Legal capacity is something that can slow sales pipelines significantly. Knowing how to manage contract backlogs means understanding which contracts need work, which redlines which contract agreements need attention, and where to apply your resources. A well-managed contract backlog can help not just get more deals over the line but get the right deals across the line in time. So was are the best ways to manage contract backlogs? Here are our two great tips for getting it right.
Knowing what an important deal is & what it doesn’t help you to manage contract backlogs
Not all deals are as important as each other. And it takes time and nuance to both understand and manage this. There are a lot of things at play in your sales pipeline and the procurement and legal side of things often develops to be a choke point because it is often where you put your least resources. Prioritizing deals for your legal team to work on can help move things forward, but that begs the question, what do I use to prioritize things?
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First in first out
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Seems simple right? Fair to everyone and keeps things moving. Well, not so much. A first-in first-out system incentivizes sales people to be getting into the front of the line even when their deal is not quite ready for legal to be looking at it. It can create a glut of half-baked deals being pushed onto the legal time well before they should be and force a higher workload onto the legal team. This is a particular problem when you haven’t yet moved legally internally and you’re paying hourly rates for your legal team
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Highest highest-value contract is looked at first
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The highest-value contract isn’t always the most important. It might be, for cashflow reasons but if there’s a lower value contract with more expansion potential a hard and fast rule around value may not be the most useful way to stack rank things
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At the discretion of the CEO or Head of Sales
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This, again, seems super simple, but often is not. When prioritization is at the discretion of a particular person and that influences the possibility of salespeople hitting targets for commission it is very easy for people to start viewing certain decisions as playing favorites, whether they are or not.
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So, if all of the available options are wrong, what is the right way? As with anything in startup land, a mix of all of the above is needed. And the best way to achieve this is with a very high level of open communication. The why and how of prioritization should be clear and documented in a contract management system that everyone has an overview of. This clear outline will allow people to understand the business drivers behind decisions and allocation of resources. This clarity is often all that is needed to help move things forward with agreement.
Let everyone communicate, but document it
Communication is the key to success in managing contract backlogs. You should be building centralized contract management as siloed communication is the key to miserable failure. We’ve seen so many teams that don’t keep track of discussions that are going on around contracts. A salesperson asks the legal team if a contract is good to send, they say to ask the key commercial decision maker, the key commercial decision maker gives a half-baked answer to push the decision down the road, the salesperson takes this as a yes, and tells the legal team and suddenly we have a terrible contract that is in the hands of a customer saying we’ll give them all of our IP and agree to unlimited liability. Not a great situation.
The quick and easy solution to this is to have your communication collated so that everyone in the team can view what has been said and what hasn’t been said. A great way to structure this is with approval tasks attached to the decisions that have to be made and have these visibly raised to the decision maker. This cuts out the possibility of miscommunication and turns approval into a simple yes it has been approved or no it hasn’t been approved.
We’ve looked to build these communication features into Contract Sent to make your contract negotiations easier and faster.
