If You Can't Find It, You Can't Save on It...

Good Contract Management is foundational to procurement success.

Thursday, September 7, 2017
BY: Betina Nygaard, CEO, Scanmarket A/S

Are you struggling with:

  • No visibility into contract status or expiration dates?
  • No single repository for all an organization's commitments
  • Hard to even find contracts?
  • Slow approvals and no structured approval process?
  • Poor compliance with contracts in place?
  • Incomplete information / missing data fields on contracts?
  • No notification of upcoming contract expirations and limits?

 

Then you're not alone, but there IS a way to fix it…

 …and generate significant savings and efficiency in the process.

 

According to a study by the National Contract Management Association, more than 75% of large companies have problems just finding their contracts and 85% are using manual or only partially-automated processes to manage their existing contracts. 

With the average organization devoting about 70% of its spending to outside, non-labor suppliers, this can cost your company serious money in addition to substantially increasing supply and compliance risk. On average, nearly 80% of a company's external spending is covered by a contract which means you probably have tens of thousands of active contracts inside your company at any one time.

Fixing your contract management woes with an online contract management system can deliver substantial benefits to your organization.

  • Easy transfer of contracts from one buyer to another when e.g. a buyer leaves his position
  • Complete log book of all actions/adjustments/amendments etc. for your audit documentation
  • Say goodbye to misplaced and mismanaged paper contracts
  • Improve overview and control of all company contracts
  • Streamline internal business processes and workflows
  • Strengthen relationships with customers, suppliers and partners
  • Ensure relevant employees access to contract history - anytime, anywhere

 

And these benefits can add up. According to another study, the tangible benefits include:

  • 2-7% Direct savings on purchase costs
  • 55% Improved compliance management
  • 25% Increased discount/rebate capture
  • 50% Reduction in contracting cycle times
  • 25-50% Reduction in contract administration costs

 

So if the pain of poor contract management is so severe and the benefits are so large, why haven't all organizations moved to an online contract management system?  Three reasons: complexity, cost and collaboration.

  • Complexity: many of the existing contract management systems have been burdened with such difficult interfaces and unusable/unneeded functionality (e.g. complex contract authoring and redlining capabilities) that only a "super" user can navigate it.  This is especially difficult for contract management because, by its very nature, it involves multiple internal and external stakeholders that use the system infrequently
  • Cost: frankly put, the reason that many providers have loaded down their systems with overly-complicated and seldom-used functionality is to raise the price point of the solution closer to other products they sell;  while this might help the software provider's bottom-line, it makes the investment in a contract management solution a difficult decision for most organizations
  • Collaboration: with so many stakeholders using the system only occasionally, something as simple as credential (i.e. username and password) management can become a challenge to the overall successof the program. Additionally, the combination of contract authoring functionality and high cost frequently mean that legal departments need to be deeply involved in the program,straining resources and presenting organizational challenges

 

When determining how best to deal with your contract management dilemma, make sure that you get as much solution as you need to capture the many benefits for your organization, but not make it so difficult and complicated that no one will actually use it. Instead, choose a contract management solution that is specifically designed to be easy-to-use, easy to get expert support, and easy to do business with.