Do You Know How Efficient Your Company's Contracts Are?
Reporting & Insight
Maximizing efficiency is the cornerstone to a successful business. Unfortunately, when it comes to the company contract portfolio, businesses often overlook the importance of efficiency. There is usually so much focus on the general operations and staying within the budget, and sometimes it's hard to see how contracts that span several years really affect day to day affairs. As a result, too many companies probably don't even know how their contract portfolio is faring, which can end up causing a lot of problems if things begin to go awry. Here are some things to evaluate to know how efficient your company's contracts are:
Most successful businesses have a business model and strategic plan in place that helps inform decision making. In general, this plan includes specific goals and objectives that the company hopes to meet, and hopefully a timeline to guide when certain things are expected to occur. Obviously, an outlined strategy provides strong guidance and can help a company ensure that it is performing as it should be to fulfill its goals. But, establishing objectives should not be restricted to the overarching business, as distinct departments or processes likely need similar guidance. To properly evaluate the efficiency of a contract portfolio, the contract management strategy must include concrete objectives that it is working toward. Without this, it will be very difficult to determine whether things are going the way the company would want.
Delineated Performance Metrics
Of course, in addition to actual objectives, there have to be performance metrics delineated so that there is a precise way to measure progress. These metrics may be task-focused, product-focused, cost-focused, or any other method that is applicable to the business and the industry it serves. Basically, there has to be specific benchmarks that each contract and the portfolio as a whole must be seeking to meet. If there is no way to measure performance, there is no way to know whether contract administration is as efficient as it should be.
In many ways, efficiency really boils down to cost-effective management. Cost overruns or leakages and any other unexpected expenses can completely derail a company's growth. Therefore, to assess whether the contract portfolio is being managed efficiently, it is imperative to assess whether there are any financial issues seeping in, whether gradually or suddenly. The economic implications of contract administration generally affect operations over time, but that is the very reason that cost containment and diligent oversight must occur from the outset. Otherwise, a minor leak may become a flood that is simply too great to survive.
Appropriate accounting clearly applies to budgetary matters but it also pertains to other things like inventory and supplies. It is absolutely vital to keep track of ordering, expenditures, payments, and the general flow of incoming and outgoing goods and funds. Failing to reconcile the monthly budget or inventory list may result in missing capital, pecuniary and otherwise. And, any time there is an accounting disruption, valuable resources must be diverted to rectify the situation, which inevitably hinders efficiency. As a result, contract management must include stringent accounting procedures.
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