At its most basic, contract management is the process of organizing a body of contracts, templates and clauses to drive standardization and efficient retrieval.
However, unsophisticated approaches to contract management are becoming a major liability to enterprises as the risk management and agility become imperative.
The Problem with Traditional Contract Management
For many enterprises, contract management continues to be splintered among legal, procurement, finance, and sales teams.
Some teams store their contracts in SharePoint. Others have homegrown systems. Some still use old-fashioned file cabinets and Excel spreadsheets. In most cases, these standalone repositories are only accessible to certain individuals and groups, with significant differences from one system to the next.
This fragmentation results in 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 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, missed obligations 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 managing contracts 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, businesses are operating 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, increasing complexities in procurement, sales and licensing models.
The risk is real. Without an enterprise approach to contract management, organizations run the risk of 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 risk, a more holistic approach to contract management is necessary.
Visible, Searchable, and Secure: A Better Approach to Contract Management
The good news is that solutions exist to help you avoid these risks.
Contract management technology 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 business 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 a lot less complicated.
‘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 contracts has been expanding as more and more business transactions are executed through electronic channels and more business relationships become highly differentiated.”
More companies are realizing 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 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.”
Contract 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.