Today's rapidly evolving business landscape, potential economic headwinds and ever-evolving regulations require stakeholders to know the ins and outs of their contracts.
Organisations that don’t know what they don’t know will face contract management risks that could negatively impact their operational and financial performance.
Those relying on outdated manual methods such as spreadsheets, email and Sharepoint are most likely to experience gaps in knowledge when it comes to their portfolio - a situation that many can’t afford.
In this article, we take a look at the contract management risks that businesses face when using outdated methods. We also outline the benefits you should advocate to the CFO to get their buy-in for a dedicated contract management solution.
Common Contract Management Risks
Inaccurate Data and Version Control
Contracts are often managed manually via solutions that have:
- User familiarity
- Affordable licensing models
- Brand-name leverage.
However, the comfort and cost-effective appeal of solutions such as Microsoft Excel lull businesses into a false sense of security."
When contracts are managed manually, the likelihood of errors increases exponentially. Spreadsheets and email chains are prone to human error, resulting in inaccurate data entry, missed amendments, and inconsistent version control.
These types of oversights and mistakes can include:
- Missed auto-renewals and change to renegotiate better terms
- Poor audit-preparedness which can lead to fines
- Business decisions being made based on incorrect data.
Contract management software resolves these issues by facilitating the automatic extraction of contract metadata.
ContractNow allows you to upload contracts, accurately extract key dates and clause language and digitise table and form data before storing it all in a repository. Use complete, up-to-date and precise records to drive action across the portfolio.
Dedicated software gives CFOs confidence in the data being presented to auditors and that any decisions being made are based on the most accurate information to hand."
Poor Contract Visibility and Non-Compliance
Inaccurate data input and poor version control lend themselves to a lack of visibility and compliance further down the line.
Not knowing where all your data is stored, what deadlines you’re facing, and which contractual and regulatory obligations have or haven’t been fulfilled can cause real trouble for your business.
Manual contract management methods cost more than money. They can cost your business its reputation, its customers’ trust and its legal standing with regulators."
CFOs want to know that the investment they make in contract management software will protect their bottom line as well as deliver ROI. A centralised repository is great, but it won’t be enough to get their buy-in.
ContractNow provides contract visibility that drives action:
- Visibility of renewal dates allows for early review and renegotiation
- Visibility of contract obligations helps businesses track compliance
- Automated notifications allow stakeholders to prioritise urgent activities
- A single source of truth facilitates the efficient retrieval of information.
Using contract management software keeps stakeholders - whether in Procurement or Legal - one step ahead of renewals, poor performance and document expiries. By moving beyond manual contract management methods, they can report more effectively and holistically to the CFO.
Missed Negotiation Opportunities and Revenue Leakage
In a competitive business landscape, organisations must seize opportunities and avoid revenue leakage. The buck stops with the CFO - especially as businesses reorganise their strategies in the face of changing economic conditions. It is more important than ever that each agreement delivers maximum value to the business.
Manual contract management methods can hinder the identification of contract milestones, renewal dates, or renegotiation opportunities.
ContractNow uses key metadata to trigger automated notifications to stakeholders, prompting them to take timely action on critical events. It also offers global search functionality so stakeholders can quickly locate termination and auto-renewal clauses.
Receive automated notifications to prevent revenue leakage
Stakeholders are empowered to act on critical events, proactively manage contracts and present favourable terms, potential cost savings, or revenue-generating opportunities to the CFO.
The financial well-being of the business via contract outcomes becomes an organisation-wide responsibility when the right technology is incorporated.
Difficulty preparing for audits
If a business cannot meet audit requests promptly or fails an audit due to missing evidence, it can face financial consequences including expensive fines. This can impact the bottom line of a business if the fine is affordable. In the worst-case scenario, it will stop the business from operating at all.
Manually managing contracts lends itself to fragmented processes and storage, making it difficult to gather complete and accurate evidence ahead of an audit.
Audits are a regular part of financial and business management. Organisations need to demonstrate their controls and internal processes for managing contracts, mitigating risks and maximising value. They may need to do this promptly if it’s a surprise audit.
In manual environments, Legal and Finance teams spend substantial time and effort:
- Locating specific details across multiple spreadsheets and email threads
- Printing or screenshotting the evidence
- Chasing colleagues to confirm who made what change and when.
CFOs understand the importance of delivering what’s needed when it’s needed to protect the business.
ContractNow builds a complete and defensible audit of every action taken. It’s stamped with information including name, date and a description of any changes. It is easily accessible and retrievable - making it far less stressful to prepare for audits.
Advocate the importance of ownership, accountability and audit-readiness to your CFO as these benefits aren’t easily attainable when manual methods are used."
In an era of digital transformation and increased regulatory scrutiny, CFOs must prioritise efficient contract management to protect their company's bottom line.
Relying on outdated manual methods such as spreadsheets and email chains exposes businesses to numerous contract management risks, including inaccurate data, compliance issues, poor visibility, revenue leakage and difficulty preparing for audits.
Investing in a dedicated contract management system equips organisations with the tools and functionalities necessary to mitigate these issues. The investment decision will often lie with the CFO, so it’s paramount to demonstrate how this technology will not only prove ROI but will protect the business in a holistic manner.
If you want to learn more about mitigating contract management risks or how to build a business case for your CFO, get in touch today.