This 12-page guide addresses four of the most common IoT myths, and discusses what field service organizations need to keep in mind when evaluating IoT for their business and for their customers.
8 Tips to Optimize Service Contract Lifecycle Management
Contract management might not be one of the most exciting elements of field service, but it is one of the — if not the — most essential.
Good contract management:
- Guarantees a steady revenue stream for service providers,
- Helps technicians out in the field avoid awkward interactions that could result in contract leakage,
- Ensures that customers’ service needs and expectations are consistently met,
- Encourages customers to renew or even upgrade their current contract, and
- Strengthens existing customer relationships
With so much at stake, it’s imperative that field service providers make a conscious effort to optimize their contract management process wherever and however possible.
Contract Management 101
Any time a customer and a field service provider enter a service level agreement, a legally binding document detailing the terms and conditions of that agreement is created. It’s important that this document — this contract — include terms that are amenable to both parties. From there, it is the responsibility of the service provider to ensure that the contract is stored in such a way that it is easily accessible, and that it is executed upon as agreed.
Simply put, contract management refers to the entire process, from start to finish, of creating, storing, and executing on the terms and conditions outlined within a service contract.
For a more granular understanding of how this contract management works, let’s look at an example of a typical contract lifecycle management process for a commercial facility management service agreement:
- Request: Following a discussion between a service provider and a prospective client, a contract is formally requested, and the first stage of contract preparation begins. Both parties work together to determine the goals and expectations for the project, while being mindful to identify key documentation, including any documents required to meet regulatory requirements, and to create the foundation for an audit trail.
- Generate: Both parties work together to outline the terms and entitlements of the contract and create an initial draft. Those involved take care to use clear and concise phrasing to prevent any potential miscommunication or confusion.
- Negotiate: Internal stakeholders for both parties review the proposed terms and conditions of the contract and negotiate to ensure that both parties are satisfied with the contract pricing made in exchange for the service entitlements. All changes made to the contract at this stage must be carefully documented before they are finalized.
- Approval: Both parties agree to the pricing, terms, and entitlements of the contract, and bring in their respective legal teams, executives, operations managers, and external stakeholders to provide final contract approval.
- Execute: Both parties sign the final approved contract and receive a copy of the signed contract for documentation purposes.
- Capture: An initial contract visit is conducted to document the starting condition of the customer assets covered by the contract. All data pertaining to the contract — including all documentation — is stored within a secure, centralized database so that it can be easily accessed for record management, contract visibility, and auditing purposes.
- Comply: Both parties agree to meet the terms and conditions outlined within the contract. The service provider agrees on the standards for meeting the entitlements and the customer agrees on payment terms. It is important to regularly review the terms and conditions, as well as the actual performance against the entitlement standards, throughout the contract management lifecycle to ensure compliance.
- Report & Audit: Both parties establish their own independent processes for accessing and auditing contract information and other relevant materials to evaluate compliance and generate reports based on their findings.
- Review & Amend: All reports are carefully reviewed, and revisions are made to the contract. A contract manager oversees the process, ensuring that any and all changes made are amenable to both parties. In the event that both parties cannot come to an agreement on a proposed amendment, the contract may be terminated.
- Renewal: When the agreement comes to an end, both parties have the opportunity to renew the contact and continue the business relationship. If the agreement includes an auto-renewing clause, then a new agreement is created unless one of the parties proactively cancels the contract.
Though there are many benefits to good contract management, a few stand out: First and foremost, when a service provider executes on deliverables as promised, it improves the overall customer experience and strengthens the customer relationship.
As mentioned earlier, this not only increases the likelihood of the customer renewing their contract, but also of them upgrading it, which could result in new revenue opportunities for the service provider. Good contract management also ensures that field service companies operate at peak performance levels, which can make them more competitive in a crowded market. Last — but not least — good contract management can help field service providers avoid the dreaded service contract leakage.
The Dangers of Service Contract Leakage
A field service technician arrives onsite for a job to repair a malfunctioning piece of equipment for a customer under Collect on Delivery payment terms. Once the work is complete, the technician presents the customer with an invoice for a part that was used in the repair. The customer pushes back, claiming that part of the work order should be covered in their service contract. Without any way to confirm or deny the customer’s claim, the technician is forced to leave the jobsite without having charged the customer for the part.
In reality, that item was not covered by the customer’s service contract, which means the company now has to decide whether to retroactively bill them for it or take the loss. If the former, the service provider risks upsetting the customer, which could result in them canceling their contract; if the latter, the service provider loses revenue and profit. Caught in the middle of all of this is the technician who, having potentially been the object of the customer’s ire, feels unprepared, unappreciated, and demoralized.
This is known as contract leakage and, as you can see, it puts everyone involved in a losing position. A couple instances of contract leakage — though far from ideal — aren’t enough to sink a field service company. However, the more frequently contract leakage occurs, the more damage is done both to the company’s reputation and bottom line.
8 Best Practices to Build a Winning Contract Management Strategy
It’s vital that field service providers develop strong contract management strategies that stop contract leakage in its tracks. Start by implementing some of these best practices:
- Standardize contract creation. Create contract templates to help expedite the contract management process, but be sure to consult your legal team, first, to ensure that the language you use in your templates is in keeping with best practice.
- Set transparent goals for your entire organization. Define KPIs that department leaders can use to gauge their success.
- Monitor contract approval time. A shorter approval timeframe can lead to a more positive working relationship with customers, so keep an eye on time and lean your contract management process wherever possible.
- Set transparent goals for your entire company. In order to achieve revenue or performance-related goals, you need to make sure everyone is aware of them. Take the time to define key performance indicators and clearly communicate them so that all of your employees, from dispatchers to technicians, can gauge their success.
- Review regulatory compliance on a regular basis. Protect your company from risk by periodically checking to see whether your contracts meet industry, state, and federal regulations.
- Make contracts accessible to technicians in the field. Equip your technicians with mobile devices they can use to pull up contract information that helps them easily answer customers’ contract-related questions and resolve minor disputes on the job.
- Automate the contract management process. By automating essential components of the contract management lifecycle, you can streamline the entire process. Also, using automation, you send out renewal notifications, so your customers never have to wonder when their contract is set to expire.
- Implement a contract management software system. A contract management system will not only enable you to take advantage of mobility and automation — you’ll also be able to build a secure, centralized digital repository to store important contacts and other relevant data. You can even use your contract management system to assign contract approval roles, either to individuals or teams, thereby eliminating bottlenecks in the contract management process.
Find the Right Contract Management System for Your Organization
The modern field service provider needs to be quick to respond to incoming work orders, creative and efficient at administering repairs, and, above all, dedicated to its customers in order to ensure continued success. That’s a tall order even without accounting for the complexity of contract management.
Fortunately, Hitachi Solutions has the ideal solution to help simplify the entire contract management process. Hitachi Solutions’ Contract Management Module extends the functionality of Dynamics 365 for Field Service and provides all the value of a bigger system without the complexity or cost. From built-in templates and workflows to a centralized digital repository, the Contract Management Module is designed to integrate seamlessly with your existing systems to enhance contract visibility and control. Best of all, with Hitachi Solutions on your side, implementation is a breeze.
To learn more about the tool or about the work we do at Hitachi Solutions, contact us today.