Inefficient contract management can take its toll on overburdened legal departments. But it’s not only a matter of wasted time. Poor contract management can also cost your business dearly.
According to the International Association for Contract and Commercial Management (IACCM), inefficient contract management can cost businesses as much as 9% of annual revenue. In fact, inefficient processes can result in financial losses due to delays in contract negotiations, disagreements over contract scope, inappropriate contract structures, performance failures, and/or missed renewal deadlines, all of which could be avoided with more effective contract management.
Legal plays in an important role in ensuring contracts enhance business results, protect the company from losses and deliver on expectations. To deliver on this promise, processes must guarantee Legal visibility over the entire contract management lifecycle, so that they can improve the quality of contracts and mitigate risk.
Fixing inefficient contract management
Effective contract management is an integral function for any legal department. However many businesses still employ tradition contract management methods, like printing, signing, scanning and filing, that limit Legal’s ability to fulfill their mandate.
For example, if your contracts are not stored digitally in a central location, it will be impossible to have an accurate overview of contract data. If you don’t know where your contracts are, how can you know ever be 100% sure of how many contracts you have or when they expire? For many legal departments, contracts are scattered everywhere, without accountability. According to Faulker Information Services, over 10% of contracts are mismanaged, costing the company money and wasted time.
Traditional methods also lead to a loss of control. When contracting processes lack definition other departments may consume responsibilities, cutting Legal out to avoid bottlenecks. For example, if procurement authors contracts using old templates, it is likely that they will cut or delete a key term by accident. This is a risk that could be avoided with document assembly tools that provide the business with “ready to sign” contracts that have Legal’s approval.
Finally, cloud-based collaboration tools and electronic signature can speed up processes that tend to derail contract negotiations and approvals. Sending contract drafts via courier is a waste of time and money. And now that e-signatures are legally binding there is really no reason to resist transitioning to paperless processes.
To conclude, digitising your contract management can drive efficiency at every stage of the contract lifecycle. If you are reading this, you are likely in a perfect position to drive this transformation. Maybe you just need to know where to start?
In our latest whitepaper, we illustrate five scenarios that are common to businesses with ad-hoc contract management and describe how technology can help Legal take control and mitigate risks. By digitising certain processes and adopting more collaborative tools across the business, you will see how Legal can gain visibility over contracting, improve effectiveness and efficiency.