Companies are in the business of getting into contracts with vendors, employees, and customers. According to KPMG, poor contract management diminishes the value of a contract anywhere between 17 and 40 percent. Now, a 40% loss in value is not a figure you would want sneaking around your arrangements, injecting dire repercussions on your bottom line.
Managing contracts appropriately contribute to the profitability of a business. Contracts are terms of a relationship between stakeholders, and how you handle these agreements will determine the nature of those relationships. The onus of a strong relationship lies with the business.
Contract management software has a repertoire of tools that ensures companies stay true to their terms of operation. You want to have every device in your arsenal to reduce operational costs, increase profits, and improve performance as a business. Automation is a business’s best friend.
Businesses that are yet to embrace technology in managing contracts operate on the brink of financial ruin. It takes one company to adopt a cutting-edge piece of tech, and you are out of business. When you no longer have a competitive advantage and contract management seems like a headache for your business, you need to interrogate your management solutions.
Are you crystal clear about your contract management process? Do you have a system that flawlessly maximizes contract value at every stage of the lifecycle? Do you have storage and security measures that guarantee the privacy of documents?
Well, if your contract process is nowhere near perfect, these are the signs that you need a better management solution.
Most companies have departments handling contracts separately—multiple sources of contracts births confusion. For example, the sales department creates an agreement for a closed deal; they then transfer the contract to legal, then finally lands in finance. Whenever matters arise, these contracts have to go through the long process of transfer with spreadsheet adjustments. Tracking documents manually by teams is cumbersome and prone to confusion.
Multiple access points create confusion in the management process, and every department incurs operational costs. A single platform reduces the chances of errors that flood manual entries.
When a customer’s contract expires without your prompt knowledge, they might ask for a renegotiation which won’t work in your favor. Renewal terms on contracts that have expired can eat into your operational costs. However, if you have contract software, you can catch these deadlines early, communicate with the customer prompting them to renew their contracts.
A proper management solution avoids the pitfalls of engaging the services of stakeholders when you no longer use their services or products. Suppose you have a contract with an internet service provider and decide to switch to someone else without promptly terminating the contract with the previous provider. In that case, you might end up paying for services you don’t require.
A Problematic Contractual Process
Whenever you have encounter problems in the lifecycle related to errors of omission or commission, understand that you have a complicated system. It would help if you had absolute fluency in the contractual processes to avoid confusion. Legal teams analyze contracts to spot inconveniences, and this process can be tedious and complex.
AI provides the incentive to analyze and cross-reference data at the click of a button. Software solutions ensure you derive the most value from every process in the lifecycle.
A Lengthy Contractual Process
When requesting something as simple as an NDA, do you have to wait till kingdom comes for you to get any headway? Are contractual processes stealing time that you would use delivering tangible value to parties? If you have longer contractual processes, say ten days or even weeks, then you need automation. AI has clause libraries and templates that you can use as references for business language, speeding up the process. Contract software ensures that contracts are secure, meet the compliance threshold, and get through the system faster.
Human beings are not immune to errors. When you share contracts via email, it is easy to miss minor details, which could mean a lot in the credibility of a contract. Imagine when you miss a minor detail and then adjust the contract and forward it to a colleague. They miss another point like a date; by the time the document gets to the third person, the errors are compounded, which can be costly to a business.
A contract management solution thoroughly adjusts all changes, tracks the audit trail, and redlines, ensuring users work on the same version.
A central repository takes away the hassle of tracking documents, provides tools that streamline the contractual process, and integrates storage and security protocols. Teams can have different contractual obligations, but all the contracting can remain in a central place.
Embracing contracting solutions will relieve the headache of errors and impulse spending that continues to take away from your bottom line.