October 30 2015 0comment

Contracts Management Solutions

Managing risks can be a huge problem especially for highly regulated industries without a systematic contracts management process and application. The impact of contracts to business cannot be overstated, and it is imperative for enterprises that needs to manage a lot of contracts, to proactively put in place systems and processes to effectively provide visibility and governance.

Close to 85% of business transactions are governed by contracts and legal documents. These contracts contain clauses, terms and conditions, penalty, liquated damages, arbitration etc. clauses that an enterprise needs visibility into, in order to do a risk assessment at any point in time. Contracts are typically stored away in emails, folders of file systems that are difficult to find when required. Several contracts are reviewed only at the time there is a real issue, which is typically after a problem arises.

With a contracts management solution, enterprises are not only looking to get compliant on their governance and compliance, but will also significantly reduce risks and bring down costs on their business transactions. The total value of supplier contracts for instance is a significant portion of the overall spends of an organization. Several contracts for instance have a clause for automatic renewal if there is no prior written notice of termination. Typically there minimal visibility on this front, and enterprises are left with several redundant contracts which may not be relevant for their business. Enterprises that are listed on the stock exchange need to provide disclosure of certain information that is directly related to the contracts they have executed. There is scope for significant cost savings as a result of implementing a comprehensive solution for contracts management.

ERP only provides historical transactional data. However several contract processes including collaboration, workflow, review and negotiation is done in a manual fashion. ERP doesn’t handle the world of unstructured data very effectively. The contracts management system eliminates the time taken due to manual processes and completely automates the lifecycle of contracts from its creation, review, approval and ultimate archival. What’s better is that as a result of the central repository of contracts, business heads now have increased visibility into the various contracts executed with entities, and as a result they are able to eliminate duplication of orders as well as better negotiations as a result of visibility into existing signed contracts with the same party. ERP integration with contracts management is a necessary to have feature though, and bi-directional data from ERP to contracts management is a good feature to have.

This is also a great way to secure email based contract negotiation given that there will be a secure collaboration workspace for sharing and modifying draft contracts, and visibility into the draft and final version of the contract. The application also provides a rich reporting capability enabled with alerts and actionable information needed by business users.  There is also an option to interact with enterprise content from any mobile device and ensure that the processes is executed in a quick and efficient way.

The contracts management application is an extremely useful application to several functions including legal, finance, procurement, bid documentation, factory, accounts payable, audit and compliance to streamline the lifecycle of the contracts process.