The Current State of Contract Management
There are numerous benefits to contract management systems, including providing the right tools for internal authoring and collaboration, external negotiation, legal review, tracking capabilities and contract automation. Yet very few organizations have implemented this contract management into their daily practice. According to PayStream’s Contract Lifecycle Management Report, in a survey of over 200 individuals employed in many different industries, only 22 percent are currently using a software solution to automate the contract management process.
Why are so few organizations using contract management software?
Organizations may feel overwhelmed at the prospect of implementation, and the cost and ramp up time can seem daunting. However, the cost impact and potential legal ramifications that can result from poor contract management are greater risks. Relying on a file cabinet storage system where contracts are manually stored away and never, or rarely looked at sets companies up for failure to recognize contract deadlines, contract renewal dates and other contract terms that can cost organizations financially and strain their vendor relationships.
Those that rely on a manual contract management process to enter and maintain contract data electronically into Word and spreadsheets also face risk. Not only is it tedious and allows for a greater margin of error, it is costly, with organizations frequently overspending time and money running the process and then overspending to correct the resulting problems. Examples of these problems include a new supplier contract not being drawn up quickly and correctly, obligations and orders remaining unfulfilled and payments are delayed. With contract management teams under greater pressure to reduce costs and increase compliance, organizations need move past how they have historically managed contract data and look for a better solution.
According to the 2016 survey data, the top pain points plaguing organizations in regards to challenges they currently face and pressures they are feeling from upper management with contract management are as follows:
Business challenges they face
- Inconsistency among contracts
- Creation, negotiations, and management is cumbersome and/or costly
- Repetitive creation of contracts
- Slow business processes and/or supply chain problems
- High risk associated with erroneous contracts
- Government or corporate compliance burdens
Pressures felt by upper management
- Reduce costs and increase savings
- Regulatory and internal compliance against mandates
- Establish better relationships with the best suppliers
- Establish and measure against sourcing initiatives
- Reduce supply chain risk and increase continuity of supply
- Reduce complexity from source-to-settle
Do these challenges and pain points sound familiar? Are you looking for ways to reduce costs and more efficiently manage your contracts? Are you looking for a better solution but haven’t pulled the trigger on one yet?
If so, check out part two of our three-part series, titled Exploring the Capabilities of a Contract Management Solution, where we discuss how the right contract management solution can help reduce these pains while meeting the expectations of upper management.