One of the most prominent challenges faced by industries and equally by all business roles is contract management. Whether it is with suppliers, vendors, outside service providers, customers, or other entities, contracts are major foundational blocks of every business operation. All it takes is a filing cabinet or a central spreadsheet, or even a shared drive for storing contracts and their related information. But would that suffice in the long run? Especially, what if the business expands?
Manually handling piles of printed documents scattered across the filing cabinets, digital files like PDFs stored in different systems, lack of visibility in tracing contracts, absence of standardized procedures are a few among the most pressing issues in contract management.
According to the PayStream Advisors report, a majority (41%) of the surveyed companies understand their vendors have a contract, but they hardly double-check their purchase orders against them. This leaves room to overlook important contract terms.
So why do you need a digital contract management system to streamline your contract processes?
Let’s explore why investing in it is worth every penny:
The undeniable reasons to have effective contract management are:
According to the Global Contract Management Association (World Commerce and Contracting), organizations lose 9.2% of revenue every year due to poor contract management. Even if you aim to prevent 50% of this loss using an intelligent contract management solution.
Create contracts smartly
Contract management systems (CMS) can make contract creation easy, simple and fast. You can use predefined, drag and drop, reusable templates, modify any new terms and conditions and import contracts in various formats.
Businesses that might be drafting several contracts on a given day may find it challenging to lay out the same terms and conditions multiple times. In such cases, a standard template, pre-approved by the legal team and the other stakeholders, can be used in a contract management system and be made available across the organization.
Shorten approval cycles
Spending hours on validating a vendor invoice due to complex pricing? Is the sheer volume of documents making the approval workflow seem like never-ending? With AI capabilities, you can automate the entire approval process – submit, review, collaborate, and approve seamlessly, and set reminders for expiration and renewal. By creating a dynamic workflow, you can scan all the documents, make redlines, compare against different versions, and notify the relevant parties about the status, next steps or escalation procedures.
Increase contract visibility
Imagine your sales team, who are most of the time on wheels for customers’ place, want to access the latest templates and clauses of key contracts. Without a centralized system, they find it difficult to pull out the most recent ones, leading to a wastage of time. In some cases, if they want to dig out the emails or search for specific information, going for a wild goose chase is simply not a feasible solution. In a centralized repository, your teams can ensure every authorized member accesses the most up-to-date template anytime.
Preventing unauthorized access to confidential contract data is critical. With a CMS, you can assign full or read-only access to specific users so that no third party can view or try to modify the existing contracts.
Automate compliance and regulations
According to a survey by Ernst & Young, where 2700 executives across 59 countries participated, the risk of fraud and corruption they are facing is not declining. The number of compliance teams spending over 10 hours a week tracking and tracing regulations has significantly gone up from 13% to 25%.
As contract management automates several compliance processes, bigger time savings and maintaining an accurate contract history and audit trail are also possible.
Faster execution of contracts
What could be better than executing contracts with e-signatures with a click of a button? Yes, by integrating digital signature applications, you don’t have to undergo the cycle of print, sign, copy, return and scan to acknowledge documents.
Gain actionable insights
By extracting key variables from contracts like terms & conditions, dates, parties, clauses, legal provisions and other obligations residing in repositories, businesses can unlock new opportunities and identify risks. Technologies like artificial intelligence, OCR, and machine learning can help extract data accurately to improve contract negotiations, processes, and critical decisions. Plus, teams can also perform a detailed analysis of contracts.
Improve contract auditing process
Another PwC study states that average Fortune 2000 companies manage nearly 20,000-40,000 contracts on average. With such huge numbers, it makes sense to conduct audits frequently at short intervals. Adopting a CMS solution, you can identify the recurring errors, assess the contract lifecycle, and monitor the results of corrective actions. For example, you can set the metrics or criteria like average time taken to execute an agreement, key dates missed number of revisions, etc. It further helps in optimizing the team’s capacity for contract volume.
Increase financial value
With a host of benefits, contract management systems can strengthen the bottom line of your organization. Automated reminders for contract renewals eliminate the dependency of resources to monitor for payments, compliance with regulatory bodies help in protecting the documents from data breaches, and periodic audits help minimize risks.
Effective contract management can unleash great cost savings. According to a PwC study, by eliminating inaccuracy and non-compliance, contract management costs could be reduced by 30-40% resulting in at least 2% savings of total annual costs.
Vuram’s Contract Management System is a fully configurable and user-centric solution designed for agile enterprises. This intelligent, plug-and-play, award-winning solution enables enterprises to go live in less than two weeks with almost zero coding. Write to firstname.lastname@example.org to establish the best practice process and performance metrics for contract management in your organization.