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The Importance of Contract Management for Growing Businesses

Image by mohamed Hassan from Pixabay

Contract management is a cornerstone of successful businesses. Contracts lay the foundation that governs both supply and demand. It is sometimes challenging to see contract management as anything other than a necessary evil, but the truth is that contracts are a valuable asset. 

A good contract management solution, such as contract management software, optimizes the value of your contracts while freeing up time and resources. Companies that are still manually managing contracts should consider the negative impact of manual contract management.

  • Employee hours to enter contract information in all necessary places. 
  • The time wasted looking for misfiled or lost contracts.
  • A thorough review of each contract reduces the potential for lost value. 
  • The potential legal ramifications for failing to meet contractual obligations can skyrocket the costs of manual management. 
  • Manual management can result in limited growth potential due to the inability to effectively manage contracts. 

Contract management software allows you to more effectively manage your contracts within a fraction of the time now allocated to the process. The following are essential benefits to implementing contract management software suited to your business.

Return on investment

If implemented and used correctly, contract management software will provide a significant return on your investment. 

  • Cost savings for employee time spent on manual contract management.
  • Cost of legal expenses to review and create contracts. 
  • Loss prevention—it is estimated that over 9% of revenue is lost every year due to ineffective contract management. If the implementation of contract management software mitigates only a portion of that loss, it still represents significant savings. 
  • Avoidance of penalties for missed contractual obligations

Risk mitigation

Contract management software helps mitigate risk by setting alerts for contractual deadlines, expiring contracts, and other contract deadlines. 

  • Protect the data in contracts with encryption. 
  • Increase contract compliance by clause and template libraries that use the most successful language to ensure a successful execution of the complete contract. Some contract management software also identifies the non-standard language in all agreements and creates an alert when such language exists. 
  • Workflow management creates an audit trail of who has worked on the document and when. The workflow history can also create evidence of compliance in the event of an audit.

Better reporting

Contract management software can create a wide array of reports to help a business better understand their contracts. These reports can be automatically generated or customized to meet the needs of a specific company. A few keystrokes can create a list of all contracts set to expire within the next month or create a report that lists every active contract with a particular clause. 

Data mining

Data is valuable, and contracts are an extensive repository of data. Data and metadata extracted from contracts using contract management software will provide valuable insight into your business.  Data mining allows you to turn raw data into useful information that will help you grow your business.

Protecting the reputation of your business

In business, reputation is everything. If you miss contractual obligations, you risk doing significant damage to your reputation. Growing companies rely on repeat business to help them reach their goals. Failing to honor a contract because of poor contract management can do irreparable harm to your business. 

Your business may also rely on suppliers and vendors, and contract management software lets you know if they are honoring their contracts with you. An unreliable supplier could result in your company being unable to meet the terms of a contract because the supplier failed to meet the terms of their contract. 

A contract is a legally binding document, and therefore a serious commitment. Whether you are at risk of failing to meet contractual obligations or another party is not fulfilling their commitment to you, you need this information at your fingertips. 

Contract management software helps you protect the reputation of your business, and also ensures that you know which contracts fail to reach a successful conclusion.  This information is valuable in helping you create more effective future contracts.