Every successful business knows the importance of managing contracts. To ensure that the drafted contracts satisfy business and regulatory requirements, firms invest a significant amount of time and money for it.
Revenue could be lost if firms don’t have the proper resources to monitor and handle contracts properly. According to World Commerce & Contracting research, bad contract management procedures cause the average business to lose 9% of its annual income.
So effective contract management in place creates long-term benefits for a company given how crucial it is for business performance. Additionally, it aids in building strong stakeholder ties. Discussed here are a few ways that can be practiced for your effective contract management.
Previously firms had physical locations that contained contracts and their copies in a dispersed manner. Over a period, firms have started to store their contracts in multiple locations by Cloud, Google Drive, on-premise, and so on. Rather than having contracts split up in varied locations, it would be helpful for firms to have a centralized place for storing contracts.
For Example, consider a purchasing team that has to check the price quoted in their contracts in Seattle and California. Here the purchase manager has to check the price in both locations by contacting the concerned team in both offices to get the contracts checked. This would lead to time consumption and get his work delayed.
To avoid such a situation, companies must maintain a Contract Repository that holds all their contracts with ensured security and confidentiality. Managing a single repository makes it easier for teams to access the contracts and do their work effectively thus ensuring effective contract management.
Many sign contracts and only check up on them regularly once there is a problem. However, after they are signed, contracts take on greater significance.
In a large firm, there may be hundreds of current contracts. Relying on individual employees to track contracts cannot ensure accuracy as humans are prone to make mistakes. Through the usage of niche technologies, firms can be ensured 100% accuracy for continual tracking of contracts.
With several technologies that can help firms in getting track of their contracts, a few that are notable include AI, ML, and NLP. So for efficient contract management, tracking continuously is essential.
Restricted access option
Companies must devise a line of accessibility when it comes to a Contract. As mentioned above, a firm should give necessary authority to those that need a part in contracting along with authorized restrictions.
If anyone can get access to a contract, then there are high chances of Information leakage in case it gets in the wrong hands. It would make it very hard to find if an alteration gets made in the document without the knowledge of everyone involved.
Consider an example. One of the firm’s contracts contains different clauses related to various departments in the organization. In this case, the clauses related to Finance should be accessible by the Finance department only. And also other department-related provisions are to be restricted to them. Hence Contracts should be distributed so that only those necessary alone get a visibility option.
If companies don’t emphasize restriction options, there might be chances of data theft and leakage. So restriction is a necessary element to be ensured during contract management.
Firms should also ensure that the necessary teams have access to the contracts. Equal emphasis is to be given to providing accessibility for the right ones along with restriction options to teams. This would ensure that work is made more accessible among teams and prevent data leakage.
Lack of transparency will lead to conflicts that might rise during work. Clauses should be transparent to the specific teams only which will ensure a smoother workflow of teams.
Analyze contract performance
Rather than depending upon human assumptions, Analytics can provide firms to give up precise and right insights. While most organizations have realized the importance of using Analytics for analyzing contracts in their firms, still many firms don’t do so.
As contracts are present in different forms for a firm, many find it hard to analyze them. This causes a firm to lose opportunities and stay back in its competition.
Thanks to recent technologies like OCR, NLP can assist firms in overcoming this challenge and aid them in performing analytics in their contracts.
Example Use Case
GeakMinds used OCR and NLP techniques to solve the issue of managing contracts for a Fortune 500 Telecom client. Initially, OCR converts PDF files into machine-readable text. A searchable index was then made through NLP. Through these methods, it made our clients do Text and Predictive Analytics over their contracts. This helped them in saving time and reach 10x productivity with increased ROI.
As per a study done by the International Association for Contract and Commercial Management (IACCM), contracting and business-related problems account for 70–75% of failed projects. By adopting the above ways into effect, you can prevent contract management from becoming a burden that slows down your company’s operations.