It’s not uncommon for contract management to be approached as a top-heavy proposition. This means that organizations invest a great deal up front in preparing to enter contract negotiations, planning optimal positioning, authoring and negotiating contract details and, finally, getting the document signed. But once the ink has dried – whether literally or, given the increasing availability of e-signature tools, figuratively – it’s not uncommon for contracts to be stored away in filing cabinets or on shared drives, and not referred to again until it’s either time to renew or problems arise.
If your organization’s approach to contract management is sign it and forget it, there’s a good chance you aren’t reaping the full benefit of those agreements you’ve invested so much time and effort to negotiate. Research from the International Association of Contract and Commercial Management (IACCM) found that as many as 40 percent of contracts don’t deliver the financial benefits that were intended. If you’re among those who believe their contracts have underperformed, financially or otherwise, it may be that taking this top-heavy approach is the reason why.
It’s what comes after a contract is signed that can make all of the difference. Taking a more proactive approach through the remainder of the contract management lifecycle is key to ensuring that you derive the full benefit of your contracts – according to the IACCM, better ongoing contract management is one factor that can help companies improve profitability by as much as nine percent of annual revenue. But according to a study in the Journal of Contract Management, 71 percent of companies can’t even locate all of their contracts, much less manage them effectively.
Proactively staying on top of contracts likely means tracking vast numbers of agreements, which are likely used by disparate users and departments and involve numerous milestones. It’s a complicated and time-consuming prospect, especially if each contract is managed manually.
Switching contract tracking processes to an automated solution can greatly reduce this burden while also delivering these key benefits.
Benefit #1: Easier access for those who need it
The appropriate storage of contracts can be a key challenge of the tracking phase of contract management for several reasons. While access to contracts by those who will be involved in monitoring performance and compliance is important, easy retrieval may come at the expense of security and vice versa: if you store contracts in a secure and highly-restricted place such as on an encrypted drive, it may be difficult for stakeholders to gain timely access when needed (or this may spell out a high volume of access requests that need to be managed on an ongoing basis by the contract management team). Collaboration tools such as Google Drive and Dropbox might seem like a solution for easier sharing – but these may not offer the level of security required for storing important company documents.
Contract management software, meanwhile, allows you to configure user permissions and not have to worry about them again. Rather than having to manage a high volume of individual requests for contract access, user permissions allow you to assign individuals the required level of access to specific contracts (for example, read-only or download) so that employees can perform necessary actions without an additional layer of support. By restricting access for everyone else, such tools also help to protect data security.
Benefit #2: No more having to manually track numerous milestones and deadlines for each and every contract
One of the biggest challenges of tracking a full portfolio of contracts is staying on top of each individual milestone and deadline; for an organization with thousands of contracts in its repository, and numerous important dates attached to each one, just the management of associated calendars is a task that can be daunting, if not impossible, to perform manually.
But automating contract tracking means you don’t have to remember important dates. From reminders to conduct periodic reviews at specific intervals to notification of upcoming expiry date, inputting this information into your contract metadata means the remembering of milestones is automatic. This can help to improve contract compliance, increasing the potential benefits and reducing the risks of your agreements.
Benefit #3: Improved profitability
Manual contract tracking can be costly to organizations in part due to the amount of time that can be wasted on inefficient processes or dealing with bottlenecks such as retrieving contracts from storage. In addition, decreased visibility and a reduced likelihood that important KPIs will be monitored that can also result from manual contract tracking – meaning that not only can the performance of individual contracts fall flat, but as a whole, opportunities to improve contracting at the organizational level may go unrecognized – spells out a double-whammy for organizations’ bottom lines.
Automating tracking makes it more efficient to both monitor the performance of individual contracts and to spot contract trends that can improve the profitability of contracting at the organizational level. These might include better utilization of money-saving opportunities such as rebates, or the reduction of costs, such as off-contract spending, that may otherwise go unaccounted due to poor or nonexistent contract performance analyses.