The uninitiated might view contract management purely as a function of the sales department. But they’d be wrong.
Increasingly, contract management touches just about every organizational department from procurement to IT to legal to finance and marketing. One could argue it’s the single thread that reaches from one end of an organization to the other.
Once a contract is created, the procurement team undertakes lots of activities like tracking the lifecycle, establishing service-level agreements, analyzing for benefits and compliance adherence, and managing document change.
With so many cooks in the kitchen, contract management is riddled with challenges unless there’s a streamlined process designed to minimize the impact of human error. A recent industry study by SpringCM shows a whopping 52% of professionals identified tracking as their biggest contract management challenge. The same study found that only 4% of procurement professionals say human error never impacts the contract process.
So if tracking confusion and human error are barriers to efficiency, productivity, and accuracy, what’s the solution?
3 Reasons Contract Management is Painful
Given the complexity of contract management, there are any number of pain points, but let’s take a step back and examine some of the most commonly reported areas that breed aggravation.
1. Tracking and Managing Contract Versioning
It’s not uncommon for a contract to undergo two or three versions, with some teams having to go through five or more versions before reaching a contract to sign. And that gets complicated very quickly.
According to SpringCM:
While a slight majority only go through one or two versions (about 39 percent), around 32 percent said they go through three or four versions of each contract, and 29 percent reported going through five or more.
Because without a streamlined way to manage across all versions of a contract, human error is almost inevitable. Lack of a good system hobbles a team’s ability to compare versions rapidly and easily, and highlight changes along the way. This can stall a contract dead in its tracks.
2. Siloed Teams and Multiple Tools Touching Contracts
And if teams are siloed, yet another layer of complexity creates even more opportunity for human error because there’s no standardized method for processing contracts. The SpringCM study found no less than seven departments that touch contracts.
According to numerous industry surveys, a significant number of teams report using more than two processes (like email, spreadsheets, and shared drives) for managing contracts— and there are even reports of teams using eleven separate processes.
3. Bottlenecks in the Contract Approval Process
Another huge pain point is the approval process. The SpingCM study found that 87% of procurement professionals said the approval process is either somewhat of or a big problem.
Without a simplified, digital workflow for gaining approvals, bottlenecks are unavoidable. And a contract can easily stall if a team member accidentally omits a crucial element within the lifecycle.
Teams must be given a simple, streamlined solution for tracking obligations, deliverables, purchase order burn down, and a myriad of other stages within the lifecycle of a contract.
Using separate processes strung together across all stages of contract management creates a hotbed of human error, making it almost impossible to track the life cycle of a contract and enforce meaningful milestones and compliance.
The Solution to COntract Management
Fortunately, technological advances have made single, automated solutions possible.
Solutions like Stave’s ProcurementPath eliminate the need to bounce back and forth between processing methods and programs. They increase efficiency and reduce the likelihood of oversights. They leverage AI to streamline the workflow and expedite the contract approval process. And perhaps most importantly, they decrease the probability of human error.
Among other things, a well designed automated solution should enable contract managers to:
- Track contracts from creation to completion
- Link budgets, POs, invoices, and assets to a contract
- Build and standardize contract lifecycle workflows
- View burndown charts that compare PO amounts to contract commitments
Furthermore, programs like these help minimize overhead by optimizing administrative tasks and offering a single and unified view of contract processes. And that all has a positive impact on the bottom line and on company reputation.
What Your Organization Gains With an Automated Contract Management Solution
Stave’s ProcurementPath leverages the security and flexibility of ServiceNow, simplifying the contract management process with guided workflows, standardized organization and storage of data, and the ability to track contract lifecycles with user-friendly dashboards and burndown charts.
If your contract management capabilities are hampered by human error, we’d love to talk with you about our game-changing solution, ProcurementPath.