In a perfect world, all contracts would begin and end on the same date, have the same compliance requirements, and act in a similar fashion. As you already know, though, this perfect world does not exist, and each contract a business enters into presents unique challenges and requirements that must be managed.
The old method of managing these contracts typically involved a stressed employee, an Excel spreadsheet, and a hope that everything would work out in the end. Thankfully, there is a better way. Contract management software is a game-changing technology for businesses, especially those that must manage a lot of different contracts.
“Whether initiated among a team of lawyers or simply representing the agreement between a salesperson and a customer, contracts spell out how business will be done: the how and why of generating revenue, and what each party’s recourse might be if outcomes don’t happen as expected,” PCMag writes. “Yet, with all of this weight behind them, it’s surprising how many organizations manage their contract processes with a haphazard combination of emails and text documents, with varying document formats and stored in multiple locations, many of which are unknown to any but those directly involved in the relationship.”
Contract management software is a program or series of related programs for storing and managing legal agreements, such as contracts with vendors, leases, and licensing agreements. More than anything, contract management software can streamline the administrative tasks of managing these contracts, reducing overhead.
Businesses stand to benefit greatly from adopting contract management software and face several pitfalls if they continue to use outdated systems and processes. Let’s take a closer look.
First and foremost, contract management software provides a tangible financial benefit to businesses. Contract management systems help businesses remain in compliance with established contract terms, ensuring they are alerted to different provisions that, if broken, would lead to additional fees and expenses.
Contract management software also alerts businesses in advance of expiring contracts or different extension options. By knowing exactly when contracts will expire, business leaders will not find themselves with a gap in service or coverage that could be used against them in future negotiations. Contract management software reduces potential expenses related to these gaps.
Also, contract management software helps business leaders gain a better understanding of their overall business revenue, at least that which is tied to contracts. While some contracts may be boilerplate, others might include different financial structures, such as contingencies or price escalators. Contract management software can take these potential changes into account, allowing businesses to better project long-term revenue.
These changes can mean a significant difference in the value of a contract, and better estimating those projected numbers allows businesses to make proactive decisions to boost or better understand their revenue options.
Finally, there is the simple workforce cost. Contract management software saves time and energy in managing contracts. While employees will need to work with the software, they will no longer have to rely on outdated spreadsheets and other organizational methods to ensure they properly manage their contract portfolios. Employees can manage their contracts more efficiently, then use that time saved on organization to address other projects, therefore improving overall company performance.
Contract management software provides a valuable service that not only helps organizations remain on top of contracts, but also avoid major mistakes. Contracts, traditionally, can be extensive and complicated with many different facets. While many businesses attempt to streamline contracts as much as possible, there will ultimately be outliers.
Contract management software ensures the company stays within compliance of its contractual obligations. While any business ultimately wants to provide top notch products and services, it is possible for requirements to slip through the cracks. These mistakes can not only create additional costs and fees, but can make the business look bad in the eyes of valuable partners. The end result could be future lost business or opportunities.
Adopting contract management software also allows companies to avoid or manage potential risks. While risk is not always quantifiable, it is something that can be measured. Contract management software helps reduce contract-related risks for businesses by identifying contracts that include indemnification clauses, insurance obligations, unilateral termination provisions, and other potentially complicated language. By gaining a full picture of the various contracts within an organization, its leaders can make note of where they might face additional or unnecessary risks.
Contracts are an important part of every business, but for too long organizations have relied on outdated processes to manage them. Contract management software provides an alternative solution with a number of benefits to businesses that use it for a relatively low cost. Business leaders should consider instituting modern contract management solutions to ensure they get the best results from their contracts, while minimizing additional expenses and risk to their companies.