If there’s one thing that is certain, it’s the harsh truth that contract management involves challenges– a lot of them. Given that 70-80% of business operations are governed by contracts, no business would get blamed for being a little too careful with it. The reason why most companies swear by contract management software is that it solves most of the contract-related problems.
According to a KPMG survey, 40% of a contract’s value is lost if there is no contract governance. This is a telling statement about the importance of having contract management software in place to eschew contract management challenges.
Let us look at some of the most common contract management problems and how contract management platform fixes them:
1. Effectively managing risk and compliance
One of the most significant contract management issues for businesses is its inherent risk and compliance issues. Contract value, contingencies, scope creep, revenue leakage, and quality failures are major risk elements in contracts. It is imperative that these are tracked and reported regularly. Alerts and notifications should be sent to the respective stakeholders to avoid the negative consequences of not being compliant.
Solution: You can reduce the risks associated with contract management by using contract management software as it has monitoring and auditing tools. It helps businesses identify and mitigate risks quickly and regularly, including financial, operational, and reputational risks. A contract management software lets you reduce risk while assessing your risk appetite. A Goldman Sachs report says that businesses can be compliant with 90-100% of regulatory guidelines by managing their contracts using the software.
2. Lack of contract visibility
A business that uses spreadsheets and folders to manage and track its contracts is setting itself up for grave issues in the future. Whenever the need to search for a specific contract arises, they will find it challenging to locate it. Each business has hundreds of contracts with vendors, partners, customers, and employees. Misplacing even one of these contracts can be disastrous. Double and triple data entry is almost the norm; it leads to numerous errors and messes up day-to-day operations.
Solution: A contract management software lets you track every single contract you have ever signed. You will even be able to see the lifecycle of the contract. A visually-attractive dashboard lets you know the contracts that are currently being drafted, approved, negotiated, and implemented. It will even show the contracts that are active and expired.
3. Supply Chain Risk
Poor supplier practices can result in reputational damages to your brand. We live in a well-connected world, and you will be judged on the behavior and practices of the suppliers you do business with. Since the global supply chains are becoming complex, poorly managed contracts can be a major liability too. You need to have a 360-degree view of the suppliers you do business with and understand the terms of the agreements and associated risks.
Solution: The software can be a single version of truth (SVoT) for supplier relationships. It will help businesses have a better sourcing strategy and handle supplier risk. The software offers visibility into the top-most suppliers from multiple perspectives. Having greater visibility into suppliers will help organizations have quality testing and review processes in place.
4. Remote Working
One of the latest paradigm shifts that the business world had to take was adapting to remote working. It not only poses security risks but compliance and accountability also become a big problem. Most businesses were not adequately prepared to handle a completely remote working environment, and it only ended up multiplying the contract management challenges.
Solution: For businesses that have robust contract management software in place or at least manually controlled policies, the shift to remote working would have been smoother. But if yours is an organization that depends heavily on paper, then contract visibility becomes your biggest problem. It reduces transparency with vendors and third parties. Ensuring that you have strong vendor relationships is crucial for enterprises working remotely.
Contract management software empowers employees to access all the contracts online. They can use its advanced search functionality from anywhere to pull in relevant data from anywhere. The software helps with version control, catalogs your metadata, uses configurable search tools, and uses data tags to identify keywords for contracts, all of which results in minimal disruption to efficiency and productiveness.
5. Expiry and Renewal
Unwanted contract expiry is a problem that enterprises keep facing. Unfortunately, unwanted expiries and renewals are not a mild annoyance. It can affect the organization’s bottom line by a considerable margin. If a contract expires, but you don’t bother about it and present your invoice at the end of hundreds of hours of work, you cannot bill it. You need to know when your contract is expiring and when you are up for renewal.
Solution: Contract Management software prevents unwanted expiries and renewals by sending alerts and notifications to the personnel concerned. Missing contract renewal dates makes you lose out on revenue-generating opportunities. None of this will happen when you have software that sends automated alerts for important dates.
With a contract management software, you won’t get stuck with undesirable contract clauses, miss contract renewal, or expiry dates. You’ll get notifications to renew or terminate the contract well in advance. Automated contract renewal tracking eliminates the possibility of human errors.
Contract management problems faced by businesses cannot be solved through manual methods. Legacy systems and age-old processes will only damage the business, no matter its size. No wonder enterprises are embracing contract management software to streamline crucial elements and processes to simplify contract management.
With the help of an AI-powered contract management software like Revnue, businesses can face the above challenges head-on to protect themselves from succumbing to common contract management problems.