Software Reduces Contract Lifecycle Management CostsContracts perform a critical role in determining the value of a business relationship. For organizations managing large volumes of contracts, contract management software can help improve relationships with vendors and customers, decrease inflated costs, and ensure compliance.
Contract Lifecycle Management (CLM)
CLM is a systematic process for the creation, execution, compliance, and analysis of corporate contracts for the purpose of reducing costs, maximizing operational efficiency, and minimizing risk. More specifically, CLM includes:
Creation. Negotiate, edit, and finalize contract terms. Ensure proper terms, clauses, and controls.
Activation. Establish central contract repository and clause library. Integration with contract data with core business systems.
Compliance. Proactively track compliance with pricing, service, and regulatory requirements at the point of intersection.
Analysis. Assess contract performance and risk during active life and at end of term. Info-Tech believes that an enterprise can optimize CLM with customers and suppliers by implementing a contract management application. These Web-based solutions help organizations to:
- Actively monitor time-sensitive events.
- Gain enterprise-wide contract visibility.
- Improve efficiency of contract creation.
- Manage supplier compliance.
- Negotiate contracts faster.
Given these benefits, a mid-sized organization managing in excess of 100 contracts can expect the following returns by deploying a contract management software solution:
|Improvement Area||Performance Impact|
|Administrative costs||Reduce expenses by 10% to 15%.|
|Contract lifecycles||Cut contract cycle time by 25%.|
|Negotiations||Improve rebates and discounts by 10% to 15%.|
|Procedures and terms||Process standardization will mitigate risk and ensure compliance.|
Contract Management Reality Check
Unfortunately, most mid-sized enterprises do not have the processes or systems in place to optimally manage their customer and/or supplier contracts. The majority continues to manage contracts with a patchwork of informal processes, cobbled together business systems, and sporadic audits and analyses. The table below lists the costs of running an inefficient contract management process:
|Issue||Purchase Contract Cycle||Sales Contract Cycle|
|Disjointed procedures||Increased maverick spending.|
|Missed sales opportunities.|
|Cost-intensive processes||Long contracting cycles.||Long sales cycles.|
Extended order-to-cash cycles.
|Poor contract visibility||Lack of compliance. Inconsistent terms and conditions.||SLA and payment penalties. Customer dissatisfaction.|
|Poor performance analysis||No view into category performance|
Policy and regulatory violations.
Financial reporting violations.
Contract management software will decrease administrative costs, increase negotiating leverage with suppliers and customers, and ensure compliance. Optimize contract lifecycle management by deploying contract management software.