Contracts play an integral role in modern business relationships — in fact, they are essential to overall business success. After all, without the proper management of agreements, companies open themselves up to immeasurable risks, penalties, and even compliance issues. As such, today’s contract lifecycle management (CLM) has usually meant lengthy drafting, negotiation, analysis, and performance, not to mention painstaking risk mitigation.
But this is precisely where contract management vendors help organizations. Due to the many benefits they provide legal teams and other departments during the contract management process, they help set the stage for ongoing business relationships. They help create rulebooks for companies and their suppliers to adhere to while making it easy to terminate contracts with non-performing suppliers. (Just to name a couple of benefits!)
How Contract Management Vendors Help the Business
According to McKinsey, it’s not uncommon for companies to have up to 90 percent of their revenue tied to vendor
contracts. The good news is that contract management vendors provide solutions that help companies streamline the contract creation process and manage supplier relations more efficiently. This results in better-performing vendor contracts that, in turn, lead to more profitable vendor relationships. (among many others!)
Companies that don’t have a good contract management system (CMS) in place may find themselves at a distinct disadvantage. They may face an increased risk of lost revenue and profits which is time-consuming and causes companies to spend more time remedying contract mistakes. That’s instead of meeting vendor performance expectations and other business goals fairly easily.
Ways to Assess Contract Management Vendors
Contract Repository
For starters, companies can evaluate contract management solutions and vendors on their ability to create a single repository for all legal documents. This is a centralized location that is accessible to all parties involved in the contracting process. In some organizations, it’s still common for employees to store Word documents on individual devices, shared folders, cloud, or contract management platforms. (Let’s not forget about those paper documents in filing cabinets either!).
By keeping all of these important files in a contract repository, though, it’s far easier to see underperforming suppliers and terminate contracts with them. It’s much easier to get a holistic view of agreements, track terms, oversee suppliers, and even invoke contract provisions. Given that many professionals can work on contracts these days, using contract repository software also goes a long way in keeping parties closely involved with the process. Instead of manually notifying each contributor after one party has completed their contract review, a contract manager can invite contributors to collaborate on agreements in real-time. This means better team engagement throughout the contract lifecycle.
Spending Visibility
Contract management vendors help increase spending visibility and reduce maverick expenditure, too. Maverick spending can be defined as buying supplies without involving the procurement department or following the company’s procurement policy. It happens when there’s already a contract in place to purchase particular goods or services from a supplier — but because it’s not immediately visible, employees go ahead and purchase from a vendor with which the company doesn’t have an existing agreement.
The reason why maverick spending is so harmful to a business is that it causes double-spending and wastes too much money. With the support of contract management vendors, though, companies are able to manage all of their contracts and related documents in a centralized location. They can better keep track of agreements — and can keep updated on suppliers — and only purchase from existing vendors.
Benefit from Legal Digital Transformation
As we can see, then, contract management vendors are most beneficial to today’s companies. Their legal technology solutions not only help organizations streamline the contract creation process, but also set up a centralized place from which to manage contracts and related documents, increase team engagement, and improve spending visibility altogether. (Yes, that means no more double-spending!)
To learn more about modern contract management systems that will best suit your needs, read ContractPodAi’s Primer and use our handy contract management checklist. And to see how you can begin your digital transformation journey, contact us today to request a demo.
Author:
Jerry Levine
Connect with us on Linkedin
Further Reading:
