In order to be successful, businesses need to be able to focus on their core strength: the key factor that sets a business apart from all others. However, in order to focus on that core strength, businesses need to be able to have enough time available to do that. Current business practices have looked into outsourcing several activities ranging from customer support to quality control. Often businesses overlook one of the most time-consuming processes: contract management.
Companies, such as Groupon and LivingSocial, that have focused on simplifying and digitizing their contractual documentation systems have reaped significant benefits by liberating resources that have been previously tied up to contract management.
Here is a review of why you should consider a contract management software.
Understanding the Contract Management Lifecycle
One common misunderstanding of why people believe that they don’t need a contract management software is that they don’t have a full grasp of the contract management lifecycle. Some businesses fail to correctly account for the amount of time that their staff dedicates to each of the phases of the contract process.
As an exercise, share this list with your contract management staff and ask them how many hours per week they dedicate to each one of these stages of the contract process:
- New Contract Requests
- Capture Data
- Contract Authoring and Creation
- Collaboration and Negotiations
- Reviews and Approvals
- Signatures and Execution (Hardcopy and Electronic/Digital Signatures)
- Post-Execution Tracking and Management (Manage Commitments and Obligations)
- Contract Reporting and Analysis
You’ll be surprised by the results of this exercise. Are your employees or team members using their time effectively? Are they focusing on the core strength of your business? Do you think they could serve better your organization by dedicating more time to other activities?
Eliminating (or Optimizing) the Paper Trail
On top of the amount of time that your employees are not dedicating to revenue generating activities, you have to think of the amount of money that you spend in self-managing a paper-based system. A contract management software not only reduces or eliminates paper waste, but also creates additional space by freeing up your office from complicated and bulky filing cabinets.
Instead of piles of papers that make it difficult to know which contracts need to be dealt with, you will have a simplified digital system. Additionally, the software will ease the task of keeping track of the different stages of the contract, from deadlines to renegotiations by creating alerts that you can receive electronically.
Keeping your Document Language Safe
By centrally controlling the integrity of your company’s approved contractual language, you will reduce the risk of unauthorized language to your contracts. Contract management software allows you to clearly keep tabs both of instances where someone has deviated from approved contract language standards and of instances where someone has approved conditions (e.g. sale discounts, spending limits, budgets, etc.) that go outside of preset thresholds.
By keeping your contract language safe, you will run a safer practice and make more informed decisions.
Last but not least, according to a study released by the Aberdeen Group in 2006:
…the percentage of an enterprise’s revenue that is dictated by a contract will increase from 56% to 68% on average over the next two years. The trend is clearly that enterprises increasingly want contracts in place with their customers and vice-versa. Apart from the increased contract data that needs to be monitored there is also the issue of cycle times with contract creation, negotiation and approval, which can pose as bottlenecks.
Savvy businesses will optimize their “quote-to-cash” cycle in advance so that they are ready for rapid growth and high demand. Failing to plan in advance for busy times will result in high opportunity costs for having to forgo additional contracts and for damaging your company goodwill with sub-par performance.
Using a contract management software may allow yo to:
- have a better understanding of the contract management lifecycle and how much manpower is being allocated to them
- eliminate (or optimize) your contract paper trail
- keep your document language safe
- prevent bottlenecks