Contracts form the basis of every business, from the terms and conditions of your bank account to the service agreement with your biggest supplier. Managing your contracts effectively will help you save money, improve operational performance and mitigate risks to your business.
For public sector organisations, the Procurement Bill introduced earlier this year sets out in law the fundamental principles of public procurement. Once the legislation is passed, organisations will be under a legal obligation to procure effectively and managing contracts properly will play a critical part of staying legally compliant.
Procurement and contract management – a technology based solution
For many organisations, contract management has been a manual process, often spreadsheet driven and unable to provide the transparency required for informed decision making. Even the smallest business can have hundreds of contracts in play and investing in contract management software brings multiple benefits.
Improved contract visibility: storing your contracts in a central repository makes it easier to view your contracts, monitor performance and create reports to help you manage your suppliers. Centrally storing contract templates will also ensure you are working from the most current versions.
Financial optimisation: contract management software not only helps you to track the costs associated with your contracts, it can also help you to negotiate better deals with your suppliers. For example, your business departments may be using different suppliers for the same products or services. If instead you choose a single supplier you may be able to negotiate a better price for a larger purchase. Having a digital contract management system also reduces the opportunity for maverick spending.
More effective risk management: minimising risk is critical in procurement and contract management software enables you to improve compliance to contract terms. With clear visibility of contract performance, you can quickly take action when issues arise, reducing the chance of non-performance or incurring increased costs. You will also have a clear audit trail of communication and activities for compliance purposes.
Increased operational effectiveness: a contract management system will track milestones and allow you to schedule automatic alerts or notifications, improving workflow efficiencies. Routine admin tasks can be done automatically and searching for information within contracts is achieved quickly and easily. Templates speed up contract creation and automating the contract approval process reduces approval times considerably.
Enhanced renewal cycle: not managing the renewal of a contract properly can lead to increased costs or paying for a service you no longer require. Your contract management software will automatically alert you when a contract is due for renewal. You can then renegotiate terms or put a contract out to tender again should you be unhappy with a supplier’s performance.
Compliance and audit ready: using contract management software helps you to remain compliant and simplifies audits. You can easily produce audit trails showing the history of each contract when required. Automatic version control allows you to see which users have made amendments to each contract. You can limit who has read/write access, so commercially sensitive contracts are controlled on a need to know basis.
The implications of contract mismanagement are far reaching. Reputational damage may affect your future business opportunities and financial penalties for breach of contract can be substantial. By effectively managing your contract creation and performance, you can maximise financial and operational performance while reducing risks. If you’d like to find out more about how contract management can benefit your business, we’d be happy to help.