If you’re a business owner, you may be familiar with contract management. However, not everybody understands the advantages of this discipline. With contract management, you may address specific issues in your company by simply gaining access to industry-wide statistics and data. And as you gather new knowledge and information, you get to adapt the best practices of contract management to, for instance, reduce overhead costs.
Now, we will make it our goal to help you understand the benefits of establishing an efficient contract management process throughout your organization. And with this, we will introduce how the proper technology may assist you in achieving your desired results.
The Financial Effect
When developing a business case for a contract management solution, consider the financial effect first and assess your existing financial condition. Remember that contract lifecycle management metrics are required. Following the implementation of the contract management system, these metrics must demonstrate a gain in income or a decrease in costs.
A simple contract costs $6,900, but more complicated contracts cost more than $49,000. On top of these costs, poor contract administration may decrease a firm’s average of 9 percent of yearly revenue. As a result, those who fail to monitor contracts carefully risk losing up to 40 percent of the contract’s value.
Moreover, less than half of agreed savings are achieved on average. When analyzing and signing contracts, using a contract management system saves time and reduces expenses by up to 30 percent. Non-legal tasks occupy a lawyer’s time, resulting in a $2.7 million loss in productivity.
Automated Contract Administration and Time Savings
Apart from immediate revenue and cost savings, the potential for time and hence money savings is also a factor. Contract administration, if not done correctly, may be time-consuming. This covers both regular and unscheduled contract management tasks such as signing off on contracts and renewing them. Prospective in-house legal clients typically express their frustration with the disruptions to their production caused by contract and vendor queries. And, of course, colleagues or staff who do not have access to contract documentation will ask straightforward inquiries, which may draw attention away from more critical duties.
Administrative tasks take 65 percent of the time of legal practitioners. This is why you must consider acquiring the services of an automated contract lifecycle management process with clever AI to minimize the amount of manual administrative work required. While there may be no strict timeline, creating, negotiating, and signing a contract takes 20 and 30 days. Thus, it may be worthwhile to investigate techniques to compress this period.
Automation has the potential to cut contracting cycles in half. Contracts should be signed as quickly as possible to either provide the promised benefits or review the next contract for approval. And when CLM software is used, businesses may cut contract approval time by 82 percent. Gartner forecasts that by 2024, AI-powered contract analytics solutions will eliminate the need for manual contract review.
Proactive contract renewal provides vendor assessment techniques to help businesses make sound judgments and build long-term relationships. It takes time to add new vendors and to replace those with poor performance. By automating procedures and ensuring best practices are followed, a contract management system may help decrease vendor churn and save time.
Managing Risk and Compliance
Having a consolidated picture of the contract and vendor portfolio is essential for compliance monitoring and risk mitigation. As a consequence, risk management approaches may be used uniformly. Additionally, contract management software may automate periodic compliance audits.
As of today, only 34 percent of businesses maintain searchable central repositories of their contracts. These firms save time by not looking for individual contracts to answer particular inquiries since they have consolidated all of their contracts in one location. At the same time, automating contract administration might result in a 55 percent boost in compliance.
There have been reports that 71 percent of firms struggle to identify 10 percent of their contracts. Once again, this affects a company’s ability to assess contract risk and maintain a consistent vendor strategy throughout its contract portfolio. The possible penalty should be weighed against the risk of breaking the law or failing to monitor your vendors’ compliance.
These statistics provide context for the impact of a contract management system on your company. However, the real impact will be based on the methods and maturity level of your company’s contract management. Contract management uses a substantial amount of resources and time; thus, measuring and optimizing it may significantly influence costs associated with the company’s top line, efficient use of internal resources, and risk exposure levels for the entire business.
Are you looking for a reliable contract tracking software? Anapact integrates your entire team when it comes to each pace of a contract change. Your business can expand with zero risks and full compliance through our simple, scalable, and fairly priced service. Book a demo today!