Regardless of company size or sector, contracts are a part of everyday business. Each contract is different and each one has its own challenges. These contracts have taken on increasing importance during the pandemic, with many businesses finding themselves operating in disrupted and difficult conditions, with liabilities requiring change and clauses adjusted.
Despite lockdowns and home working, contracts have continued to be issued during the pandemic for ongoing requirements such as goods and services. The degree of contract management that has been possible varies between organizations, but as we ease into the new normal there is a need to revisit contract management practices to ensure business continuity. It imperative that organizations have full visibility into identifying, tracking and managing both payments and risk obligations at all times, not just in a crisis.
As organizations shy away from depending on single suppliers in the supply chain in the new normal, we will see more local and international contracts being issued. These are often complex and need to take into consideration various legal systems and political factors. They also need to be readily available, which is where flexible, automated workflows show their value.
Contract management for the new normal
Implementing best practices for a digital contract management strategy and associated system that can guide a business through unexpected changes is paramount for coping with the new regulations and the tide of contracts that will descend as business normality unfolds.
A lack of fit for purpose contract management results in revenue loss. The International Association for Contract and Commercial Management estimates that due to insufficient or lack of contract management, companies lose 9% of revenue on average. This is a figure that organizations opening up for business again post-pandemic can ill afford.
Here are five key business benefits of digital contract management that will prove invaluable as organizations move forward into a brave, new and unchartered touchless economy.
Centralized contract management
Digital contract management breaks down data silos and provides a company-wide, centralized archive for contracts. By so doing, it brings all the contracts with their relevant contextual information from different channels and systems together in one place. These contracts can be quickly and easily accessed from anywhere by anyone in the company who needs them to aid in smart decision-making if they have the right security access. The result is an agile and flexible company that can respond to and address contractual issues quickly.
Many contracts, notably for software services, are automatically extended unless advance notice is provided. Digital contract management helps users to avoid such mistakes and make sure they are not paying for a service they don’t use. Contract managers are automatically alerted to review, approve and terminate contracts. This avoids unnecessary contract renewals and associated costs.
With contracts, it is essential that every process is traceable to fulfill legal requirements. Changes must be documented and verified. Digital contract management makes it easy to archive entire contract histories, including all correspondence, in an audit-proof format to demonstrate compliance, among other things. It also provides a single version of the truth across the company.
Better secure data
Digital user authorization prevents unauthorized access to contracts. This leaves companies less exposed to data breaches and cyberattacks, both of which have dramatically risen during the pandemic as organizations have been caught off guard. The World Health Organization, for example, saw a fivefold increase in cyber attacks alone.
Digital contract management can also be integrated with other systems such as SAP or Microsoft Office. This allows data to be worked on directly in a specialized application or in Microsoft Office, for example. Users don’t have to switch between applications, which can be open to human error. Data is also updated automatically in respective applications to ensure continuity.
What is your plan for the return?
Organizations that had already started on their digital transformation journey have found it easier to adapt to the disruption of COVID-19. Cloud, for example, has made it easier for them to trigger effective home working programs. As a result, digitalization is high on the boardroom agenda for organizations moving forward.
Digital contract management is a key building block for end-to-end digitalization. Contract management is no longer merely a necessary administrative task. It now plays a central role in driving performance and business outcomes that are imperative to businesses re-establishing themselves in the new normal.
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