Contract Management Software Improves Revenue
For businesses that always have a multitude of debtors, even small errors in billing-if they occur consistently-can add up to a substantial amount of lost revenue.
Consider an industry such as healthcare, in which hospitals must collect from thousands of patients at a time. If the hospital is under-billing each of these patients by even a few cents on the dollar, the amount of lost revenue grows to an unacceptable amount.
One of the primary causes of repetitive under-billing is failing to recognize all of the revenue allowed by contract terms. This can occur when contract management is not integrated across all relevant business units. If legal doesn’t communicate with sales about a revenue opportunity within a contract, or if sales doesn’t tell accounts receivable exactly how billing should be conducted for each contract, or if any other vital communication fails to take place due to disorganized contract management, the risk increases of missing out on revenue you’re due.
Contract management software can prevent miscommunication- or lack of communication altogether-from causing you to miss revenue opportunities. Contract templates for the system can be developed with input from sales, service, accounts receivable, and other stakeholders so that everyone is aware of the revenue opportunities for each type of contract and how to take advantage of them.
And when nonstandard contracts are being negotiated, contract management software will keep all stakeholders working from the latest version, with comments and revisions readily apparent. Deviations that would result in lost revenue will produce notifications. Contract management software makes the necessary communication between all affected parties happen.
For recurring transactions, contract management software can automate how charges are allocated for those transactions so that the maximum amount allowed by contract is always billed.
For example, healthcare contract management systems automate the process of coding medical conditions so that mistakes aren’t made by undercharging or not charging for services allowed by contract. (In addition, because hospital staff is no longer burdened with determining coding, there’s the corollary benefit of increased hospital productivity.)
When payments are made, contract management software can analyze each payment against contract terms and data generated by accounting. If revenue is being missed, the software will generate an automatic alert.
As previously mentioned, contract management systems should involve contract templates that are maximized for profit. Likewise, when negotiating contracts, the software should assist stakeholders in understanding and securing revenue possibilities.
To help you analyze terms, contract management software can produce “what if” scenarios to allow you to model the effects of various payment rates and penalties. This enables side-by-side comparisons to determine the ramifications of changes and helps prevent mistakes in judgment or the overlooking of critical revenue factors.
Implementing contract management software can involve a sizable upfront investment, but it usually takes but a short time-perhaps even less than a year-for the increased revenue realization to cover the investment.
And the emergence of cloud-based software solutions has made it possible to reduce the upfront cost substantially, as well as to stay current with the latest technology developments without buying additional software.
Now more than ever, there’s no reason not to use contract management software.