Does Your Business Need Contract Management?

Does Your Business Need Contract Management?

Contracts are complex yet crucial in the intricate relationships between businesses. At a given time, companies may have hundreds or even thousands of contracts stored within their database or filing system. While having a plethora of contracts is a normal part of company processes, it’s important to ensure each contract is carefully organized. This is where a reliable contract life cycle management system comes into play.

Who Needs Contract Management?

A reliable contract management system can benefit any large company, especially those that have thousands of active contracts at a time. It’s neither reasonable nor responsible to attempt to manage so many contracts without an effective system. Doing so exposes a company to unnecessary risks including uncollected bonuses, revenue leakage, and indemnities.

It can be a challenge to manage such a volume of contracts in number alone, but organizing contractual details can become an even greater issue. This is especially true when certain contracts are kept in different departments and in a variety of formats. Without an organized central location, finding a contract in order to review or update it may take ages. As a result, the company decreases productivity and may even lose clients due to poor contract management.

For businesses wanting to maximize profitability, productivity, and reputation, contract management is crucial. By keeping every contract in a centralized location, companies can stay ahead of any issues that may arise. This includes keeping track of contract renewal, contract concerns, and possible audits. 

What Does Contract Management Solve?

Because contracts have a lot to do with key business functions, a dedicated contract life cycle management system can improve the processes of nearly every department. Legal teams, marketing departments, sales professionals, and human resources are all likely to access and utilize the company’s CLM. For example, sales teams may take advantage of sell-side contract organizations and project managers will benefit from the analysis features.

Contract management helps streamline each phase of a contract’s life cycle (pre-award, middle, and post-award). By keeping track of requests, authoring, negotiations, approval, revisions, reporting, and renewal, companies can develop behaviors that benefit both parties.

By employing the use of CLM software, many of the inefficient practices behind outdated paper filing can be eliminated. A well-designed system that keeps all business contracts centrally-organized can reduce unnecessary labor hours and improve the company’s overall efficiency.

Contract Management Tasks

A contract life cycle management system tracks and organizes each step of the contractual process. Rather than having the entire process resting on the shoulders of human managers, automated software presents time-saving solutions without overlooking any aspect of complex agreements.

On top of organizing contracts themselves, CLM software ensures that all aspects of a contract’s details are met as promised. This may include:

  • Managing Communications: Logging communication between businesses and customers or companies.
  • Managing Contract Changes: Noting and keeping track of any changes made to the contract along the way.
  • Monitoring Services: Ensuring that agreements are met and products are delivered on time.
  • Maintaining Business Relationships: Determining company strengths and weaknesses to improve business relationships.
  • Improving the Process: Pattern development and contract examination to help improve procurement processes.
  • Assessment and Analysis: Close organization allows for detailed assessments of the procurement process. This way, project managers can determine areas where improvements are needed.

Benefits of Analysis and Reporting

Analyzing business contracts can help prevent errors that are likely to take away from a company’s profits. For example, by examining vague clauses that were listed in past contracts, companies can help tighten wordage to remove complications. In addition, analyzing contracts can help businesses prevent conflicts between contracts and protect themselves from liabilities. 

Oversights are not unheard of, even in successful businesses. Without a CLM system, it’s not easy to look back at a company’s history of contractual agreements. As such, it may become difficult to use the past to help make smart business decisions. 

By having an accessible contract history organized in a company’s CLM, procurement teams can access past contracts to determine the fairness of current offers. This way, it becomes easier to maintain profits. 

Analysis and reporting can also prevent miscommunication, missed deadlines, and poor cost estimations. Having detailed reports also help companies estimate the staff capacity needed for tasks. Effective reporting can also be a useful tool for staff training. With it, each member of individual teams will be up to speed on new contract terms and review procedures.

Because so many companies, even those that have experienced relative success, fall short in contract management, a CLM system is highly recommended. Processes can always be improved upon with an organized system and nearly every aspect of a company’s performance can benefit from contract management software.