5-6-2016 | by Ben Fleshman
A recent study has provided some interesting data regarding usage of contract management tools. Their team surveyed 822 businesses in the month of March and found that 74.6% of businesses surveyed did not have an automated contract management process. Of those surveyed, 7% had no management system in place at all, and the vast majority of the companies surveyed were using insufficient tools (such as excel and shared drives) to manage their contracts. Inefficient contract management can lead to lost revenue, missed deadlines, litigation, penalties, and a whole slue of other problems. That’s why so many companies are switching to online contract management—they all want to manage their contracts better to avoid problems and increase revenue.
When asked what was the top business driver behind better contract management, companies surveyed gave the following responses:
- Increase Revenue—20.1%
- Mitigate Risk—19.6%
- Improve Customer Experience—19.1%
- Increased Sales productivity—18.7%
- Shorten Sales Cycle—17.4%
Today, we wanted to discuss the specifics of how using automated contract management can improve your performance in the top 5 areas of concern for modern businesses.
An Aberdeen Group Study explains that anywhere from 5% to 9% of revenue can leak out of a contract due to “regulatory penalties, collection failures, maverick pricing, lost sales and transaction errors.” This revenue leakage is caused, in large part, by insufficient contract management. The the opportunity to increase revenue is often overlooked because contract managers are not properly monitoring the available opportunities. They are so preoccupied with mundane tasks that they fail to take advantage of rebates, discount pricing, better sales opportunities, and various other revenue increasing areas for contracts.
Managing contracts with an automated system reduces or eliminates the risk of revenue leakage, because the system automatically alerts you when deadlines are due. Information is more readily available, so invoices will never be missed, duplicated, or overpaid. Automated contract management systems decrease revenue lost, and increase the awareness of opportunities for gaining new revenue.
Mitigate Contract Risk
There are many areas for risk to creep in when a contract is not monitored properly. One of these is revenue leakage, which is discussed above. But, contract management software can also decrease your company’s exposure to other types of risk. One very simple way is through using a secure, cloud-based server to store documents. 56.4% of companies in Spring CM’s survey indicated that they store documents using a “shared server” such as Dropbox or Google Drives. 18.6% responded that they use email to store documents. Such systems may be secured against basic threats, but not against all, or even most, kinds of security threats.
Cloud-based storage offers bank level security to protect your contracts and contract related documents. The risk of data lost to theft, or even to human error, is significantly reduced by using the central repository provided by contract management software.
Other risks which can be mitigated using contract management software include:
- Litigation due to ambiguity in the contract
- Supply chain risk
- Misplaced contracts
- Incorrect contract drafts
Improve Customer Experience
Contract management software improves the customer experience by streamlining and simplifying their signing and online negotiation process. Negotiations with clients can be performed electronically through the software program, which is particularly useful for clients across state, or even national borders. Comments and drafts will be saved in the secure server for later reference. And, when both you and the client are pleased with the contract, you can both sign electronically. This gives them the power to sign in seconds, without the hassle of printing, signing, scanning, and sending the document back to you. Customers can also sign from any location, which makes your company appear more flexible and versatile to customers. Their experience will be improved by using automated software.
Increase Sales Productivity
Increasing sales productivity and reducing sales contract cycles are very closely related. We will discuss a few elements other than reducing cycle time in this section, but be aware that one of the most significant contributions to sales team productivity is reducing the time wasted on mundane tasks. One other benefit that can increase productivity is the ability to integrate your contract management software with Salesforce software, thus allowing your team to run advanced analytics on contracts that have to do with sales. Your team will thus be able to understand the snags in their system and then make and execute plans for improvement.
Shorten Sales Contract Cycles
61.3% of companies surveyed reported that their sales contract cycle took more than 3 weeks to complete. This is due to overcomplicated approvals workflow, time wasted searching for contracts, time spent drafting new contracts, and time lost to waiting for the process of emailing back and forth to produce a workable contract.
Automated contract management can significantly reduce sales contract cycles by providing an easier way to search for contracts that is more time efficient, contract templates to reduce the amount of time drafting each new contract, and communicative and collaborative tools to eliminate the need to email contracts back and forth. Approvals workflow can also be streamlined through using contract management software, which helps you to reduce your overall time spent on the contract lifecycle.