Contract management is an important aspect of managing supplier relationships and ensuring that commodities and services are negotiated at the right time. Unfortunately contracts are often managed poorly within a company. Even a smaller company can have hundreds of active agreements, adding up to thousands of contract terms and clauses. As you may know, not one of those contract terms carries much weight if the agreement isn’t monitored and enforced. Procurement Managers know that getting a fair price on goods and services is only part of strategic sourcing. And contract management tools help companies get the most out of the agreement terms that buyers spend so much effort negotiating!
Here are four reasons why every company should make the move to a Contract Management system:
Easy Access to Contract Agreements. What happens to contracts after they’re signed? Within companies that have not adopted a contract management tool, we often hear of hard-copies being stored in varied places: Filed away by the legal department, kept in a desk drawer by the procurement manager, sent off to the relevant stakeholder. Contract management tools allow companies to store and organize contract records in an easily-accessible, centralized repository. Agreements can be downloaded and reviewed with the click of a mouse, taking the guesswork out of locating your contract documents and giving you visibility into which contracts are currently in place.
Organized Database = Smarter Spend. Unlike the email inbox you use every day, contract management tools provide sorting and searching functionality to quickly locate the document you need. Having an easy-to-use catalog of your company’s agreements is one of the first steps to reducing off-contract spending. With a quick search, your facilities manager will have pest control, snow removal and other agreements on hand. In addition, an organized database may help bring to light areas for smarter spend down the road. For example, would having multiple agreements within a single company offer better terms considering the amount of business you give them? Or could you consolidate to a single supplier if you had multiple vendors in a single category?
Locate Key Data Quickly. How many times have you found yourself scanning through contract clauses, looking for just a few key words? Besides storing soft-copies of signed agreements, contract management systems enable administrators to pull out the key contract terms and fields for quick viewing. This means no more flipping through pages of agreements to find your termination options, payment terms, fixed pricing duration, etc.
Keep Track of Important Dates. It’s vital for businesses to stay on top of important contract dates. Automated reminders make doing so significantly easier. Contract management tools let users schedule notifications as needed, so you never miss key dates of a contract’s lifespan. Here are just a few examples of valuable reminders:
- Expiration dates of critical supplier certifications
- Auto-renewal dates
- Performance reviews
- Contract end-dates
The negotiation of a contract is only part of the strategic sourcing process. Companies also need to ensure that they are adequately managing the agreement throughout its lifespan. Using the proper tools to track and monitor contracts will impact your company in a positive way, and make a big difference in managing supplier relationships and spend.
If you enjoyed this blog post, you might also enjoy our whitepaper, “A Procurement Leader’s Guide to Contract Management. Download the guide here.
In the meantime, what benefits are you reaping from a contract management solution? Tweet us @iasta or comment below!