contract management

Beware of the Evergreen Clause

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Unfortunately, some businesses only recognize the need for contract management software once a problem arises – when it’s too late to enact “an ounce of prevention.”

Here’s a perfect example: Consider the “evergreen clause,” or the autorenewal.

Investopedia defines the evergreen clause as: “A contract provision that automatically renews the length of the agreement after a predetermined period, unless notice for termination is given. Evergreens are often used for long term agreements such as memberships or maintenance contracts.”

How does this sneak up on the unsuspecting contract administrator? In an article on the website Mondaq, author Steve Dutton poses the situation of a business owner deciding to cancel the license agreement for a certain computer software which was purchased to improve productivity, but ended up not being effectively used.

Upon calling the vendor, the representative notifies the business owner that the license agreement does not allow a simple cancellation. Instead, the business owner is contractually obligated to continue paying for the software for another full year. The real culprits here are the terms and conditions of the software license containing the automatic renewal or evergreen clause.

Automatic renewals often come with a definition of when notice must be given to cancel a contract. The problem isn’t that evergreen clauses are inherently bad. It’s that notification dates for cancellation have a habit of being institutionally “forgotten” – unless there’s a serious problem.

Contract management software helps you shed light on these forgotten contracts in two key ways. First, you can customize notes and fields to record specific deliverables of vendor/service providers, thus giving you a history of performance. Second, you can set up automatic reminders for key renewal dates. This feature is in all Contract Assistant versions, and in the Enterprise edition you can even configure alerts to be distributed via email.

Setting an alert or reminder 60 to 90 days out from a renewal notice cut-off notice date should give you enough time to review performance and get input before contacting the vendor/service provider. At the very least, it may give your business the leverage it needs to alter a contract to meet your company’s needs better.

For additional discussion and recommendations about evergreen clauses, read this blog post by Law 4 Small Business.

It may not always be possible to avoid evergreen clauses, but you can certainly get ahead of any potential problems if you’re using good contract management software.

Tripped up by the fine print: cost reduction and contract management

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By: Judy Tucker, business consultant, Blueridge Software, Inc.

With 75 percent or more of business relationships today governed by contracts, booby traps hidden in the fine print can threaten the health of your organization. Overlooking an automatic renewal date, for example, can multiply your costs, sometimes for years to come.

For example, one tech company discovered after signing a multi-year deal for telecom services that it’s existing contract still ran for another year. This was overlooked in the negotiating phase (and before they implemented contract management software, which could have alerted them to the end date). The overlap cost them ore than $100,000

Then there’s the case of the small city in the southwest that recovered $70,000 in overpayments for expired contracts in the first six months after implementing a contract management system. The city recovered an additional $200,000 in the next fiscal year.

At Blueridge Software, we’ve heard lots of stories like these over the years and all these underscore one very important point: Contract management can directly affect your bottom line.

And unlike many other business operations, contract management can be done fairly easily with consumer-level interfaces like those found in Contract Assistant. Lack of a timely review, a missed escalation clause, or failure to give required notice of a price increase simply because of an unnoticed deadline can have an immediate negative impact on your bottom line.

Let’s face it: doing the deal gets a lot more attention than managing the signed agreement. Once a contract is inked it all too often disappears into a filing cabinet, or onto a spreadsheet that can’t begin to do a decent job of tracking.

Contract management software makes this “hidden” information visible, customizable, and most important of all, usable to anyone viewing it for reporting purposes. That report and review process of existing contracts and end dates can easily become important cost-cutting information when budgets are reviewed.

The bottom line is that contract management is not just for “easing” the pain of contract management; it can be part of your company’s cost-cutting strategy as well.

10 Years in Business … and a cautionary tale

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Blueridge Software this month celebrates the 10-year anniversary of Contract Assistant – the leading contract management software for organizations of any size and budget.

Ten years of stable growth, product releases, and customer support is a proud milestone. It is something our customers can also appreciate, considering Contract Assistant is the business tool they use to help manage the contracts and documents that govern business-wide operations of all types.

Yet all is not necessarily good in the contract management world. Many software companies offer their products as software-as-a-service (SaaS), offering their services on a subscription basis via the web. It sounds like a good idea, but consider what happened to Mumboe.

A few months ago, our industry reported the hasty closure of Mumboe, an SaaS contract management company. It gave clients just two weeks to access and download all of their stored data before shutting down its site and web-based service for good in November 2011. Such a rapid shutdown was a tough enough situation for Mumboe customers, but consider, too, that many were left to scramble and search for replacement contract management software.

Nothing demonstrates the pitfall of trusting SaaS quite as well as the Mumboe event. SaaS companies store your information and records on their system. And in the event of a service failure or company shuttering, you may or may not get those records back; and if you do, they may not be in a viable file format for you to use. Granted, the anytime/anywhere access and instant software updates have a certain appeal, but keep in mind the drawbacks of vulnerability to Internet service interruptions and application closures.

Now, consider the difference we offer with Contact Assistant: when you purchase and own the software outright, your critical contracts and other legal documents remain on your system and under your full control.

Access to your data and to the program is indefinite, regardless of the selling company’s future state, your Internet service connection, or whatever else. With virtualization options available, you can set up anytime/anywhere access to the program across the devices and access points you use to run your business. Plus, you can rest assured that with your information stored on your network, you have control over its security.

So while Blueridge Software celebrates the 10th year anniversary of Contract Assistant, we hope all our customers have found some peace of mind with our purchased solution.

Hot topics in contract management solutions

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Contract Management Software

Contract Management Software

We started this blog just 18 months ago, so we thought this would be a good time to take stock of what feedback we’ve received from visitors. It is clear that readers have an interest in our blog, but the following are the three most popular blogs posted (so far, that is).

Top Three Most Popular Posts

  1. News Flash: Introducing Contract Assistant PRO Edition 3.7!
  2. Key Benefits of Contact Administration
  3. 8 Steps to Choosing a Contract Management Solution

What’s driving the interest in new versions, key benefits and how to select contract management software?

Taken together, these three topics are a snapshot of where many people in large and small enterprises find themselves: knowing there has to be a solution out there, and wondering what the real benefits are. After all, businesses today have more contracts than ever — and those contracts are increasingly complex. Add to that situation an ever-increasing pressure to drive costs lower and the result is longer-term agreements with suppliers of all types.

For many employees and business owners, this combination of circumstances cries out for a way to better manage contracts to reduce risk, centralize information and generally make a difficult, disjointed process more coherent.

So we see the interest in choosing a contract management solution, and interest in benefits. And of course, interest in Contract Assistant naturally follows that. We see a lot of interest in our free 30-day trial as well as our free 30-minute demo of the product as well.

Considering the list of risks associated with no or poor contract management, is it any wonder why readers are exploring the benefits, best practices, and case studies?

For more information about document retention policies, see this prior post. And here is a quick case study of how Texas A&M-Corpus Christi solved their contract management issues with Contract Assistant.

Stopping overpayment with contract management software

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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.