Unlocking the Critical Business Value Within Contracts
“Make fair agreements, and stick to them.” – Confucius
This directive is fairly straightforward, but as many sourcing and procurement professionals know, following this excellent business advice can be anything but simple. The contract management process is akin to herding cats in most organizations, given the wide array of stakeholders involved, each with their own specific requirements and timelines. This leads to significant delays during the negotiation and authoring phases, and indeed throughout the entire contract lifecycle. Mastering this linchpin of B2B commerce is crucial to streamlining the full process of requisition to purchase to settlement, resulting in massive cost and efficiency savings.
Because the success of a project will depend on not only how expertly a contract is negotiated up front, but on how it is managed post award, it’s key for organizations to think about the procurement process in a holistic way. All too often, signed contracts are filed away or misplaced, scheduled performance reviews forgotten, and all the potential value won through the initial negotiation gradually lost. A contract standardization and centralization strategy, built within the controlled framework provided by contract management software, helps ensure a secure document lifecycle. Solutions like SMART by GEP make it possible to configure automated notifications to alert relevant stakeholders when an action is needed.
PayStream Advisors’ 2015 Contract Management Report found that this holistic way of thinking about the contract management process is severely lacking in most organizations. 44 percent of organizations currently manage their contracts with disparate internal teams, such as sourcing, project management, and/or legal teams, and nearly one-quarter manage their contracts across many departments, see Figure 1. Less than one-third of organizations use a contract management software solution.
In many organizations, effectively managing the enormous volume of new, existing, and expiring contracts in a way that maximizes their value is a near-impossibility. It’s no surprise that organizations struggle to implement a standardized contract lifecycle management system in the midst of all these high-risk, high-stakes documents flowing in and out of various departments. Today’s procurement technology comes equipped with functionality that automatically triggers contract creation at the end of a sourcing event, configured to pre-defined templates. There are report types for common contract measurements and advanced ad-hoc reporting for more complex circumstances built in, with the option to create customized dashboards to make reporting and analysis more efficient.
Contract management software effectively supports and tends to the contract like an invaluable organism within the source-to-pay procedure, guiding it securely from the beginning to the end of its lifecycle. To learn more about how innovative organizations are managing and optimizing their critical contracts, keep a lookout for forthcoming 2016 Contract Lifecycle Management Report, available for free download next week.
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