Every business has contracts to manage, but many aren’t handling them effectively, and this can have a detrimental effect on profitability.

Many organizations are turning to third parties more often for service delivery, and so the number of supplier relationships that all businesses are managing is increasing all the time. Along with the globalization of marketplaces, supply chains are becoming more convoluted, and more challenging to formalize through contracts.

Failure to adequately manage supplier contracts can leave organizations vulnerable to the risk of varying types and proportions, including supplier non-compliance, supplier performance issues, and decreasing standards, increased costs and decreased opportunity due to inefficiency and direct value leakage.

The sheer volume of contracts is a major challenge for most businesses

A lot of organizations are handling hundreds and even thousands of supplier contracts at any one time, and this can be so overwhelming that supplier relationship management falls by the wayside once the initial deal is done. Many organizations simply lose track of their agreements with their vendors, even dealing with out of date agreements and contracts that have been left to lapse into rolling agreements where there is no protection for either party against price changes or expectations.

It is within lapsed agreements that the potential for most value leakage exists.

According to KPMG, this can equate to 17-40% of any given value of a contract, and it occurs when buyers are not in control of the dates and terms of their contracts. When this happens, businesses are therefore not auditing their supplier’s adherence to the contract terms. With manual contracting, there is often no way to be alerted to key contract milestones, and transgressions are easily missed.

A contract management solution is the only way to ensure you aren’t missing something

A robust contract management tool can help overcome the major challenges of supplier relationship management. Many organizations, when dealing with a large volume of agreements, have a lack of uniformity and standardized terms and vocabulary and certainly don’t have a way to extract or analyze their contract data. The systems are laborious, clumsy and take a long time to overhaul manually.

Without a contract management software solution, an organization looking to ensure they were alerted to all contract milestones and renewal dates for a wide range of contracts would need to invest in staffing resources for trawling contracts and compiling all this data to ensure they aren’t missing anything.

Contract management software can relieve the burden of responsibility

Contract management software can easily standardize and organize all supplier contracts in one, centralized database, enabling organizations to quickly extract all data needed across individual and multiple contracts.

Built-in alert systems can ensure that no contract lapses without awareness and no contract milestone can pass without the opportunity to assess progress. Businesses are protected against potential legal disputes, against the risk of destruction of physical contracts, and against the potential for human error.

ProcurePort’s software solutions could help you close the gaps in your contract management system

ProcurePort’s Contract Management Software tool can give your business a secure cloud-based software solution to assist you in creating, executing, managing and analyzing all your supplier contracts right through the contracting process, from negotiation to creation through to expiration and renewal. The tool can help you assess supplier performance and compliance, and gives you on-demand access to all your contracts plus reporting features to give you insight into a range of contract management issues.

With the potential costs of a below-par contract management process so high, can any organization afford not to take this step into automating the supplier contracting process? Talk to our team of procurement software experts to schedule a demo and see how we can help.