The value of specific contracts vary significantly throughout a company. One contract may not have as much meaning to one person as it does to the next. Regardless, meeting contract obligations and taking advantage of entitlements will ultimately result in increased revenue and decreased expenses for the entire company. Proactively managing contracts helps companies take advantage of these benefits.
Defining contract obligations and entitlements
Contract obligations (what you owe) and entitlements (what you are owed) mean different things across different roles in a company:
Chief Procurement Officers
For CPOs, contractual entitlements may involve a reduction in costs at certain volumes of purchasing or at different SLA levels. Keeping track of entitlements across a wide range of suppliers is a challenge.
Chief Legal Officers
For CLOs, contract obligations are legal requirements to customers or regulators that could result in penalties or damages if left unmet. A contract entitlement may provide legal rights that a company may not have otherwise had. Foregoing these rights may mean waiving them in the future, which may be costly from a legal standpoint.
Chief Financial Officers
CFOs see contracts as a means to manage costs, increase productivity and decrease inefficiencies. Missing contractual obligations can lead to large financial penalties. An entitlement could mean a financial benefit, depending on the type of contract.
What Happens When Contracts Are Not Properly Managed?
Failure to manage contracts properly leads to negative results. Consequences include missed contract obligations, poor relationships with vendors and suppliers, lost opportunities for income, and increased risk. Overlooking entitlements may mean increased expenses, and foregone benefits.
Failing to keep a close watch on contracts can lead to:
- Unwanted contract expirations
- Failure to end unfavorable auto renewals
- Missed deadlines
- Failure to take advantage of early payment discounts
- Lost renegotiation periods
- Foregone product order change windows
- Liquidated damages for failure to meet contract obligations
- Noncompliance with contract terms
- Lost productivity and inefficiencies
- Failed or strained relationships with suppliers, producers, and customers
Contracts are valuable business assets. There is simply too much at stake to miss obligations and entitlements.
Properly managing obligations and entitlements
Managing your contracts effectively will help you avoid the negative consequences of missed obligations and lost opportunities. Visibility and accessibility are vital to effective contract management and compliance tracking.
For example, when you have a central repository for contracts, your team can reference rights and responsibilities for each agreement whenever necessary. A system that provides automatic notifications when an important event is on the horizon is also extremely helpful. Contract analytics that offer visibility into performance metrics allow businesses to take more timely actions.
How Can Icertis Help Manage Contracts?
The Icertis Contract Management (ICM) platform allows customers to track obligations and provides notifications to users when deadlines are approaching. Teams rely on ICM to assign specific commitments to the appropriate stakeholders. This helps manage and decrease risk, even when third parties are involved.
Icertis uses Smart Links to put every project in context quickly and efficiently. Users can track potential liabilities, flesh out dependencies, link to other dependent contracts, and more. This visibility throughout the value chain allows users to align terms and dramatically increase efficiency, while also decreasing the risk of overlooking valuable entitlements.
Proactively managing contract obligations and entitlements provides significant benefits to businesses. Learn more about how Icertis can help your company manage contracts effectively by reserving a seat for a demo.