Effective contract management is necessary if you want to have a fully integrated approach to keeping track of all contracts and activities linked to those contracts.
An efficient contract management lifecycle cannot be run through paper-based systems or isolated spreadsheets because those options works against total system integration and access to real-time data.
Here are 5 benefits of using contract management software.
1. Company-Wide Data Repository
A key benefit from using a digital contract management system is that it connects all areas and departments. From accounting to sales to legal, all users have access to the same documents and files from anywhere at any time. This allows them to access to the latest contract templates and data at all times, which is an essential component of an agile contract lifecycle.
As a result, compliance is improved because system users can be assured that they’re using the most up-to-date files. Furthermore, it takes a lot of work off of system administrators because all they need to do is upload revisions to a single location to make them available to the entire organization.
2. Centralized Contract Folders
Centralized contract folders are the foundation of professional contract management. They provide the complete picture of a contract. Unlike paper-based systems, centralized contract folders are accessible by several users from different locations.
The result is that your company has a better overview of everything that has to do with a specific contract, from email correspondence to milestones to relevant attachments. The more informed your company is, the more educated decisions that it can make about its contracts.
3. Foresighted Management Decisions
Another key to contract management success is having a clear structure of the overall contracting process. In a March 2014 article for the IACCM, Richard Waugh points out the importance for procurement organizations to “increasingly be able to anticipate future spending patterns, rather than just analyzing historical spending, and … prevent supply risk failures, such as supply chain disruptions, before they occur.”
A contract management system empowers your managers to have a clear picture of the entire contract lifecycle, including tasks, responsible persons for each task, deadlines, and workflows.
By having a bird-eye view of the whole process, management can be more proactive and efficient in planning and controlling resources.
4. Increased Customer Retention
5. Reduced Error Rate in Contract Development
In an article on the IACCM website, Ron MacInnis proposes to assemble contracts in “the same way that a manufacturer assembles a physical product”. This process can be achieved through the use of a contract management system. “Each team, business system, or stakeholder sequentially adds its unique information to an accumulating set of data that is efficiently moved among teams”, writes MacInnis. By breaking down the process into smaller tasks, teams effectively reduce the rate of errors in contracts.
The payoff from reduced error rate is enormous. According to research from the Harvard Business Review, the cost of performance is increased tenfold when flaws exist in the document data versus when they do not exist.
Takeaway
Contract management software integrates existing applications, such as archiving and communications solutions, and consolidates all contract data in one, centralized place. The main benefits from using a contract management system are company-wide access to up-to-date contract library, centralized data management, foresighted management decision making, increased customer retention, and reduced error rate in contract development.