines, expensive lawsuits, lost revenue, and damaged relationships if they continue to overlook contract administration or handle it poorly. This article will discuss how startups can benefit from implementing a systemized approach to contract management.
1. Greater Operational Efficiency
Performance is at the heart of every contract. Thus, it should come as no surprise that a contract management process with standardized workflows is a surefire way to drive growth. Keeping track of your contacts can help you save money by increasing transparency and reducing your cost per client.
Plus, you can negotiate favorable terms if you manage and monitor a contract’s performance throughout its lifecycle. Besides ensuring contract visibility across the board, you can also identify, prevent and reduce risks that could otherwise sink the firm, if left unattended.
Startups can stick to traditional paper-based contract management when they are just getting off the ground. But as their operations expand, they’ll find themselves in dire need of an all-inclusive contract management software (CMS) to optimize operational efficiency with fewer resources. By keeping other contract stakeholders in sync with key contract performance metrics and analytics, a CMS removes bottlenecks that slow down the contract process or make it costly.
2. Improved Legal Compliance
Early-stage startups lack enough funds to hire experienced professionals and pay them handsome salaries for overseeing the contract lifecycle management process. It is no secret that startup founders and their core teams juggle multiple roles and responsibilities to get things running smoothly. Given the limited resources and ever-changing business priorities, ensuring complete adherence to relevant laws, regulations, and guidelines can be challenging.
By offering a digital audit trail from contract creation to approval routes to electronic signatures, a CMS guarantees full compliance with industry standards. Also, the software packs a template library with dozens of clear and precisely drafted contracts with zero contractual inconsistencies. So, whenever you require a new contract, you can create it in seconds without first involving an in-house legal counsel or outsourcing the task to a legal firm.
3. Better Chances of Getting Funded
Sure, no one looks forward to starting the day by digging a spreadsheet to locate the renewal date of a contract or chasing a client for a signature. Still, it remains undeniable that contracts are a cornerstone to the success of your startup.
Yes, you heard that right! You need contracts to keep track of your revenue and make accurate projections. You will also need them when it comes time to seek out more capital. Top-tier investors will conduct a deep dive into your contracts as part of their due diligence protocol. You cannot show growth and raise series B funding unless you have a stack of well-managed contracts to support your pitch.
A CMS facilitates internal communication by making contracts accessible to all teams involved in the contract’s lifecycle, including account management, procurement, and finance. Additionally, it triggers notifications for key activities like revisions, approvals, signatures, and opt-outs so that everyone knows where they stand vis à vis the contract. The software also sends reminder alerts for upcoming renewals so you never forget to re-engage with clients and lock them in for the next billing cycle.
No matter how easy it looks, drafting legal documents on MS Word, revising them with tracked changes, emailing them back and forth, and then wet-signing or electronically signing the final PDF version is strenuous and time-consuming.
While storing contracts on the cloud may seem like a reasonable alternative, it often takes hours and hours of scouring each contract to find even the most basic yet important details such as:
- Number of revision rounds allowed
- Important contract dates like payment schedule, renewal, expiration, etc.
- Mode of payment (by milestone or by project)
Either way, you will have to deal with issues like longer sales cycles, data breaches, lack of version control, or worse, financial or reputational loss. Thus, opt for the most reliable solution – contract management software and streamline your management process.
Qurat-ul-Ain Ghazali, aka Annie, is the growth manager at Contractbook and looks after all the organic channels. She has been with tech startups and scaleups for a couple of years with a B2B focus. You can find her socializing, traveling, indulging in extreme sports, and enjoying the local desserts when she is not working.