The Problem with Traditional Contract Management
For many enterprises, the contract management process continues to be splintered among legal departments, procurement teams, finance, legal teams, and sales teams.
Some teams store their contract data in SharePoint. Others have homegrown systems. Some still use old-fashioned file cabinets and Excel spreadsheets. In most cases, these standalone contract repositories are only accessible to certain individuals and groups, with significant differences from one system to the next.
This fragmentation results in poor contract performance analysis and contracts scattered throughout the enterprise, with disconnected workflows and inconsistent language and terms. At times people can’t even find their own contracts, let alone those in another department. Tracking commitments and deadlines is a manual contracting process, one that’s prone to human error. Rate increase clauses, automatic renewals, incentives and rebates, service level agreements (SLAs), and other details are often overlooked.
At a minimum, poor contract administration can result in lost revenue, unnecessary cost, and unwanted renewals. At worst, they can cause noncompliance or breach of contract situations that may lead to fines or litigation.
Indeed, the most important part of procurement contract management is not what the company knows about them—it’s what they don’t know that can cost them.
Modern Business Demands Better Contract Management
Meanwhile, contract managers operate in an increasingly complex, global, and agile business environment.
A recent Gartner study confirms the challenges facing enterprises—higher velocity of business, employee self-service, governance, risk and compliance requirements, merger and acquisition, digitization, and increasing complexities in procurement, sales, and licensing models.
The risk is real. Without an enterprise approach to contract lifecycle management, organizations risk taking a hit to the bottom line due to lost time, money, damaged reputations, and costly litigation.
Organizations recognize that to stay competitive and reduce business risk, a more holistic contract management solution is necessary.
Visible, Searchable, and Secure: A Better Approach to Contract Management Solutions
The good news is that CLM solutions exist to help you avoid these risks.
Contract management software makes it possible to automate and streamline all aspects of the contract lifecycle to increase visibility, compliance, and contracting velocity while reducing risk.
Contract management platforms unify buy-side, sell-side, and corporate contracts into a single, central repository. These cloud-based platforms dramatically improve contract visibility, velocity, and consistency—reducing contractual risk and boosting operational and financial performance.
From contract creation to tracking and compliance, you’ll have an accurate, real-time picture of your organization’s contracting risks and opportunities. These insights save precious time and resources and help cash flow management become much less complicated.
Benefits of contract management include:
- End-to-end contracting automation for all contract types
- Risk and compliance management
- Business rules automation
- Effective clause and template library management
- Sourcing and invoicing collaboration portal
- Channel and vendor payment compliance
- Real-time reporting and analytics
Contract Management is a ‘Must-Have,’ not ‘Nice-to-Have.’
The need for a contract management solution is at a tipping point.
As the analyst firm Forrester noted in its latest report on contract management software: “Contracts formalize who is buying what from whom, at what price, for how long, and puts conditions in place for when things go wrong. The role of managing contracts has been expanding as more and more business transactions are executed through electronic channels and more business relationships become highly differentiated.”
More companies realize that contract accountability and transparency are necessary to meet regulatory and compliance standards. Organizations that have already embraced other cloud-based products understand the benefits of a seamless data environment and see successful contract management as the logical next step in becoming a fully digital organization.
In short, forward-thinking companies are realizing that contract management as an enterprise initiative is no longer a “nice-to-have”—it’s now a “must-have.”
What are the benefits of contract management?
A poorly managed contract management process can result in exposure to serious legal risk; however, with an automated contract management system in place, you can establish effective contract risk mitigation strategies in order to meet your business's contractual obligations.
Along with a dedicated contract manager, contract management software can help your company increase its ability to close deals as well as contract renewals. Poor management of the contract cycle can result in key dates being missed, which can lead to expensive renewal costs. A key aim of contract lifecycle management is to establish a system of record to mitigate this risk.
Contract lifecycle management software moves an organization beyond a transactional approach with a fully integrated system that provides valuable insights that scale with its business and help realize the full value of its contracts. To learn more about what contract management is please schedule a clm demo.