What is the Process of Contract Management
Have you ever been asked what is the process of contract management? Contract management is a critical area of any business organization because contractual relationships are the lifeline of any business. Without clear parameters for transactions, businesses would have a hard time maintaining a sustainable operation.
However, contract management results in an ever-increasing amount of business data and documentation collected to monitor and keep complex systems operating. This puts a lot of strain on contract management departments, which when operating paper-based systems, tend to waste too much time and resources on redundant processes.
When used properly a contract management system streamlines contract management processes. Here are four reasons why.
Process Big Data
Large, complex contract management systems consist of a massive number of documents interacting with each other in a series of events and relationships. The longer that your enterprise has been in operation, the more contract data that you will store. Contractual relationships become ever more numerous and complex as more transactions are executed.
By using paper-based systems, an organization isn’t able to keep track of all moving parts in an efficient manner. This is where a digital contract management system is most useful. It not only allows instant access to the latest version of a contract template for a specific client, but also lists out pre-approved clauses that can be used for that specific client. By automating this process and many others, a salesperson makes more efficient use of her time and doesn’t have to put transactions on hold.
Provide Early Warnings
Time is the most scarce of commodities. Your contract managers can only do a limited number of tasks within a day. To help your team of contract managers prioritize time-sensitive tasks, you can leverage the automated email warning feature of your contract management system.
For example, a contract with a client renews every six months. Because this is a very demanding client, past account managers have found that the standard two-week review period isn’t enough and that three to four weeks are needed. The client is so demanding that an account manager often doesn’t last more than four months with the client. The key information about the required three to four weeks is never documented due to the high turnover of staff.
You could solve this issue by setting an automated early warning for this client so that no matter who is the assigned account manager in the future, he or she automatically receives an automated email reminder to start the review process three weeks (instead of two) before the contract’s expiration date. The early warning system is also useful for other scenarios, such as billing, compliance, and client management.
Show Comprehensive Overview
Early warnings are even more useful, when an enterprise contract management system can show them within the context of the entire contract lifecycle. Long before thresholds are crossed for early warnings, a contract management system lets each manager know about upcoming tasks for their portfolio of clients.
Rather than the fragmented monitoring of paper-based systems, contract management systems provide a comprehensive overview through a dashboard. By highlighting key dates, metrics, and reminders, contract management systems enable staff to make better decisions.
Also, management can leverage dashboards to provide reminders to staff about specific initiatives, measures, or procedures.
On the one hand, a 2005 survey by the Financial Executives Research Foundation found that 83% of large company CFOs agreed that the Sarbanes-Oxley Act had increased investor confidence. On the other hand, most CFOs agree that the cost of compliance under SOX is high. Despite the savings provided by the 2007 modifications to the Act, there is still room for improvement.
To alleviate the necessary burden of SOX compliance, some contract management systems offer useful features, such as the ability to maintain contract history for auditing, provide full audit trail for Sarbanes-Oxley compliance, and generate automatic reports per compliance standards.
However, the benefits don’t end there. Depending on your industry, your organization has to comply with additional requirements that could be externally or internally required. An effective contract management system has a wizard that allows you to select report criteria making filtering reports easy. Additionally, reports can be saved to Excel, PDF, and other formats.
What is the Process of Contract Management Takeaway
Contract management systems are efficient tools that when used properly can increase productivity and profitability. By processing big data, providing early warnings, showing a comprehensive overview, and automating compliance, a contract management system streamlines contract management processes.
Image Credit: Robert Couse-Baker