Getting Your Docs in a Row

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Whether you are a first-time entrepreneur or a proven business leader, facing due diligence can be a long and arduous process if your company does not have its “docs in a row.”

Your focus is on running your business, but failure to set up systems for executing and tracking documents can land your company in a difficult due diligence process or even put you at risk of losing a big deal.

We’ve compiled the 7 contract management tips below to help your company be ready for investment rounds, acquisition or even going public. 

As part of the due diligence process, you’ll need to provide copies of your contracts. Setting up a contract management system from Day 1 is critical. It can be as simple as saving the documents in SharePoint or DropBox. As the company grows, you can implement a more sophisticated contract management system. 

If employees don’t have the time to file their contracts, you can create a dedicated email address where employees can forward their contracts for a contract manager to organize, name, and file. 

Regardless of the system, everyone who handles contracts should use the same procedure consistently in real time. All company contracts should be saved in the required location within a few days of being executed. Otherwise, important contracts can get lost. 

Prior to saving contracts in your contract management system, double-check that each contract is signed by both parties and that the signatories have proper signing authority.

To prevent errors, contract execution should be handled with a consistent procedure, whether using DocuSign or another method.

Inconsistent naming practices can quickly cause confusion. In the moment, you may know which document is which, but once there are dozens or even hundreds of contracts, sorting through this clutter becomes an immense challenge.

Every document title should include the following information in a consistent order:

a. Date

b. Your company name

c. Other party name

d. Contract type (MSA, NDA, Work Order, etc.)

e. Contract number, if applicable 

• For example: “Change Order#2 for Work Order#3”

f. Important vendor labeling

• For example: if a vendor labels Work Orders with a specific number, you should include this number in the document title.

Tracking parent documents with children can be as simple as keeping Master Agreements with their respective Work Orders and Change Orders. 

Automated contract management systems provide ways to keep contract families together. However, if you have a filing system in DropBox or SharePoint, using subfolders will keep things organized. 

If you aren’t using an automated system, keep contracts in subfolders specific to each vendor or consultant. If a particular vendor has multiple Work Orders, with each Work Order having multiple Change Orders, create additional subfolders for each Work Order to keep the Change Orders clustered with the correct Work Order. 

All agreements should have a clause allowing for transfer of the contract without notice or consent in the event of a merger or acquisition. Otherwise, your company will need to get permission to assign each contract in the event of an acquisition, which can be a time-consuming process. If the other party does require written notice, consider including an email notice option in the Notices section in order to avoid mailing out paper notices if an acquisition takes place. 

Expirations and renewals can be tracked in an Excel sheet or through an automated contract management system. Some contract management systems provide an email notification system to warn contract owners when their contracts are about to expire. Having a tracking system is especially important for subscriptions and licenses.

This will be extremely helpful in tying financial information to each contract with ease. If you don’t do this from the start (in conjunction with consistent naming practices), you’ll have to piece the information together later, combing through hundreds of documents to find the right contract that is hopefully somewhere in your folders.