Contract management: The ‘missing piece’ of the best-practices puzzle?
Let’s start with a basic premise: Companies that are trendsetters and market leaders often focus on process and devote a lot of time and energy to “best practices.”
This is nothing new, of course, and you can tie much of modern business theory into this simple idea – everything from Six Sigma to Jack Welch’s idea of a “vitality curve.”
The problem, of course, is in the execution of whatever is defined as a “best practice.” Executing a “best practice” process of course takes time, people, and resources. The complexity of implementing new processes is difficult for organizations to grapple with, too. (How do you improve efficiency, for example, when you pull managers off their jobs to work on … efficiency?)
But the most difficult part of implementing any process for improvement is this: knowing what processes to implement as a best practice. Sometimes, without that “missing piece” of the process puzzle, some companies find themselves lagging the competition, not leading it.
Weak contracts are a good indication of a missing process (contract management) that can significantly and negatively impact your company. According to a recent survey by the International Association of Contract and Commercial Management, 63 percent of respondents (presumably IACCM members) said weakness in contract terms was the frequent source of cost overruns.
The reasons for weak contract terms can be many: poorly written contracts relying on “template” terms from other contracts; poor communication of company goals that align with purchasing or sales decisions; poor oversight of key clauses by key parties – or no oversight at all.
We know we are biased in this blog on this point — but it doesn’t mean we don’t have a valid point when we say that by buying and implementing a contract management solution such as Contract Assistant, you are adding a key “missing piece” to your best practices.
Buying a contract management solution such as Contract Assistant helps to reinforce “best practices” when it comes to the contract process. These improved processes, in turn, can impact the bottom line in many ways. These processes are as follows:
- — Timely and accurate electronic documentation of all existing contracts
- — Clear understanding of key contract clauses (terms) by recording and making these easily retrievable/accessible to key personnel.
- — Complete note and document linking or storage so that all contract terms, statements of work, invoice instructions, etc., are available for review.
- — Ensuring that contracts and vendor relationships go through some type of periodic review ahead of key dates (end dates, deliverable dates, auto-renewals, etc.)
- — Recording of key financial summary data for retrieval and report generation.
As Blueridge Software, makers of Contract Assistant, can attest to, first-time users of our contract management software are often surprised by just how much has gone unmanaged before a solution implementation.
Weak terms in a contract that lead to cost overruns are symptomatic of an organization that simply has no contract management process. By dedicating resources to a contract management solution (which can be modest), many businesses can add another layer of “best practice” to their organization.
That, in the end, may result in fewer cost overruns, and healthier budgets all around.
[Photo Credit: plasticrevolver via Compfight cc]
[About the author: Todd Hyten is a former business journalist who now writes about B2B topics and consults on content marketing. You can find him on Twitter and Google+.]