Contract management plays a pivotal role in the success of businesses, ensuring compliance, mitigating risks, and optimising operations. In this ultimate guide, we explore the main reasons why your corporate legal department should foster efficiency in contract management to drive business growth.
Contract management is essential for both corporate legal departments and the entire business, involving the creation, negotiation, oversight, and maintenance of agreements with various stakeholders, including customers, vendors, and partners.
By implementing efficient contract management practices, in-house counsel can contribute to driving business growth by mitigating legal, compliance, and financial risks, and strengthening commercial partnerships.
What is the contract management role for the business and why is it so important?
Efficient contract management hosts a variety of benefits. We have outlined five top benefits of implementing a streamlined contract management system within your organization.
- Enhanced business efficiency
Efficient contract management streamlines processes, reducing administrative overhead and saving time and resources for your business. It ensures that contracts are executed on time, preventing delays, missed opportunities and potential risks.
According to a report by the International Association for Contract and Commercial Management (IACCM), businesses lose an average of 9% of their annual revenue due to poor contract management. This economic loss can result from missed opportunities for cost savings, penalty fees, and poor negotiation outcomes.
By streamlining the contract management lifecycle within your legal department, you can contribute to:- Reducing costs: effective management helps mitigate avoidable expenses linked to missed deadlines or contractual disputes.
- Ensuring efficient usage of resources: efficient resource allocation minimizes waste and maximizes value.
- Enhancing productivity: by prioritising value-driven tasks, teams can shift focus from contract-related administrative work to more strategic responsibilities.
- Automated processes for better collaboration within the business
LegalTech solutions are crucial for enhancing contract management efficiency for in-house lawyers. Utilizing innovative contract management software, legal professionals can streamline the entire contract lifecycle management process, conserving time and resources.
The incorporation of Artificial Intelligence (AI) in LegalTech solutions has further transformed contract management, offering unparalleled benefits such as enhanced efficiency and accuracy. In its report “Innovation Insights for Contract Analytics”, Gartner forecasts that by 2024 manual contract processing and review will be reduced by 50% because of the swift incorporation of AI and contract management software solution.
AI-powered platforms enable swift analysis of vast contract data, allowing identification of crucial information and potential risks. This equips legal professionals to make well-informed decisions and tackle potential issues before they worsen.
For instance, AI-powered contract review processes can complete a contract review in a matter of minutes, compared to the hours it would take for a manual review.
Read more about the benefits of AI-based contract review!
Modern businesses can leverage contract management software to streamline and automate many aspects of the process.
- Ensuring compliance and risk mitigation
Compliance with legal and regulatory requirements is essential for businesses. Contract management ensures that contracts adhere to applicable laws and standards, reducing the risk of legal disputes and fines.
Contract management supports compliance and risk mitigation by:- Providing visibility: it offers a centralised repository for easy access to contracts and related documents.
- Alerts and notifications: systems can send alerts for key dates and milestones, reducing the risk of missed obligations.
- Audit trails: keeping detailed records can be crucial in case of legal disputes.
- Fostering stakeholder collaboration
Efficient contract management promotes collaboration among stakeholders, cultivating stronger relationships in the process. Clear communication and transparency are crucial in guaranteeing that all parties involved are fully aware of their duties, due dates, and expectations.
Fostering a collaborative environment increases the likelihood of forming successful partnerships, contributing to sustainable and long-term business growth. - Measuring performance and continuous improvement
To optimise contract management, you should regularly assess your processes and performance. Key performance indicators (KPIs) can help evaluate the effectiveness of your contract management system.
Evaluating performance and promoting ongoing enhancement encompass:- Monitoring Key Performance Indicators: Keeping an eye on essential metrics such as contract cycle duration, adherence to regulations, and cost reduction.
- Incorporating Stakeholder Feedback: Utilising input from relevant parties to adjust and refine contract management procedures for in-house lawyers.
In summary, contract management is a vital component that propels efficiency, adherence to regulations, and cooperation within organizations, particularly for legal departments. By using advanced technology and adopting best practices in your daily work, you can support business growth, minimizing risks, and nurturing robust relationships with collaborators, customers, and vendors.
To optimise your contract management process and harness its benefits, consider integrating AI-based contract management solutions like Legisway – a versatile, all-in-one software solution that scales seamlessly with your organization's needs.
