Contracts are the foundation of business for many industries. Managing contracts in a process known as contract lifecycle management (CLM), is crucial to maintaining business relationships. Using contract management software allows organizations to maximize their agreement terms. The solution aims to execute and monitor a contract in a way that maximizes both financial and operational performance while minimizing risk – all things essential to business success.
Even midsize companies may have thousands of active contracts and a fact at any moment in time. Each active deal adds to the level of complexity that it is impossible to manage without the appropriate supporting technology. Organizations that rely on spreadsheets with manual approaches suffer quantifiable losses. Without data integration and integration with other systems like customer relationship management or enterprise resource planning, contract management cannot be scaled to match growth.
The Benefits of Contract Management Software
Improved Contract Compliance
Contact management software allows organizations to streamline their processes and provide better contract accountability from request to approval. No critical terms can be deleted, and only the right people have access to editing the document accordingly so that you have control over your contract.
With improved contract compliance comes the significant benefit of risk production. Enforcing and operating on the latest terms and conditions, as specified in your contract, helps improve overall compliance. A study from Aberdeen shows that compliance management is enhanced by 55% by using a contract management system. Compliance, along with the ability to demonstrate it, depends on audit trails and compliance monitoring.
On the purchasing side, standardizing processes and procedures reduce the amount of maverick spending and supply risk while increasing spend leverage. Ultimately, supply chain risks are reduced, and on the whole, buys are less costly and more valuable, improving overall risk management.
Using a contract management system allows for greater effectiveness in supplier onboarding courtesy of validation and certification tools. It makes it easy to identify contracts with diverse suppliers and those that are in high-risk zones, be it because of economic uncertainty, political unrest, or natural disasters. This is critical to managing your organizational risk. Contract management systems also make it easier to quickly and efficiently spot and deal with policy or regulation violations.
Better Document Management
With contract management software, there is no need to outsource document storage or take up valuable office square footage with messy filing cabinets. Team members can scan paper documents directly into the system with an automatic image or optical character recognition so that all documentation relevant to the agreement is available from one location. Additionally, it’s possible to import electronic contacts from any type and display document status with other relevant details for all of them. Features including version control allow you to keep track of all of your contacts from a single repository.
Stay Ahead of Renewal Dates
When you archive a contract automatically upon expiration and use alert notifications based on rules you specify, you can improve your renewal awareness. Contract renewal is part of the lowest hanging fruit for your company and yet a commonly missed opportunity. Contract management software allows you to configure alarms with default or custom settings as a recurrence. The alarms won’t reset until the next milestone has been reached by the assigned team that you can make sure the appropriate action is being taken towards the renewal date.
With better contract management, organizations increase the contract lifecycle completion rate.
Stay Prepared for Audits
With audit trails, you’ll have access to your entire contract history with just a few clicks of the mouse. As such, you’ll be able to maintain an accurate account for auditing and keep track of your full audit Trail for policy compliance purposes.
Increased Contract Visibility
Unlike paper-based contract management systems, storing files in a single centralized digital repository allows for better compliance and Reporting. With the central contract repository, you can ensure your staff is working from the most up-to-date contract templates from legal teams and using the latest clauses. Should your staff need to access any of this on the go, you can authorize access through a password-protected website that’s available anywhere there is an internet connection. This way, the latest templates, and clauses are open to any authorized staff members anytime, anywhere.
Shorter Approval Times
By completely automating your contract process with customizable workflows, you can expedite the review process and improve efficiency. Creating a dynamic workflow to-do list allows you to scan all contracts, so contract managers have a better idea of your current state of affairs. With this information, you can notify responsible parties by email to remind them of the next steps or clearly define escalation procedures.
A contract management system helps to eliminate unplanned renewals of on wanted services and reduced legal fees. It also provides spend visibility, which is essential for ensuring you’re getting the best value for your investment.
According to Ardent Partners, organizations that link their sourcing and contracting processes are more likely to retain a higher percentage of savings. Best-in-class procurement teams reported an annual savings of 37% higher than their peers. Purchasing from approved suppliers at the right times, for the right quantity at the agreed-upon price, reduces maverick spending. Tracking rebates, delivery time, and volume discounts ensure that all of the negotiated savings in a sourcing cycle are realized.
Forecasting is much more accurate with improved data and analytics. Using a contract management system allows you to check critical milestones better and provides automated tools and alerts so that you receive notifications as needed. By getting rid of manual processes and centralizing your document repository, you have greater control over your process and workflow efficiency.
Negotiating a contract is only the beginning of a supplier relationship. Organizations must make sure that they are adequately managing all of their agreements and obligations. Using the proper tools to track and monitor contracts will make a big difference in the way you manage your spend and supplier relationships.
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