Top excuses for not doing contract management – and how to rebut them
Forbes.com recently posted an interesting article “The 3 Biggest Roadblocks to Getting Things Done (And How to Get Around Them)” written by contributor Eliza Berman. Berman relates how a job in local government gave her an education in how to get around major obstacles.
With a big tip of the hat to Berman, I read the article and it seemed like her roadblocks and solutions were applicable to contract management too – or rather the excuses for not implementing contract management.
If you think your organization or company could use a contract management solution, you may want to read the following excuses and ideas on how you can respond to them.
Excuse No. 1: It’s Too Expensive
Here at Blueridge Software Inc., makers of Contract Assistant, we are well aware of how sensitive some organizations are to the cost of a solution. There is a wide range of prices and contract management solutions, but we’re rather happy to say that our solution (which is top ranked) is less expensive than many offerings on the market.
But when someone makes the excuse that a contract management solution is “too expensive,” it’s important to remember that the cost of the software solution is not the real issue. That’s because we know from experience that the cost of not managing your contracts is high.
Estimates vary, but organizations such as the International Association for Contract and Commercial Management estimate that poor contract management can cost companies as much as 9 percent of their revenue. Companies may indeed practice contract management without a contract management solution – but the efficiency gained by converting your contract records into a searchable, indexed database is solid and tangible (See “Five quick benefits from the contract management process”).
So when people object to the cost of contract management or a solution, keep in mind that the cost of “leakage” when contracts are not organized, accessible or searchable, is very real – and possibly very high.
Excuse No. 2: It’ll take too long
Using a solution such as Contract Assistant, users create a database by converting existing contracts into electronic records.
It may be easy to look at the job of converting paper or scattered electronic files into new records and say “that will take X hours” to do. However, the time (and money) lost from a disorganized or haphazard system of contract record-keeping is harder to quantify – but is nonetheless very real.
According to a recent survey of IT pros in legal departments, only 25 percent responded that they stored their records electronically in a single repository (database). That leaves 75% who didn’t, and among those, the vast majority usually stored contracts in different places as well as different formats.
When it comes time to review contractor or contract performance, how much time and effort is put into tracking down contracts (and hopefully finding the right versions)?
If anyone objects to the time it takes to build up your database, just remind them that once built, all in-house contracts, contract dates, contact information, and even associated documents, can be accessed in just a few mouse clicks.
There’s another point to make here, too, that we can attest to. Many times when customers implement our solution and create their database, the sheer number of in-house contracts surprises them. Organizations that aren’t aware of all the contracts in place are probably not doing a very good job of ensuring these contracts are performing as expected. Simply knowing the scope of the contracts that need to be managed is a true accomplishment in itself — and a real benefit to just taking the first steps in contract management by creating your database.
Excuse No. 3: “We’ve always done it this way”
This is, of course, the worst excuse of all but probably one of the most natural of excuses. After all, how many times have you heard the old saw “if it ain’t broke, don’t fix it.” The problem with this attitude, however, is that doing things the “old way” often means you don’t know what is “broken” and what is not.
The only way to determine if contracts are both performing as expected and that key information is being recorded is to actively manage them via periodic reviews (and good electronic record-keeping).
However, without a complete, searchable database of contracts, it is very difficult to efficiently schedule contract reviews on all contracts. (And indeed, without a single database to refer to, how do you know you’re managing all contracts?) One of the great strengths of a contract management solution is that it reinforces good practices by making them easier.
Without a database, consider the time-consuming task of (for instance) keeping a spreadsheet of all contracts, their start and end dates, and then identifying several periods for contract reviews or verification of commitments – on each contract.
With Contract Assistant, database administrators or contract managers can easily set alarms on key dates and even (with the Enterprise version) schedule emails to alert key personnel of review dates.
An organization that is not practicing any kind of contract reviews of contracts may be losing money due to missed deliverables, inaccurate billing, or even “make goods” extended to customers because of missed deadlines.
In short, you can’t say something isn’t “broke” if you don’t have a history of checking for “breakage.”
Summing Up: There’s always an excuse
In many organizations, there’s always an excuse for not doing something new. Inertia is a real hurdle to overcome in any organization, especially ones that are experiencing significant strains on budget and resources.
However, by making a good business case for a contract management solution, you can overcome objections. Stick to the benefits of solutions, and when stakeholders can see the real value, you may have won the day.
If you’re looking for more information on building a case for implementing solution, you may want to refer to these prior blogs as well.
Strategically thinking about contracts can net real profits
10 quick facts about contract management software
Making the best case for contract management
Top ten contract management practices for large enterprises
[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+.]
Photo Credit: Tsahi Levent-Levi via Compfight cc