Managing contracts effectively can have a huge impact on any company or organization’s bottom line. Contract lifecycle management software is increasingly being considered an indispensable tool in day to day business operations to enhance organization, compliance, and decreasing contract execution time. In an increasingly fast-paced world, it is becoming apparent that it is not just a matter of accruing benefits from using good contract management software, but it can be risky not to.
The major risk of inadequate contract management is that it promotes avoidable costs. Below we’ll take a look at some of the major avoidable costs that good Contract Lifecycle Management (CLM) software can reduce, or even entirely eliminate.
A crucial part of a contract manager’s role is analyzing and looking for ways to mitigate potential risks. Risks that go unnoticed or without an associated plan of action can drive up cost, liability, etc. Software that has a clean and accessible interface, with automated alerts, reduces the possibility of unnoticed and unmanaged risks by increasing awareness and data availability.
Improper contract management can cause a company to miss important revenue and sales opportunities. These can include rebates, discounts, beneficial renewals, or contract procurement entirely. The less effective a company is at managing its contracts, the fewer contracts it can take on. This limits the company’s potential for growth and makes it more difficult to procure further contracts.
Errors and Additional Work
Typical contract management does not foster effective collaboration and editing. Common errors and imprecise terminology in a contract can be a major cost, especially if the contract must be rewritten several times before it to fix the inconsistencies. The more quickly a contract can be drafted, negotiated and signed, the less that contract will cost a company, and the sooner revenue can start steaming in.
Failure to Enforce Negotiated Supplier Terms
Terms that go unfulfilled reduce the amount of money gained in a transaction. Monitoring compliance correctly can decrease the instances of non-compliance, which increases revenue and job completion.
Time Lost to Disorganization
Searching through filing cabinets and offices for contracts, spreadsheets, schedules, notes, and other data wastes time that could be spent on more productive tasks. Time not spent sifting through documents for information could be spent on procurement, enforcement, fulfillment, and a host of other things. Good CLM software can reduce the time spent on disorganized searching to turn a task that used to take days into one that takes mere hours or minutes.
Inadequate or Incomplete Delivery to Customers
Missed deadlines, incomplete or duplicated payments, and insufficient or unfulfilled client orders are some of the biggest costs associated with inefficiency. Reducing the amount of error and inefficiency in a company’s delivery practices can save the company costs in potential litigation and repetition, and save face with the client.
For more information on 6 key benefits of contract management, see this previous blog post.