Aberdeen Group, an international market intelligence company, found that organizations with contract management solutions perform at a higher level than their peers. The best-in-class companies have more than 75 percent of their contracts in a searchable repository, enabling them to gain greater insight into contract performance, mitigate risk, and improve their contract renewal rates.
With manual contract management, you run the risk of bottlenecks in the sales or approval cycle that could result in missed renewal opportunities and lost business revenue. Manual contract management exposes you to manual errors and inefficient filing systems that bog down your organization.
That’s why many organizations accept, trust, and rely on cloud-based applications and software. These systems can feature central document repositories that function like a digital version of a filing cabinet. Here are a list of features:
- Organized and searchable contracts that give you greater visibility into the data and details of your contract portfolio
- Self-service portals
- Electronic signatures (e-signatures) and approvals
- Pre-approved contract templates, which are especially useful for larger contracts that require coordination among multiple departments and parties
- Standard legal playbooks
- In-depth tracking and reporting tools
- Software storage that securely protects contracts and processes
The more robust systems bridge the gap between your company’s customer relationship management (CRM) and enterprise resource planning (ERP) systems. Automated systems allow you to accomplish a range of tasks, including the following:
- Streamline contract management processes, giving management, stakeholders, and general counsel greater confidence.
- Create contracts quickly and accurately, shortening your sales cycle, improving contract flexibility, and decreasing contract disputes.
- Increase revenue by collecting payment sooner and improving contract renewal rates.
- Track compliance quickly and improve legal, vendor, and supplier compliance.
- Cut your administrative costs and free up staff time.
- Decrease revenue leakage.
- Mitigate risk quickly.
- Grow sales due to more time for lead generation and managing customer relationships.
- Improve your KPI analysis and spend optimization, identifying business opportunities and cutting costs.
STEPS TO AUTOMATE YOUR CONTRACT MANAGEMENT
You can take steps to move to an automated process, which combines your collection of paper and digital files to create an online repository that helps you grow your business and optimize your contract administration process.
Put your files in one location with these steps:
- Conduct an audit of contract locations. Identify where your files are currently located and who manages, stores, and accesses them.
- Identify the digital systems used to store and monitor contracts.
- Gather supporting contract management tools, such as contract templates and checklists.
- Determine how you want to structure a single system that creates a central repository of contracts, templates, amendments, and vendor information. Include key terms that you will use to search the data.
Improve your contract workflow with these steps:
- Identify which departments or areas need to review contracts.
- Map the order for contract approval.
- Determine how you will add contract language and version control.
- Build a library of legal playbook talking points and tools.
- Evaluate which processes can be automated to free up manual stakeholder and legal reviews.
Establish your contract execution process for all stakeholders with these steps:
- Gain process efficiencies with alerts and notifications.
- Implement an e-signature process.
- Determine how you will distribute final contracts to all parties.
Monitor contract performance with these steps:
- Build and use role-based dashboards for real-time performance data.
- Use compliance tracking to identify and mitigate pain points.
- Create alerts that monitor milestones, invoicing, and renewal deadlines.
THE FUTURE OF CONTRACT MANAGEMENT
In an increasingly global economy, the companies that survive and thrive will be those that know how to gather and leverage data to drive new revenue. The best in breed are already reimagining how they manage the customer life cycle; they are beginning to see contract management as a discipline that extracts contract information to guide their sales and revenue and impact the bottom line. Contract managers will work closely with sales, as an integrated unit, to oversee contracts in all the organization’s trading relationships.
Contract management will shift from managing compliance to improving governance. It will be the “framework within which the integrity of a transaction is decided,” as defined by Nobel laureate Oliver Williamson. There are four components to an evolving collaborative governance framework for contract management:
Gone are the days of merely managing approvals and monitoring compliance. Contract management is about the relationship between the key departments in your organization and your vendors and service providers.
JOINT PERFORMANCE AND TRANSFORMATION MANAGEMENT:
This process tracks partnerships and strategically envisions how these relationships can help you re-imagine your business.
Use governance to control your organization’s risk and revenue. It encourages ethical, positive, and proactive approaches.
COMPLIANCE WITH EVOLVING REGULATIONS AND SPECIAL CONCERNS:
Once contract management matures in your organization, the process can broaden its view. Managers will be forward-thinking, looking at the future of an increasingly complex regulatory environment and the unique needs of existing partners, as well as the demands of potential customers.
IMPROVE CONTRACT MANAGEMENT WITH REAL-TIME WORK MANAGEMENT
Contract management affects every aspect of an organization, including its revenue, budget, operations, public image, and relationships. Managing contracts effectively is crucial to the success of any business, but in order to do so, companies need the right tools.