Are You Managing the Entire Contract Lifecycle?
Throughout a contract’s lifecycle, there are multiple opportunities to increase revenue and reduce costs. Multiply those opportunities by the bevy of contracts that most enterprises are administrating, negotiating, and pursuing, and it’s easy to see why effective contract management is an essential aspect of top-performing companies.
“Contract life cycle management can correct inefficient processes, leading to greater growth and stability, long-term viability, and immediate improvements to the bottom line,” concludes Villanova University.
Nonetheless, it’s still common for businesses – particularly SMBs – to operate without a sufficient contract management system in place.
“Many businesses lack proper accountability, guidelines, and required processes to optimally manage contracts. Most rely on ad-hoc processes, reactionary tactics, and manual, offline, informal systems,” Villanova’s report states. “This disorganization likely results in money left on the negotiating table, wasted resources, and unsatisfactory product delivery.”
Much of this inefficiency can be attributed to a reliance on paper-based contract life cycle administration. Manual contract management-with its cumbersome and hard-to-track paper trail-is prone to error and miscommunication. It’s also decidedly slow in today’s instant-communication business world.
Fortunately, contract management software offers an immediate solution for businesses still mired in paper-based contracting. Almost universally, the ROI is substantial.
Never-Ending Contract Management
Consider the life cycle of a contract, and how contract management automation pays off in each stage.
Enterprise contract management software includes contract authoring tools such as templates and clauses that are pre-approved to adhere to internal and legal requirements. But the software isn’t rigid, because it will alert to any non-compliant language or terms and will automatically forward customized contracts for appropriate approvals. In fact, the software actually improves flexibility by allowing contract alterations without having to worry about inadvertent non-compliance.
With contract management software, there’s no chance for terms to be unclear, or for outdated documents to be mistakenly used in the negotiations. Contract management software also ensures that an enterprise’s negotiators have solid business intelligence about past performance – valuable information to bring to the table to push for more favorable terms. Internally, contract management software facilitates communication and coordination among the various affected business units during negotiations.
With the software’s e-signature capability, contracts can be closed immediately upon completion of negotiation, without paper contracts having to be transmitted or mailed back and forth. This not only pleases customers, it allows revenue to be realized sooner and for the enterprise to waste no time in beginning to profit from the contract.
Contract management software aggregates all contract data in a secure, centralized location, so that it’s easily accessible and shared by those who need it. The inefficiency of tracking down contracts is eliminated.
Contract management software provides alerts for milestone dates and non-compliant performance, helping to ensure that an enterprise meets its obligations and takes advantage of all opportunities to increase the bottom line (e.g., enforcement of negotiated sales levels, allowed penalties, available discounts, bulk purchasing, timing of purchases). The software also easily integrates with other business software (e.g., enterprise resource planning, customer relationship management, supply chain management) to involve all relevant business functions in ensuring that contract oversight is systematic, comprehensive, and strategically focused.
By providing detailed, customizable reports on contract performance, contract management software supports ongoing strategic refinement of an enterprise’s contractual methods and relationships. The payoff keeps coming.
Contract management is a crucial aspect of profitability that calls for well-structured and aggressively implemented processes to maximize return on each contract. Enterprises that haven’t automated their contract management are failing to capitalize on a technological development that can increase the productivity of contracts throughout their life cycle.