Contracts are the bedrock of any business. They contain all the terms and conditions that govern the relationship between the organization and any external/internal party, including customers, suppliers, vendors, and employees. Teams such as human resources, sales, and legal have multiple contracts—with conflicting deadlines, responsibilities, and terms—in effect. When businesses expand, so do the number of contracts the business leaders have to manage. Despite the growing number, overseeing and fulfilling an organization’s commitment to any external party is crucial to ensure the smooth business operation and minimal business risk.
Importance of A Streamlined Approach to Contract Management
While trying to improve and adapt to efficient contract lifecycle management (CLM), firms that have been hitherto trying to keep up with paper trails have to rip off the band-aid to boost overall business performance. According to the calculations of the International Association for Contract and Commercial Management (IACCM), each year poor contract management practices cost businesses an average of 9 percent of revenues. Besides the financial loss, slow and inefficient processes can delay deal closures.
A Contract Management System is the Need of the Hour
Contract management software efficiently manages contract initiation, creation, negotiation, approvals, and renewals of legal contracts. The common challenges faced with contract management can be easily sorted by switching to an efficient contract management solution; it also helps in getting a better grip on all stages of a contract’s lifecycle.
It is the age of digital transformation. Organizations around the world have started to digitize all their processes and embrace solutions built to solve the specific challenge. Resorting to spreadsheets and manual processes can be too complex to handle the growing number of contracts a business deals with. Applications with built-in analytics and features like contract redlining, centralized document storage, digital signatures, configurable workflows can help effortlessly handle the entire contract lifecycle.
Improved Obligations and Renewals
Obligation management is a crucial responsibility of all the stakeholders involved in the contract. Organizations shy away from adopting a new application or refrain from it due to the fear of time invested in learning; the consequences can be even disastrous. According to Aberdeen Research, an efficient contract management process improves compliance by 55 percent. An intelligent solution can send automatic notifications and reminders on the contract expiry dates so that late contract renewals are out of the question. Similarly, the stakeholders receive notifications if any change is made to the clauses or terms.
Benefit from Analytics
With a modern contract management solution in place, organizations can get detailed insights on the data metrics that they have hitherto missed. They benefit from improved holistic visibility of the contracts: by status or type at a glance. The statistical insights on data can help analyze trends and observe the areas of risk.
Gain Overall Visibility on Contracts
Following paper trails, maintaining hard copies of documents, or rummaging through the file cabinets makes it difficult to keep up with the obligations. Having a digital repository for contracts in effect and executed ones reduces the time spent upon specific queries, say on contract expiry or finding the latest version. It is often likely to miss the sight of the renewal or expiry dates of contracts. Imagine the loss of benefit when a successful collaboration with a vendor gets terminated because you have lost visibility on the contract renewal date. When a contract is about to expire, that is also the right time to review how successful it has been for you. The advantage of a centralized storage location also empowers the stakeholders to get access to the latest contract versions and be up to date without any confusion. Certain intelligent solutions also store the contracts in the respective client folders for easy access.
Faster Contract Cycles
A 2019 Forrester survey revealed that organizations with greater maturity of CLM strategy execute a contract in 1.2 days on average. On the other hand, immature organizations take 3.4 days. Adopting an efficient solution can expedite each stage of the contract lifecycle and can provide the ultimate control to organizations throughout the lifecycle and a streamlined approach.
- Contract Initiation – Contracts can be initiated and created at ease with the available templates. You can also configure workflows that can significantly expedite the process.
- Contract creation – Let’s say you are drafting a pretty standard contract for the sales department or a non-disclosure agreement. Instead of creating one from scratch, you can pull up the available template and create the contract; you can also create the contract you want by adding parameters to clauses, sections, and templates. At scale, this can save a significant amount of your teams’ time.
- Negotiation – A contract is likely to be modified multiple times before it’s approved and executed. During negotiations, contract parties collaborate to make any amendments or modify any terms to the contract. The redlining feature that comes with a digital solution makes the changes easy to be tracked and seen by other users. The capability to edit and comment in the document comes in handy during this stage.
- Approvals – With digital platforms, putting a pen to the paper can only serve as imagery. Signatories can make electronic signatures on-the-fly—on mobile phones, desktops, and tablets—making contract approvals hassle-free compared to printing out the documents, sharing, and reviewing them.
Faster contract cycles can positively snowball into positive business outcomes, and an efficient system built specifically can make this possible. However, while choosing such a system for your organization, you have to consider how it will fit your needs. The solution should be easy to use and transition to. Vuram, a hyperautomation services company, has a dedicated contract management system that is easy-to-use and ideal for companies that manage contracts at scale. It is a horizontal solution that can integrate easily with your existing platforms.
Contract management, despite being inevitable, consumes a significant amount of effort and man-hours. Despite the efforts put in, it can be very complex and challenging. An efficient contract management system can eliminate these difficulties, scale up when needed, reduce risks, and offer significant benefits for your organization.