When businesses have large contract portfolios, managing each contract lifecycle from initiation though award, compliance and renewal can become a burden without the proper tools. Often seen as the easiest tool to implement, many companies use contract management tracking spreadsheets (ex. Microsoft Excel, Google Sheets) to keep track of contract milestones, changes and deadlines, and to record key contract data like obligations and terms. However, there are major disadvantages to using spreadsheets for contract management, including issues around data reliability, risk management and reporting limitations, as well as security threats. These drawbacks not only limit the efficiency of contract management, but can pose serious consequences to the company’s overall health.
Here are 4 reasons your company needs to stop using spreadsheets for contract management:
1. Prone to manual errors
Contract management spreadsheets are often filled with interconnected cells, formulas and hidden rows, making them prone to human error. It only takes one employee to make a data entry error that could compromise the reliability of data and have a serious impact on the business. Case in point? The 2012 JPMorgan $6.2 billion trading loss, known as the “London Whale”, was in large part due to an employee who “copied and pasted the wrong figures into an Excel spreadsheet, throwing the firm’s risk models out of whack”.
When you have a large volume of contracts to manage, you don’t have time to continually check that spreadsheets are correct and up-to-date. You need to rely on the accuracy of contract data and milestones to make decisions or take actions. With a centralised contract management system, employees follow specific workflows with enforced rules when they’re adding contract data like deadlines or terms, ensuring that key information is always accurate and actionable.
2. No alerts for crucial information
Another major problem with spreadsheets is that even if the information is correct, they are often “out of sight out of mind” of the employees who need to take action. If you’re relying on spreadsheets to track contract milestones, how can you be sure that you’re effectively managing the risks to your company’s health? Without a structured way to manage contractual issues, your company is at risk of missing deadlines, incurring extra costs or missing out on increased revenue. Unlike spreadsheets, a contract management system can alert employees of key obligations such as notice periods or automatic increases, and help you avoid contract breaches and unnecessary costs associated with delayed or missed contract renewals.
3. Reporting is difficult
As General Counsel, one of your responsibilities is to keep track of the potential risks and opportunities in the company’s contract portfolio. However, when contract data is spread across various files, it can be extremely difficult to get a clear, up-to-date overview of key information. Furthermore, while spreadsheets may be good at capturing structured data (ex. dates, currencies, locations), unstructured data like terms and conditions, can get lost in the mix. Whatever the information you need – from expiring contracts, contracts awaiting signature, contract owners to specific contract values – it should always be close at hand. With a cloud-based contract management system you can easily pull up all this information and more thanks to powerful reporting capabilities that help you extract the key insights to guide your priorities.
4. Exposure to security risks
Cyber attacks and data breaches are a growing threat to business and are projected to cost upwards of $2.1 trillion globally by 2019, according to a study from Juniper Research. They estimate that the majority of new breaches will come from existing IT and network infrastructure – highlighting the need for companies to evaluate the inherent security risks associated with the digital methods used to conduct business, including contract management. Spreadsheets that are emailed or saved on hard drives can quickly find their way into the hands of people that may have malicious intent. If you rely on spreadsheets to store or share confidential company and customer information, you are exposing your company to data security risks that could have disastrous consequences.
With a cloud-based contract management system, you invite only those authorized users who you want to access or modify data. Additionally, using a secure service with encryption and passwords ensures that only registered users within your company are able to access sensitive contract information. The result is a secure workflow for contract management that complies with data privacy rules and protects your company from data leaks or other security threats.
Moving your contract management processes to a smart online repository – like the one offered by Legisway – can address the data reliability, compliance, risk, reporting and security problems posed by using spreadsheets. Legisway stores all your existing contracts and associated emails in one central location, gives you smart tools, including alerts, that enable you to recognise, search, analyse and report on all your critical contract data quickly. Furthermore, with Legisway you can set up online workflows using templates and e-signatures to standardise contract drafting and approvals.