By Timothy Donaghy
Despite the increased digitization of many business functions, the contract management function has lagged behind at many organizations. Horror stories still exist of sensitive contract data being scattered around organizations in:
For procurement professionals, these practices pose challenges in simply finding the most recent version of a contact, let alone meeting contractual deadlines or holding suppliers accountable for agreed-upon milestones. But procurement professionals in forward-thinking organizations are leveraging contract management technology to manage their contract lifecycle to ensure compliance, mitigate risk, reduce costs, and increase revenue.
Help Avoid Missed Deadlines
Secure, centralized electronic contract repositories are at the core of today’s automated contract management software. They store and organize all the important data, as well as supporting documents and files, associated with your vendor agreements. The technology ensures that the purchasing and procurement staff are automatically alerted in advance of important contractual obligations and provides precise information on the key deliverables and obligations associated with your contracts.
You can receive an automated alert on something as simple as a contract with a supplier that is going to auto-renew – which you may actually want to cancel – or on something as complex as notifying you of specific terms, such as pricing discounts, that go into effect when certain volumes or project milestones are achieved.
In one case, there is the risk of being tied to another year of products or services that you hadn’t intended to buy, and in the other, the risk of missing out on savings associated with terms your team might not have otherwise remembered.
Identify the Impact of Regulatory or Policy Changes
A major benefit of having your contract data and associated documents in an electronic repository is its searchability. Imagine that a new regulation – such as GDPR – is slated to go into effect. Simply run a search for occurrences of “data,” “privacy,” or “personally identifiable information” to uncover all your contracts and supporting materials that may be affected by the change.
Similarly, suppose you’re considering a change to a corporate policy. A few keystrokes and a click of a mouse surface all instances of “limitations of liability,” “indemnification,” or “certificate of insurance.” In either case, you can identify and quantify the affected contracts, which will inform your risk mitigation strategy, as well as define those parties that need to be approached regarding the change.
Protection Against Audits
Contract management software tracks and saves every change made during the contract drafting, negotiation, redlining and approval process – what the change was, when it was made, and who made it – providing historical records of those events. For those working in heavily-regulated industries, a couple clicks of a mouse produces a complete audit trail so that if you are ever faced with a compliance audit, you’ll be prepared with the required documentation.
It makes the experience of going through an audit a little less stressful. Retrospectively, these systems of contractual record deliver meaningful knowledge and visibility on these historical events. Proactively, you can periodically perform random checks of these audit logs to identify the costs and risks associated with any errors they might uncover. This provides your organization with the opportunity to adopt strategies and tactics to prevent the same issues in the future.
Procurement is an art. Today’s contract management platforms can empower procurement professionals with some added “science” to ensure they practice that art efficiently, in a compliant manner, and with minimal risk.
Timothy Donaghy is Vice President of Technology at contract management software provider Contract Logix. He has over a decade of experience developing products for procurement, finance, legal and sales professionals across dozens of industries to more effectively manage risk within their contracting processes. A recognized contract management expert, Tim has authored articles for numerous trade publications, and has spoken at various industry conferences, including Procurement Leaders, and the International Association of Commercial and Contract Management (IACCM).
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