4 Ways to Stay Ahead in Contract Management
When you think about it, sometimes it just comes down to cost.
Removing the veil from operating costs and imposing accountability and awareness of amounts spent in the contract process can give you a leg up on the competition. Here are 4 specific ways on how to stay ahead in contract management.
1. Reveal the Cost
You may not think much about the current way you execute your contracts. You print a couple of contract copies, each one several pages long, get a private courier to deliver them to your client for review, and wait until he or she mails them back to you. When this is how you run your business, the best case scenario is that you’re able to ship each contract express at about $20 per contract. With that in mind, think about how much you spend just sending documents. Write down an estimate.
Now think of the cost of the paper for your printer, not to mention the ink used and time wasted waiting for the agreement to be shipped, signed, and returned. In a 2001 study, the Gartner Group found that the mismanagement of printers can cost an enterprise somewhere between 1% and 3% of revenue annually, which doesn’t even factor in the cost per contract you just calculated.
We recommend that you take a good look at that total number, and start figuring out how you can bring it down.
2. Impose Accountability
Your COO should not be the only one keeping the reins on operations. The more you can break down the responsibility of tracking tasks, the more likely you will be able to keep a healthy contract lifecycle. If no one owns the process, it will get out of control. One way to do this is to use a contract management system to notify reponsible parties of their task(s) using automated emails. Not only will the person be responsible to complete the task, but they will also automatically be assigned another task once the previous one is completed. Making sure that the who, when, and what is clear to all parties improves efficiency and sets clear expectations.
3. Keep Up with Current Trends
Many companies believe that good contract managers share the same qualities that they did many years ago. While some traditional skills are still necessary, there are many new, necessary ones in order to meet the demands of current practices. The IACCM has identified three trends in contract management specifically:
- An increased importance on capabilities such as shaping direct deals and commercial strategy or financial principles and analysis
- A growing emphasis on international business, leading to placing greater value on cross-cultural awareness, understanding of geo-political issues, financing options, and laws/regulations of various countries
- A renewed focus on ‘psychology’, or an appreciation of the impact of culture and the way that negotiation or contract terms may influence behavior
These reveal that we need to expand our knowledge and skills to tackle these emerging needs and priorities in our field.
4. Invest Wisely to Win
According to a Citigroup-Environmental Defense study, the actual cost of printing is 13 to 31 times the purchase price of the paper used, or somewhere between $.06 and $.13 per page. If you are running all of your contract management processes on paper, imagine how much money you’re wasting. We’ve already discussed the revealing cost of manual contract processes, including the approval process. Sometimes, a paradigm shift is necessary.
There are many reasons why your company needs to evaluate contract management software, and some of the reasons go beyond saving money. “The distinction between current and future processes for a contracting function undergoing change is the most critical element of all”, explains Julie Brignac, Principal, Vantage Partners. Brignac argues that a good way to disarm people resistant to savvy investments in new technologies is to focus on how those technologies offer cost savings, improve negotiation tactics through consistent use of tools and templates, and reduce potential risks from lax compliance.
Staying ahead of the curve in terms of contract management involves revealing operating costs, imposing accountability, keeping up with current trends, and investing wisely in effective technologies. Building a strategy to address these 4 points will help shift your organization towards a more efficient contract lifecycle long-term.