Contract portfolios are larger than ever before, and many organizations are struggling to keep up. According to IBM, Fortune 1000 companies now manage an average of 20,000 to 40,000 active contracts at any given point in time.
While you may not have quite so many contracts on your plate (or maybe you do), having a growing contract portfolio causes issues such as poor contract management performance and a high rate of human error.
Meanwhile, McKinsey & Company estimates that suboptimal contracts and poor processes cause organizations to lose an average of 9 percent of their annual revenue.
The good news is that you don’t have to sit helplessly and watch as your contract portfolio balloons far beyond your control. By following the 4 tips below, you can regain control of your contracts and make your contract management processes more efficient and effective.
1. Use a single contract repository
The first contract management tip is to gather up all your contracts and related documents and store them in a secure contract repository, like a digital “filing cabinet.”
Trying to locate a misplaced document, even in digital format, is often an exercise in aggravation and wasted time. Contract repositories ensure that the files you need are always searchable and within reach, stored in the location where you expect them to be.
Using a contract repository also makes it simpler to secure your confidential and sensitive documents from prying eyes and unauthorized users. Contract repositories allow you to easily share and collaborate, while logging user activity and restricting files to only those people who should truly be able to view them.
2. Name and organize files consistently
Even if you gather your files within a single contract repository, however, there’s no guarantee that you’ll be able to find them easily.
For example, searching for a particular file is much more difficult when that file is named “9056-21834-1-10-20100712.pdf” than when it’s named “MasterServicesAgreement_EM_Edits_July_12_2010.pdf” and stored in the proper folder.
Implementing a consistent naming and organization scheme is crucial in order to efficiently locate the contracts and files you’re looking for. With a sophisticated digital contract management system, you can take advantage of features like folders, subfolders, tagging, and highlighting to implement the organization scheme that makes the most sense based on your needs.
3. Set up a notification system
Even the most diligent contract managers will struggle to remember the relevant dates and deadlines for hundreds or thousands of contracts in their portfolio. If you’re caught off guard and a contract deadline sneaks by you, your organization could be subject to fines, lost business, and other penalties.
You’ve already migrated your documents to a contract repository and used a consistent scheme to organize them. In order to effectively manage these contracts, however, you also need a dedicated notification system that will alert you to important deadlines, such as contract milestone alerts. This system should let you set various options for contract alerts, such as the frequency with which to send them and the method of notification (e.g. emails or pop-up dialogs).
4. Make use of rules and templates
Alerts for contract deadlines can be highly valuable in helping to manage your contract portfolio’s complexity. However, this still requires you to set up the alert manually—something that is easy to forget about and susceptible to human error.
Rather than manually creating alerts, sophisticated contract management systems can use automated rules to extract the most important dates and deadlines from a contract. Once created, you can apply these rules to all current and future contracts, saving you a great deal of time and stress.
Contract templates are another way to expedite the contract management process, particularly for organizations who have a large volume of very similar contracts. By using contract templates, your contract management process will become more uniform and accurate while saving valuable time and effort.
More and more companies need to regain control and deal with the spiraling complexity of their contract portfolios. For these organizations, dedicated contract management systems and software are essential. To learn more about how contract management systems can benefit your business, download Measuring the ROI of Contract Management Software.