4 Key Benefits of Adopting a Contract Management Solution
For large organizations, contract management can be a burden. A largely manual process for many organizations, contract management is often a time-consuming, laborious task that, if not done correctly, can have a huge negative impact. Most large organizations deal with thousands of contracts, each one with its own unique set of stipulations, deadlines and other hidden risks that can lead to noncompliance or cost overruns.
Contract lifecycle management (CLM) has emerged as a viable strategy to help organizations deal with the increasing volume and complexity of contracts. Regardless of the type of contract your organization may primarily deal with there are four key reasons that organizations take on a CLM project.
1. Streamlining the contract creation, authoring, and negotiation process and reducing risk by ensuring compliance with legal guidelines.
The ability to standardize contract language and processing is the easiest path to increased compliance and efficiency. Utilizing standard legal and compliance approved template language allows organizations to reduce the time legal and compliance departments spend reviewing contracts. Tracking deviations from the standard language and processes allows those exceptions to be routed to the appropriate legal or compliance channels to ensure the deviation is acceptable.
2. Visibility to your contract repository helps you understand your compliance and monitor your portfolio to ensure business continuity.
Not every person in an organization needs to be aware of every contract detail. Contract management solutions allow organizations to ensure that only the correct people in their organization have visibility into contracts, providing a secure central repository.
In addition, CLM solutions help organizations comply with document and record management policies by providing a central repository that manages the full lifecycle of a contract, including contract creation, approval, management and its final disposition.
Finally, every contract has its own set of pertinent dates. Contract management solutions provide automated notifications to the appropriate parties when important contracting dates are coming up such as renewals, ending of contracts and compliance issues (e.g. certificates of insurance) to ensure all parties are aware of important dates.
3. Reducing risk by ensuring contractual commitment and performance.
Let’s be honest. Contracts by their nature are vehicles of risk mitigation. They help to define a framework where parties can collaborate together to achieve an outcome that reduces risk on all sides but also provide an upside. Said differently, contracts work both ways. Organizations are held to them, but so are the vendors contracted with them. Contract management provides vendor compliance and performance management against contracts, allowing organizations to effectively gauge how vendors are performing and take appropriate action if needed.
4. Achieving cost savings by making the contracting process as efficient as possible.
In essence the three previous points above all help to achieve cost savings by reducing the manual effort that is required to administer a contract management solution. Streamlining the authoring process lets organizations become more strategic in nature by having the contract management tool ensure adherence with organizational policy. Improving visibility and automating notifications for contracts in the repository reduces the time needed to find the correct information at the correct time. Having a tool CLM monitor and track your contractual obligations can reduce risk and contract leakage.
Finally, spend compliance should not be understated. For those procurement organizations it is extremely important that your vendor stays in compliance with you negotiated terms and conditions. A CLM tool that is combined with a broader sourcing and procurement strategy can help to maintain compliance with contract items and services, thereby reducing costly mistakes.
Too often, organizations fly blind when it comes to contract management, leading to costly issues in processes ranging from authoring/negotiating contracts through the management and all the way to contracts’ end of life. Improving the process through automation can have a significant impact on the bottom line and increasing efficiency.
Interested in knowing more about the benefits of a contract management solution? Watch our Contract Manager demo now!