Software Reduces Contract Lifecycle Management Costs

Contracts perform a critical role in determining the value of a business relationship. For organizations managing large volumes of contracts, contract management software can help improve relationships with vendors and customers, decrease inflated costs, and ensure compliance.

Contract Lifecycle Management (CLM)

CLM is a systematic process for the creation, execution, compliance, and analysis of corporate contracts for the purpose of reducing costs, maximizing operational efficiency, and minimizing risk. More specifically, CLM includes:

Creation. Negotiate, edit, and finalize contract terms. Ensure proper terms, clauses, and controls.

Activation. Establish central contract repository and clause library. Integration with contract data with core business systems.

Compliance. Proactively track compliance with pricing, service, and regulatory requirements at the point of intersection.

Analysis. Assess contract performance and risk during active life and at end of term. Info-Tech believes that an enterprise can optimize CLM with customers and suppliers by implementing a contract management application. These Web-based solutions help organizations to:

- Actively monitor time-sensitive events.
- Gain enterprise-wide contract visibility.
- Improve efficiency of contract creation.
- Manage supplier compliance.
- Negotiate contracts faster.

Given these benefits, a mid-sized organization managing in excess of 100 contracts can expect the following returns by deploying a contract management software solution:

Improvement AreaPerformance Impact
Administrative costsReduce expenses by 10% to 15%.
Contract lifecyclesCut contract cycle time by 25%.
NegotiationsImprove rebates and discounts by 10% to 15%.
Procedures and termsProcess standardization will mitigate risk and ensure compliance.

Contract Management Reality Check

Unfortunately, most mid-sized enterprises do not have the processes or systems in place to optimally manage their customer and/or supplier contracts. The majority continues to manage contracts with a patchwork of informal processes, cobbled together business systems, and sporadic audits and analyses. The table below lists the costs of running an inefficient contract management process:

IssuePurchase Contract CycleSales Contract Cycle
Disjointed proceduresIncreased maverick spending.
Under-leveraged spending.
Missed sales opportunities.
Cost-intensive processesLong contracting cycles.Long sales cycles.
Extended order-to-cash cycles.
Poor contract visibilityLack of compliance. Inconsistent terms and conditions.SLA and payment penalties. Customer dissatisfaction.
Poor performance analysisNo view into category performance
Policy and regulatory violations.
Ineffective pricing.
Financial reporting violations.

Bottom Line

Contract management software will decrease administrative costs, increase negotiating leverage with suppliers and customers, and ensure compliance. Optimize contract lifecycle management by deploying contract management software.

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