What is ‘good’ contract management?
When it comes to explaining what contract management (CM) is, the clue is in the name; contract management is simply the process that an organization follows to store, monitor and log their contracts with vendors and other stakeholders.
However, technological advancements have transformed CM systems from a simple filing and storage process to become a strategic tool for organizations to leverage.
Throughout this blog post, we’ll examine what ‘good‘ CM used to be compared to what it is today and how it benefits organizations with an effective CM system.
What was ‘good’ contract management?
Think before technology was at the heart of all key procurement functions and when most purchasing tasks were paper-based. ‘Good’ CM was then seen as having an organized and maintained filing system to store all your paper contracts in a structured order.
At this point, CM was a procurement formality that was used as a precaution to protect your organization in case issues with vendors arose. These systems were 100% paper-based, which meant maintaining and finding important information was difficult - not to mention the really annoying squeaky drawers!
Today, contract management is a critical activity that cannot be overlooked. Technological advances mean that organizations are relocating paper contracts stored in dusty warehouses to online cloud-based CM systems, that are accessible anywhere, anytime and on any device.
So, what should a CM platform do for your business today?
A ‘good’ contract management system will…
- Create a globally accessible online database of all contract information
Taking your CM system online means that contract information is not only found in the filing cabinets but anywhere in the world and quickly. But this isn’t the only benefit of storing contracts in the cloud – it also means that contracts aren’t lost or forgotten about and automatic alerts help you see when contracts are ending or when new details are needed.
- Assist in enterprising strategies
The bulk of procurement contracts simply outline a legally binding agreement of what goods should be supplied to a specific location at an agreed time. However, CM technology autonomously manages the time-consuming input and management of data, realizing strategic elements of your procurement strategy.
By allowing buyers to easily manage their sourcing activities around existing contracts, you reduce the time spent searching for vendors when agreements are already in place.
In addition, CM platforms that actively monitor and ensure that all suppliers are compliant with the regulatory and production terms within your contract, automatically help to mitigate supply chain risk. What’s more, by having a repository of up to date contracts available acts as a safety net for your procurement team, allowing you to focus on strategic projects and partnerships.
- Work fluently with legal
Although many procurement and legal teams work separately, it’s essential that both teams fully embrace a single CM solution to maximize it’s potential – by creating a frictionless process of accessing and exchanging contract information. By both teams adopting a single platform all red-lining, signatures, reporting and storage happens in one place.
How will this benefit your procurement team?
So, now you know what a ‘good’ CM platform should do, find how it transforms your spend analysis capabilities, spend visibility, supplier compliance and reduces supply chain risk.
Full spend visibility
CM offers full transparency of who and where your goods are coming from and in what quantity – eliminating uncontrolled spend. Also, by making it easy to spot vendors who operate in areas and countries which may be prone to environmental, economic and political uncertainty, you can make appropriate risk management strategies.
Eliminate maverick spend
By having a company-wide platform that contains all up to date contract information, all buyers can instantly see if a contract already exists - eliminating the classic mistake of buyers onboarding new vendors when you have an existing agreement with another supplier.
Prevent accidental contract renewals
Have you ever completely forgotten that a contract renewal date was coming up and accidentally signed up for another term by not ending the agreement? Well, you’re not the only one.
This is where traditional filing cabinet CM systems failed, because if there’s one thing that they were good for, it’s losing and forgetting contracts. To solve this, businesses take their contracts to the cloud, where renewal alerts can be set weeks or months prior to the termination date – allowing buyers enough time to source new vendors or negotiate a better price.
A clear foundation for spend analysis
When it comes to reporting, having access to a centralized database of all negotiated prices and contract conditions makes comparing actual spend against contracted buys a whole lot easier. If any discrepancies are identified during the process, you can simply search on your CM platform to find where the contract violation has come from to rectify and deal with it.
Ensure agreement and legislation compliance
As we mentioned in the last section, today’s CM platforms autonomously audit your supplier information. This means that any failures to meet the contract terms by suppliers are instantly raised to your procurement team.
Contract information that needs updating is also monitored by your platform and notifications will be sent to both you and the suppliers informing you that new data is required – avoiding any potential legal issues down the line.
How can you get started?
So, how does your CM system sound now? ‘Good’ or not?
Platforms like Medius Contract Management are designed to make the transformation from a paper-based CM process to an entirely cloud-based system as seamless as possible. With over 20 years of experience delivering new eProcurement and CM platforms to a huge range of organizations, we have dealt with it all.
Eager to learn more about how you can implement Medius Spend Management? Read about our work with a leading TV broadcaster – transforming their process in just three weeks. Or click here to speak to a member of our friendly team.
