Contract Management for Small Businesses
Small businesses often don’t give much thought to contract management. They’re understandably more worried about getting customers than about the contracts that come with the customers.
But one of the most common mistakes made by small businesses is failing to plan properly for growth. If a company has great marketing and excellent customer satisfaction, they’re probably going to grow. But if a framework isn’t in place to handle the increase in business, the resulting poor performance will lower profit margin, decrease customer satisfaction, and hamper further growth.
It’s a case of being careful of what you wish for. If a business isn’t ready for it, growth can be overwhelming. And to be ready, an efficient contract management system needs to be in place.
Nonetheless, 71 percent of companies couldn’t even locate at least 10 percent of their contracts, according to the Journal of Contract Management.
Contract Management: No Need for Growing Pains
Entrepreneur.com provides an insightful assessment of some of the risk associated with poor contract management in a recent article: “Misplaced contracts mean you can’t say with much accuracy what your company is obligated to or what you owe in money or services. You could be violating contract terms you’re not even aware of, leading to at least a damaged business reputation — and worse, legal damages and court costs.”
Just as importantly, poor contract management misses an opportunity to increase productivity. Diligent and intelligent contract management will result in more-profitable terms, greater compliance, and improved customer and vendor relationships.
A solution for small businesses is contract management software, which provides storage, management, and drafting support that prepares a company’s contracting system for growth.
This isn’t to say that contract management software’s only purpose for small businesses is to plan for the future. Small businesses can immediately benefit from contract management software. “Any company with more than 10 contracts will benefit from a basic contract software program,” Entrepreneur.com concludes.
But there is no doubt that contract management software is an essential building block for business expansion.
The Cloud Leads to the Future for Small Businesses
The good news is that Software-as-a-Service (SaaS) cloud computing is making the implementation of contract management software affordable to even the smallest of companies. Because of the inherent scalability of cloud-based software, costs can be minimized upfront because software and hardware investments don’t have to be made. Instead, companies pay based on usage.
Consider for example the difference between a hospital contract management system and the contract management for a startup private doctor’s practice. The hospital may choose to use cloud-based healthcare contract management software, but it likely has the resources to also make physical investments if it decides that’s the best option.
That’s not a choice the small doctor’s practice may be able to make. The cost of implementing an in-house contract management tool could very well be prohibitive. However, a cloud-based third party provider can allow the fledgling practice to implement a system that will be customizable and scalable as the practice grows.
Small businesses can find providers with contract management software tailored specifically for them. A provider can also train employees and will handle technical problems – so resources can be focused on providing value.
Small businesses can take advantage of contract management software to increase productivity in the present and to prepare for growth in the future. The cost of the software-especially from a third-party provider-will be more than justified by the increased short-term and long-term profit due to productivity gains and better tracking of contracts through all stages- conception, negotiation, completion, and compliance monitoring.