Stopping overpayment with contract management software

stop-overpaying-contractsOne of the biggest advantages of contract management software is the ability to uncover overpayments. Even on a small scale, a small monthly overpayment can add up to a significant amount. For mid-size or large enterprises, duplicated services and overpayments can be downright disastrous.

Overpayment is remarkably easy to do. In a post on the Apex Expert Blog, Jim Arnold wrote about tracking down the scourge of overpayments in the context of ERP systems. He cited a couple of excellent examples in his blog of overpayments.

In one example, an automotive company ended up paying $421,000 more on a vendor contract because someone misplaced a decimal on the invoice. In another example, a large manufacturer contracted to pay 75 cents per cubic foot for gases, but on the invoice that was
changed to $75 per cubic foot. It got paid because the calculation made sense.

That’s how easy it is to overpay. When you have invoice payments being made but not recorded against an easy-to-view record of a contract, these kinds of mistakes are possible – even likely.

Consider the upside to catching these kinds of oversights. You could save your enterprise or branch a lot of money – helping to boost net profits and reducing expenses. We know of one example of a small city that implemented contract management software and in the first six months discovered $70,000 in overpayments on expired contracts — and an additional $200,000 in the next fiscal year.

Any version of Contract Assistant, for example, allows you to input key information on contract records, including payments made and details on contract rates and payment conditions. Even if you don’t catch something minor, you can set alerts to remind you when to check invoices to ensure that billings match agreed prices. Those are just two very quick examples of how contract management can help.

Don’t forget the reporting function too. If you are recording and sharing payment information within internal department groups, you have more “eyes” on the subject matter, and therefore more help in catching something irregular.

In any case, the real risk is letting contracts get signed, filed and forgotten by one department, then letting another handle the invoices with little to no information on the contract conditions. It’s just too easy for mistakes to be made at some point in the process. Giving your company the ability to record payments, review key deliverables and invoice information – pulling these things out into the daylight – makes it less likely to let overpayments go unnoticed.

Contract Management for Corporate Counsel

Corporate Counsel

Sura Nualpradid /

Many departments within a company can benefit from contract management software, but corporate legal is a natural.

Every company needs a corporate counsel to vet contracts at some point. All too often, however, during a contracts lifecycle, key information about a contract tends to get dispersed – and lost to legal’s view.

For instance, what if a client’s contract calls for X number of products to be delivered within a certain time period. However, during the agreed upon period, your company cannot take delivery of that contracted number of products due to warehouse problems. So, numbers are altered and an agreement reached. But this “agreement” happened between a product administrator, warehouse, and the contracted vendor, leaving legal out of the loop. At the end of the contract period, the billing department may be looking for a “make good” and ask the legal department to write a letter regarding a possible breach of contract.

This can be a touchy situation, leading to confusion and maybe even a bruised business relationship – maybe even lost business with a key partner.

With a centralized repository of contract records, information on deliverables, met obligations and key deadlines can be entered in notes or linked to relevant documents or document excerpts. Consider the time and trouble that saves when internal departments ask for legal to either weigh in or take action on a contract. Without all that information in one accessible place, tracking down something as simple as a mid-contract amendment can be tiresome and labor-intensive.

With a single contract database corporate counsel departments can ensure:

  • a holistic view and approach to managing a corporation’s legal obligations through the contract lifecycle
  • consistency of contract execution
  • reduction of duplicated services and efforts
  • limited errors and unapproved changes to contracts

Mitigating organizational risk and maintaining compliance with federal, state and local law can also be more effectively managed with contract management software. Read some of our previous posts on how proper contract administration and use of document retention policies can reduce the business risk of your organization while helping you meet the demands of laws such as the Sarbanes-Oxley Act of 2002.

Reputable legal associations suggest contract management software as a reliable resource for in-house legal departments as well. Check out what the American Bar Association (ABA) and Association of Corporate Counsel (ACC) say about contract management software.