What is a Contract Negotiation Workflow?
With more than half of enterprise spending expected to shift to the cloud by 2025, it’s more imperative than ever to have a firm grasp of how your business handles its contract negotiation process.
A contract negotiation workflow is the step-by-step process of moving a legal contract through negotiations. Each step has specific requirements that must be met before the document moves on to the next. These steps are usually tracked through software that allows users to request edits and comments from others involved at different points in the process.
Why is a Contract Negotiation Workflow Important?
Contract negotiation workflows are essential for businesses for two reasons:
First, workflows make it much easier for employees to manage their workloads. A workflow allows them to see what stage of the negotiation process each prospect is in within their pipeline, what tasks they need to complete and who else needs to be involved in that process. Not only do workflows help reduce stress, but they also save time by reducing the number of emails that need to be sent when tracking down documents and getting others' feedback.
Second, contract negotiation workflows allow businesses to stay organized even when they're creating multiple contracts at once. Businesses with hundreds or thousands of documents circulating at any given moment can easily lose track of which version of a document is current or where a certain document is in its progression. A workflow ensures things stay on track.
What Makes a Contract Negotiation Workflow Unique?
Contract negotiation workflows are similar to contract approval and renewal workflows. What makes them unique is in the name: negotiations. If you're a company often in a negotiation phase of multiple contracts, you must have a workflow to stay on top of them.
Having a workflow makes it possible to keep track of many contracts being discussed at once, ensuring that nothing slips through the cracks and you're able to stay on top of your business like a pro. Having a specific contract negotiation workflow can also help minimize the risk of mistakes or oversights, and makes it easy to involve others during specific aspects of a negotiation only when you need them.
How do you prepare for a contract negotiation?
How do you prepare for a business contract negotiation? A good practice is to craft a short, focused document that lists three to five of your most important issues, along with the reasoning behind them. This will help you stay on track and avoid getting sidetracked by other concerns.
The next step is to decide on your limits. Decide, for example, that if you don't get 50 percent of what you're asking, it's not worth doing the deal. Or if they don't give you 50 percent of what you're asking, you'll walk away from the deal. By deciding in advance what's acceptable and what isn't, you'll be better prepared if things get heated.
What do you need for a contract negotiation?
The first thing you need is time. It's very hard to make rational decisions when you don't have enough time. So if you are pushed up against a deadline, it is best to ask for an extension if possible. If not, it may be best to wait until you can give the contract your full attention.
The second thing is research. Before you begin negotiating, know what your goals are and understand the other party's position as well as possible. This will allow you to find common ground and to highlight areas where there may be disagreement or points of contention.
How to negotiate a contract
When you’re negotiating a contract, it’s important to manage your expectations. Not everything is up for negotiation.
In many cases, there are certain terms that are non-negotiable. That is, the other side will not be willing to change their position on these items.
To decide what you can and cannot negotiate, first look at the issues that are most important to you and see if they are negotiable. If they are not negotiable, move on; if they are negotiable, decide how strongly you feel about them.
Terms that could be up for negotiation include delivery date, price, specifications and format.
Terms that are less likely to be negotiable include indemnification obligations or intellectual property rights.
If there are critical terms in the agreement that are non-negotiable and that you cannot live with, it may be best to walk away from the deal rather than sign a contract that contains unacceptable terms.
How to set up (and optimize) your contract negotiation workflow
Each stage of the business contracting process has its own set of tasks, but sometimes your departmental responsibilities extend beyond one stage. Remember that a contract negotiation workflow is a series of processes that require time and resources, so they should be optimized whenever possible.
Here are two tips for optimizing your negotiation workflow:
Set up a tracking system for your contracts. This could be as simple as using Outlook or Gmail, but if you're negotiating many contracts at once, it can help to have a dedicated system that lets you track multiple documents at once.
Make sure all parties involved know where to find the documents they need to sign and what's expected of them. Keeping all documents in a central, dedicated location will ensure nobody gets lost when it's time either to participate in the negotiation process or research something vitally important to it.
As a result, you'll find that a strong contract negotiation workflow ensures things go smoothly, and without frustration—every agreement is documented accurately, and each party is satisfied with the terms.
Best practices for your contract negotiation workflow (i.e. How to avoid common pitfalls )
Contract negotiation can be a time-consuming and laborious process, especially when it comes to large, complex deals. Streamlining your contract negotiation workflow—the process of getting your contracts signed—is critical to increasing productivity and scaling your business while mitigating risk.
We're always looking for ways to make our users' lives easier, so we've been speaking with customers about the contract negotiation workflow. As a result of those conversations, we've discovered several best practices and ways to avoid common pitfalls for contract negotiation workflows.
1. Create solid templates
Your contracts should be prepared using consistent formatting across the board. This helps reduce confusion among stakeholders, which is critical when you're negotiating.
Contracts should also reflect your organization's voice and tone, instilling confidence in your partners that they're working with a professional business.
A great place to start is Proposify’s Contract Template library. Whether you start with one of their templates or borrow inspiration from the designs, this is a helpful first step to creating solid templates.
2. Include a clear approval process
While it might seem obvious, every contract your business creates needs an approval process that's easy to follow. The approval process should be as straightforward as possible to ensure there aren't delays due to confusion over the sign-off process.
It's important to set expectations with all stakeholders on how long the approval process will take, so everyone is on the same page during the negotiation. In addition, you'll need to be transparent about who is involved in the approval process and why they have final sign-off authority.
It's also a good idea to consider having certain contracts approved by legal teams before sending them out for signatures.
Whichever option you choose for your contract negotiation workflow, it's important to customize the process to best fit your needs. After all, you know your company best and can therefore create the best contract negotiation workflow for your company. The important thing is that the workflow exists; saving yourself time, money and unnecessary stress. This way, your negotiations will run smoothly, with more accurate results and clear expectations for all involved.