5 Signs You Need Contract Management Software
Every contract that your company has – even customer contracts that are still in the negotiation phase – contributes to the bottom line. In some industries, contracts represent as much as 90 percent of the company’s value. Too many organizations, though, don’t manage their contracts to capture their maximum value. In fact, research by KPMG found that poor contract management policies can diminish a contract’s value by anywhere from 17 to 40 percent.
Ask yourself: How does our company manage its contracts? How are we maximizing value at every stage of a contract’s lifecycle? Are we using our contracts strategically? Do we even know where all our contracts are stored – and where they are in their lifecycle? Chances are the answers to those questions point to an inescapable conclusion: your contract management process is lacking.
However, even if your contract lifecycle management process is relatively good, and you are actually managing your contracts rather than simply storing them, there are some signs that your process might still need some work, and investment in a better contract management platform is necessary, especially if any of these problems sound familiar.
1. You’ve lost money on contract renewals and rogue spending
Expiring contracts can cost your company big bucks. Not only is there the potential for lost business when a contract expires and a customer switches to a new vendor, but expired contracts can spur a renegotiation, which may result in less favorable terms. With the right contract management solution in place, however, you can significantly increase your contract renewal rates and avoid expirations by proactively reaching out to customers to renew their contracts.
By the same token, using a contract management solution can also help you save money on your vendor contracts. Your company could be losing money on agreements that were automatically renewed when they could have been canceled or renegotiated. For instance, your company may be paying for licenses or maintenance on software or equipment that you no longer use, simply because the contract was not managed properly. Contract management offers you unprecedented visibility into your entire contract portfolio so you never miss a key milestone or obligation.
Contract visibility also helps control rogue spending, or off-contract spending. The Institute for Supply Management defines rogue spend as the “process of an employee buying a needed product or service without complying with the organization’s normal or prescribed process.” Rogue spending is usually small purchases spread across multiple suppliers, but the costs add up: On average, about 5-10 percent of a company’s spending is off-contract, but there have been cases where it’s closer to 30 percent or even more. Without clear insights into existing contracts and a streamlined procurement process, rogue spending is going to take a big bite from your bottom line.
2. Your contracting process takes forever
When it comes to drafting contracts, is your company slower than molasses in the winter? Does requesting even a simple contract, like an NDA, take a week or longer? While ensuring that contracts are correct and that all the necessary departments have approved the language and terms is vital, you don’t always have a lot of time to wait. You might need an NDA for a potential customer or investor, for example, but if you have to wait 10 business days for it, you could lose the opportunity. Implementing a contract management platform with self-service contracting via an intuitive wizard interview and template library speeds up the process. It also ensures contracts are safe, compliant and controlled by your legal department.
3. You’ve had errors in the contracting process
When it comes to contracting, there is really no room for error – yet it happens all the time. When contracts are shared via email or on a shared drive, it’s easy for errors to occur. Just imagine that you pull the wrong version of a contract and make edits to it before sending it on – but then realize your mistake and must start all over. Not only are such situations time-consuming, they also increase the likelihood of flawed contracts that could prove costly to your company. A contract management solution ensures that everyone is working on the same version of a document, and that all changes and redlines are tracked to provide a thorough and up-to-date audit trail.
4. You have no insight into your contracts
Do you have an accurate picture of the risk that your contracts present to your company? Can you easily determine which contracts contain specific clauses or potentially problematic terms? Often, analyzing contracts for specific information requires weeks or months of manual work, in which your legal team looks at every relevant contract to parse out the necessary information. This is costly, time-consuming, and prone to errors and omissions. With a contract management platform that includes AI-driven insights, you can easily analyze your contracts and capture valuable data with just a few clicks, allowing you to get the most value from your contracts. As Beverly Rich noted in Harvard Business Review, firms using AI-driven contract management tools “have generally seen an increase in productivity and efficiency in their contracting.”
5. You are using multiple solutions
In many companies, “contract management” means that the sales team enters information into a CRM platform, which is then captured by the legal department and entered manually into a word processing program, which is then sent to finance, who manually enters data into a spreadsheet or other tracking program, and so on. In other words, every department that touches the contract has its own system, and the constant manual entry and toggling between programs is not only inefficient but increases the chances of error – and overspending. According to McKinsey, for instance, 80 percent of procurement functions are not fully aware of competitive terms and contract structure. Without this awareness, it’s almost impossible for your teams to make good purchasing decisions and avoid rogue spending – rogue spending that may not be intentional.
With a single platform that integrates with your existing enterprise tools, each department can continue to use the tools it prefers, but all the contracting remains in one place, so everyone has access to the same information and data doesn’t need to be constantly reentered.
These are just some of the signs that your company needs a better spending and contract management process. To discuss your company’s needs further, and learn more about Coupa’s spend management platform and contract management solutions, contact us to schedule a free demonstration.
Mat Calabro is a Product Marketing Manager at Coupa, specializing in Coupa's CLM and S2C solutions. Mat lives in the Greater Boston area with his wife and son.