Taking advantage of contract management software can have tremendous benefits for your business. But even more importantly, not implementing a tool to help you automate the contract management process can lead to major risks, unnecessary costs, and missed opportunities.
Despite the fact that there is practical, affordable contract management software available, a number of companies continue to rely on manual methods and hesitate to switch to an automated system. Concerns over the price tag of contract management software, the time it takes to implement, and lack of system adoption also trigger concerns, leaving businesses stuck in limbo as they try to decide what to do.
If there’s one thing most businesses have in common about their current contract management process, it’s that no clear path exists for what to do with agreements after they’re signed. Sixty percent of organizations use email to manage their contracts, and a similar rate uses Excel, two solutions which are extremely limited as far as access, visibility, security, and other essential contract needs. Meanwhile, 71 percent of companies can’t even find at least one-tenth of their existing contracts.
Unfortunately, an inability or unwillingness to make the switch to a software solution means that the already complicated task of managing a contract portfolio is even more difficult – especially as the contract repository grows and the number of contracts increases. The end result? Inefficiency, disorganization, missed revenue-generating opportunities, and increased costs.
THE IMPACT OF INEFFECTIVE CONTRACT MANAGEMENT
Poor contract management processes foment inefficiency, impede communication and collaboration, and can trigger risk and other compliance issues. When you consider that only one-quarter of organizations have a centralized automated contract management solution, it’s easy to see why the lack of consolidated contract storage can lead to chaos. The problem is so bad that one study by MarketWatch found that nearly 90 percent of spreadsheets contain mistakes; large spreadsheets may contain “dozens of undetected errors,” experts say. These inaccuracies can be expensive – in one instance, something as simple as a “cut and paste” mistake cost a Canadian power company $24-million.
INEFFICIENCY AND DISORGANIZATION
Chaos in your contracts leads to additional expenditures and increased risk. For most organizations, inefficiency is likely the culmination of a series of smaller problems associated with an ineffective management approach. Unclear goals and expectations, poor communication, redundancy, and convoluted compliance matters are all contributing factors. Disorganization also leads to lost opportunities, increased cost, and increased risk.
Disorganization usually stems from the lack of a centralized, up-to-date contract repository. Depending on spreadsheets and shared drives makes consolidation and consistency difficult – your contracts may live on different computers, be overwritten and saved as duplicate files, living in numerous different versions.
This disorganization can also make the data within spreadsheets unreliable, as the user may have no easy way to check that they are working off the most recent or accurate spreadsheet. Different formatting or types of information tracked from spreadsheet to spreadsheet can further introduce confusion and complication to contract management processes.
While your spreadsheet may keep track of which contracts are in existence, they may not tell you where each contract is located – so even if your spreadsheet is up-to-date and accurate in all other ways, actually finding that contract, or locating a particular term or other information within, may pose a whole new set of challenges.
LACKLUSTER COMMUNICATION AND COLLABORATION
Effective contract management requires easy and effective internal collaboration between the people who will be using said contracts and the contract management team. Done right, this collaboration results in contracts that effectively represent the user’s needs, but that also leverages the deep contract-related expertise that lies within the contract management team.
Two key challenges that often stand in the way of this effective collaboration are communication and visibility. When contracts are handled manually, they are not always accessible to everyone who needs them. That makes involving the right team members a top priority, especially when relying on a single gatekeeper to dole out information.
SECURITY AND COMPLIANCE
Processes for sharing spreadsheets between users and across departments are often at odds with best practices for data security due to access requirements.
Initially, storing such spreadsheets on shared drives or using free storage and collaboration tools may enable easier access for those who need it, but this may also allow unauthorized individuals to gain entry. On the other hand, if spreadsheets related to contract tracking are locked up tight on a restricted drive or some other secure location, those who need to access them may not easily be able to do so (or dealing with a high volume of access requests may create additional work and backlogs).
Without the ability to set customized permissions and manage access to contracts, organizations risk making their contract repository vulnerable to a security breach or too locked down to be useful to the company.
To learn more about how contract management software can help you achieve your business objectives and what to look for when choosing a solution, download the Buyer’s Guide to Contract Management Software.
