Contract Management Procedures: 4 Reasons Excel Won't Cut It
One of the biggest challenges of contract management is finding a solution for dealing with volumes of contracts that can reach the tens or even hundreds of thousands. Though cost-effective software solutions exist that help organizations seamlessly manage each stage of the contract lifecycle, it’s also easy to understand why manual tools such as Excel spreadsheets are so popular.
Though the functionalities of Excel come with their own learning curve, the software is a corporate stalwart. Used by more than a billion people worldwide, Excel is ubiquitous to say the least – not only is it probably already installed on your computer but it’s also compatible with free spreadsheet tools such as Google Sheets. But popularity doesn’t always go hand-in-hand with effectiveness.
Though Excel is a frequently-cited tool for contract management – for example, 60 percent of federal contractors say they use it to track their agreements – it doesn’t always deliver the benefits companies need.
Here are 4 reasons why Excel won’t cut it when it comes to your contract management processes.
Reason #1: It’s hard to keep track of contracts with a spreadsheet
With so many contracts to stay on top of, it’s no surprise that some companies simply can’t keep track of them all – one study found that the majority of businesses can’t even locate at least 10 percent of their contracts. And while one of the key objectives inherent in your contract management strategy might be as simple as keeping contracts organized, Excel is unlikely to help you meet this goal.
This is because spreadsheets can be difficult to centralize – they may live on different computers, be overwritten and saved as duplicate files, living in numerous different versions. This disorganization can also make the data within spreadsheets unreliable, as the user may have no easy way to check that they are working off the most recent or accurate Excel file. Different formatting or types of information tracked from spreadsheet to spreadsheet can further introduce confusion and complication to contract management processes. This may result in missed deadlines, unexpected renewals or terminations, or breaches of contracts.
Additionally, while your spreadsheet may keep track of which contracts are in existence, they may not tell you where each contract is located – so even if your spreadsheet is up-to-date and accurate in all other ways, actually finding that contract, or locating a particular term or other information within, may pose a whole new set of challenges. Having a centralized contract repository eliminates these challenges by providing a single source of truth for accessing and managing all your contracts efficiently.
Reason #2: Spreadsheets are prone to error
The more manual processes you rely on to manage the contract management workflow, the more opportunities that exist for error. While versioning issues, as mentioned above, can be one problem that affects the accuracy and integrity of the information in your contract-tracking spreadsheets, there are countless other ways in which Excel is vulnerable. The problem is so bad that one study found that nearly 90 percent of spreadsheets contain errors; large spreadsheets may contain “dozens of undetected errors”, experts say.
These inaccuracies can cost companies – in one instance, something as simple as a “cut and paste” mistake cost a Canadian power company $24-million.
Reason #3: Managing contracts via Excel can be a security risk
Whether accidental or malicious, data breaches are costly for businesses – to the tune of $3.62 million, on average, for a breach. As such, security is likely top of mind for your organization, especially for documents as sensitive and important as contracts. Processes for sharing spreadsheets between users and across departments are often at odds with best practices for data security due to access requirements. If spreadsheets related to contract tracking are locked up tight on a restricted drive or some other secure location, those who need to access them may not easily be able to do so (or dealing with a high volume of access requests may create additional work and backlogs). But while storing such spreadsheets on shared drives or using free storage and collaboration tools may enable easier access for those who need it, this may also allow unauthorized individuals to also gain entry.
Reason #4: Excel doesn’t seamlessly integrate with the contract management lifecycle
Taking a proactive approach to monitoring contract performance can help organizations reap greater benefits at both the micro and macro levels. This can help organizations to better optimize contract terms at renewal time and can improve the effectiveness of the overall contract portfolio. But in order for organizations to glean actionable insights from their contracts, there must be a plan in place to monitor and review contract performance.
Once a contract is signed and filed away, it’s all too easy for this important next step to fall by the wayside – especially if your organization uses a tool such as Excel for tracking. The issue isn’t so much a fault with Excel, rather the lack of a full suite of features for managing the full contract lifecycle. In order to stay on top of tasks related to contract performance management, you would need an additional system for keeping track of and taking action at each designated milestone; while not impossible, this adds more work and complexity. Dedicated contract lifecycle management software, meanwhile, contains built-in notification and reporting features, so there’s one less vital thing to remember. Book our free demo today to find out how CLM software can facilitate your contract management workflow.
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