Why Contract Management is a Good Return on Investment
Small to large businesses have one thing in common; revenue generation. Organizations exist to make profits; therefore, increasing revenue and productivity while decreasing legal risk and cost underpins the essence of businesses.
Contract management involves the creation, execution, and negotiation of contracts efficiently and effectively. A business needs to interrogate its management processes to identify blips in the system that hinder progress. Contract management continues to be a headache for businesses that want to streamline processes.
Most business leaders and owners are ignorant of the positive implications of contract management. A good management process increases return on investment up to 40%, according to research. A contract need not impede the growth of a business because of its user’s poor management systems. Contracts stay at the helm of business processes, and wrongful execution or noncompliance could cause dire financial consequences. Poor contract management attracts bottleneck issues that compound, thereby eroding business profits.
Contractsafe provides the safety of documents, prompt alerts that eliminate compliance challenges, and ample storage capabilities. Proper contract management, therefore, increases efficiency return of investment. Contract management is a worthy investment whose upside contributes to profitability.
Contract managers, administrators, and legal professionals have a tough time elaborating to executives the impeccable return on investment of contract management systems.
Businesses incur costs on error reduction, contract process maintenance, compliance that skyrocket depending on the efficiency of a contract lifecycle. Executives consider these inflated contact costs as inexorable business expenses whose automation has no tangible effect on the growth of a business. Well, nothing could be further from the truth.
Technology serves to explicitly show the ROI of investing in a worthy contract management system.
The International Association for Contract and Commercial Management (IACCM) found that a business lose 9.2% of revenue due to inefficient contract processes. Suppose you have an annual bottom line of $4,000,000 and adopting automation increases revenue by 20%, which means that you increase profits by $800,000. Well, $800,000 is nowhere close to the price of acquiring contract software. The return on investment for a proper contract software beats the cost of acquisition.
Consider the 9.2% loss on the bottom line because of poor management (9.2% of $4,000,000 equals $368,000). The loss on lack of investment is significant and incomparable to the cost of acquisition. Numbers don’t lie, and these findings elucidate the importance of contract management. A business that stands to gain $800,000 by simply implementing software is all the evidence that executives need to implement contract software.
Different organizations have varying Contract Lifecycle Management (CLM) solutions depending on size, budget, and expectations. Businesses induce unique contract processes whose lifecycle varies from inception to renewal, and legal professionals need to develop varying metrics to measure contract success. The characteristics of a good contract management process include improvement of visibility, increase in productivity, and improvement in compliance which reduces risk.
Contract managers and corporate legal teams use Key Performance Indicators (KPIs) to measure the performance of contract software against organizational objectives such as contract efficacy, efficiency, and risk. The performance of contract software revolves around contract value, monitoring, and renewal.
Situations that attract contract risk include delayed approvals, incorrect signature approval, improper vendor approval, and clause variance. Proper contract management fixes risk issues by improving standard clause variance, contract cycle time, synchronizing the number of contracts per type, and eliminating the number of contracts that expire without renewal.
CLM solutions depend on your business’s expected ROI. Unlike traditional contract management processes, CLM ensures that no revenue is lost and legal professionals swear by improved increased bottom-line revenue. Contract management software compliments the efforts of legal professionals and administrators, and the evidence of tangible results will be visible in the balance sheet at the end of the financial year.
Finding a Contract Management Partner
Not every CLM provider will fit your business objectives. Look for a vendor that understands your ROI expectations and payment plans such that the software solution meets or exceeds your cost framework. Installation of software can take anywhere between one to two years, so you need to communicate with your vendor how soon you can have the system installed.
Since you are excited about incorporating technology, you might confuse delay in deployment for incompetency. Installing systems, maintenance, and support takes a bit of time so, you need to be patient. However, a vendor that offers quick deployment means that you enjoy the benefits of automation immediately. Businesses whose executives want to limit access to contracts can choose a contract partner with customizable contract access.
Contract management generates positive ROI, and businesses that adopt software can calculate its value using contract KPIs. CLM allows businesses and legal teams to streamline processes, strengthen relationships with stakeholders, boost performance, and reduce overall risk.
CLM uses cloud-based programs that automate 89% of contracts processes. Companies that implement contract management stand to enjoy a huge pay-off on return on investment.