Contracts are the foundation of many businesses, detailing their service agreements and remuneration rates with their customers amongst other elements. These legally binding documents are essential for the efficient operation of the business.
Despite their importance however, many organisations fail to put adequate contract management processes and procedures in place. This opens the business up to risk on a number of levels, and could result in lost revenue, reduced productivity and even legislative penalties. Implementing appropriate automated contract management systems is an essential component of risk mitigation and operational efficiency.
Business contracts between organisations and their customers are often high value items, and may run into millions and multi-millions of rands. In spite of this, many enterprises still use ad hoc processes and manual methods for contract management, which result in a lot of the business value of a contract being lost. Poor contract management has a number of repercussions, all of which can be detrimental to the business.
Without proper management, organisations could be prone to revenue loss. This includes failure to monetise high value services appropriately and a lack of proactive behaviour regarding contract renewals, as well as cost overruns as budgets cannot be effectively managed. Scope creep is another significant challenge. If organisations do not manage their contracts effectively, they may end up doing work that does not fall within the contractual agreement and is thus not being paid for. This again causes revenue loss as well as impacting negatively on productivity.
Quality failure can also become an issue, including failure of the contract to meet the business needs of the customer. Without careful management, organisations may fail to meet the expectations and agreed service levels of their customers, which can in turn cause knock-on reputational damage. Damage to the business can also occur from an inability to maintain competitive edge, as a result of being unable to adjust and manage contracts effectively according to customer requirements. In addition, without proper processes in place to manage knowledge transfer, intellectual property is prone to being lost when individuals leave an organisation. This damages continuity of service and can have further repercussions for business productivity.
These are just some of the consequences of ineffective contract management, and all have one thing in common – they increase business risk, and have a negative impact on profitability. Automating contract management is the ideal solution to this challenge, however many organisations are unwilling or unable to spend large sums of money purchasing out of the box solutions that then still need to be customised and integrated. What many of these businesses do not realise is that they already have all of the tools they need to leverage more effective contract management.
With the assistance of a solution provider partner, a basic automated contract management solution can be created, customised and integrated in a matter of days without the need to invest heavily into auxiliary solutions.
For organisations that then require more advanced functionality, third party solutions can then be integrated. These include the ability to utilise electronic signatures, with long-term proof of signer identity, signer intent and document integrity for deniability and cyber-security purposes. This improves efficiency as it reduces the need to print, scan, send and re-send documents backward and forward. It also delivers enhanced compliance capability enabling contracts management to become a true enterprise solution.
In addition, best of breed business process automation can be incorporated. This enables organisations to build and run a contract management lifecycle process that empowers business-user collaboration with on-line creation, approval and sign off driven by specific business requirements.
Through the addition of third party systems, organisations can leverage Line of Business (LOB) System integration. This delivers the ability to connect to data wherever it resides and leverage that data to drive productivity and efficient decision making throughout an organisation.
Enterprise level contracts management ensures organisations have an increased understanding of contractual obligations, fewer negotiation cycles, and reduced demands on the legal department’s time to mention a few benefits. A complete picture of all contracts within an organisation ensures organisations can make improved fact based decisions and ensure maximum revenue through more effective, efficient and automated processes.