Originally, contracts were chiseled into clay tablets. For a long period, only the most important of contracts were written down. But the days of fewer contracts, handshake deals and IOUs are long gone - in today’s world, contracts are used to define nearly every aspect of a company's relationship with a third party. Sales contracts, Services agreements, NDAs, SOWs, IT agreements, and even employment offers all enable companies to conduct business while also protecting themselves from risk and legal action.
Because contacts govern all business operations, a company's process around the creation, negotiation, and management of legal documents can have significant impact on a business’s bottom line. A well-managed process can drive revenue and reduce costs while a poorly managed process can have severe financial consequences.
The challenge for many businesses is that contract management requires a significant amount of time and resources. The management of a small contract can involve dozens of employees, multiple departments, and hundreds of hours. However, instead of treating contract management as a cost center, smart businesses can see it as an opportunity: by realizing the importance of contract management and improving internal processes, companies can be better positioned to increase revenue, decrease costs, and mitigate risk.
What are the Benefits of Contract Management?
Below are some of the specific benefits companies can realize by making drastic improvements to their contract management process:
Improved Business Operations
In order to grow and maintain a competitive advantage, businesses must strike a balance between agility and risk mitigation. If a company is not able to make quick decisions and adapt to market conditions, it'll be quickly left behind. The faster a company can move a contract through its lifecycle, the faster that company can grow. New customers, products, services, acquisitions and partnerships are all contingent on a company’s ability to effectively and efficiently manage a contract.
A poor contract management process is not only time consuming, it's expensive. An unorganized process can very easily lead to unfavorable contracts, which can then result in underperforming projects and wasted dollars. In addition, poor tools and limited visibility into contracts can lead to hundreds of wasted hours searching for contracts or trying to run reports on contract details.
An inefficient contract lifecycle can also have broader financial implications as well. According to the International Association for Contract & Commercial Management (IACCM), managing a simple contract costs businesses an average of $6,900 in employee salaries alone, while the cost of managing a complex contract can be more than $49,000. The good news is by increasing the speed in which internal teams can review, negotiate, and execute a contract, businesses can reduce these costs significantly.
Legally-binding agreements help companies minimize the risk that inevitably occurs from simply conducting business with a third party. Contracts serve to assign liability and indemnity in the event legal issues or problems arise during the course of the business relationship. Additionally, they help to ensure both sides honor terms and commitments agreed to during the negotiation phase. However, in order to effectively manage risk contracts must be carefully crafted, negotiated, and finalized. Without an organized process, key terms can be missed.
Increased Vendor Visibility
Once a company reaches a certain size, it becomes difficult to keep tabs on which vendors are providing what services. This is especially true for large companies that have multiple subdivisions, brands, or properties. It is not uncommon for these companies to have multiple contracts for the same service with the same vendor and not even realize it.
A good contract process can provide leaders with visibility into contracted vendors and the services and dollar amounts tied to each contract. Greater visibility can prevent companies with multiple subdivisions from entering into separate contracts with the same vendor, and increase the ability to negotiate discounts or favorable terms.
Better Safety and Compliance Practices
For businesses in heavily regulated industries such as financial services, healthcare, or pharmaceuticals, establishing a compliant contract management process is mandatory. For businesses in less regulated industries, it’s a highly recommended best practice. By having an efficient contract lifecycle, companies can ensure business operations satisfy regulatory and compliance requirements.
Additionally, contracts contain confidential information. Effective contract management means businesses are taking steps to safeguard their contracts by storing them in a secure storage location that is protected from unauthorized internal or external access.
How Can Contract Management Software Help?
A company's contract lifecycle is only as efficient as its contract management software. Contract platforms offer a variety of tools that can help streamline or automate the manual processes that often cause delays in contract execution.
ContractSafe is an easy-to-use, cloud-based repository that helps facilitate all phases of the contract lifecycle. ContractSafe is designed to be implemented quickly, and deliver value in record time. Some its features include:
Intuitive search and reporting eliminates the need for a full-time contract librarian.
Artificial Intelligence helps companies organize and locate documents in seconds.
Intelligent, customizable alerts help teams stay ahead of auto renewing contracts or expiration dates
Sharing & roles permissions and new upload notifications helps managers keep tabs on who’s doing what.
State-of-the-art security helps companies maintain compliance and prevent data breaches or malware.
Simple integrations with other third party platforms, such as DocuSign, Okta/SAML 2.0, and Salesforce help further streamline operations.
Contract management is important for every business, yet for many companies, it’s simply a necessary cost center. However, by taking steps to automate manual processes and providing internal teams with the tools to be successful, companies can use contract management as a tool to enhance performance, drive growth, and increase competitiveness. If your company is looking for a new solution to help streamline its contract lifecycle, schedule a free trial with ContractSafe today.