Misaligned and poorly constructed contracts create both increased cost and increase risk for many organizations. According to the International Association for Contract and Commercial Management:
- 77% of companies “frequently” suffer from misaligned contract scope and goals.
- 55% experience confusion in contractual responsibilities.
- 48% experience have challenges tied to price changes and delivery terms.
All of this is a direct byproduct of a manual and adhoc approach to contract management. Getting rid of the paper through digital contracts represents a key discipline to maximizing financial and operational performance, effective subcontractor management and minimizing contract risk (e.g., letting contracts that are not valuable auto-renew, continuing to pay on cancelled contracts, letting valuable contracts lapse).
There are three main elements in an effective enterprise contract management strategy:
1. Getting from idea to agreement
- How can you streamline the mechanics of the contracting process?
- How can you use contract templates to accelerate the editing process?
- Is there a clear and consistent contract structure and are the main components clear (term, notice, scope, billing)?
- Is there an automated process in place to notify you about deadlines and due dates?
- Do you use electronic signatures wherever possible?
- Are your employees able process contracts anywhere, anytime, and on any device?
2. Creating a clear an auditable record
- Who agreed to what, when did they do so, and how can you prove it?
- Are your contracts archived in a way that is immutable, long-term, and auditable?
- Are ALL of the contract elements (text of the contract itself, contract drafts, pictures, protocols and conditions) all stored in electronic form and secure?
- Do you maintain versions and audit what changes are made and by whom?
- Have you protected and secured confidential contractual information and terms?
3. Identifying trends and developing insight
- If all of your contracts were developed in a consistent process and kept in one place, what strategic insights could that bring to your business?
- Have you identified the business risks – and opportunities -- inherent in your outstanding contracts?
- Are you using this intelligence to drive business decisions?
The risk/reward payoff of automating and securing the contracts administration process is huge. Digital contracts provide more control, reduce risk, and allow organizations to extract valuable business and customer intelligence that is often hidden away in an ad hoc and manual contracts process.
Editor's note: This post has been updated for accuracy and new content has been added.
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