Did you know that up to 9% of topline revenue is lost due to inefficient contract management? Contract management governance helps avoid inaccuracies and non-compliance and ensures that your suppliers and licensees adhere to your contract and payment terms.
Here are 5 reasons why you should increase your investment in contract management today:
1. Contracts Provide the Foundation for Your Business
From third-party vendors to partners and employees, your organization relies on contracts. Contracts and agreements govern an estimated 60-80% of business operations, making them integral to the smooth running of most business functions. Contract management ensures you and your internal teams do not lose sight of what has been agreed and by whom.
If you or your employees don’t know the terms of your contracts, how can you be sure that you are adhering to the benefits and liabilities they contain? Lack of knowledge can result in poor planning, unnecessary misunderstandings, missed deadlines, and unnecessary costs. It can also lead to irreparable harm to the value of a contract.
2. Inefficient Contract Management Wastes Time and Money
Contracts are expensive to set up and maintain. According to World Commerce and Contracting, the average cost of managing a simple contract is $6,900, with more complex contracts reaching costs of up to $49,000.
Contract management enables you to streamline and automate your approach to managing existing contracts and creating new ones. It helps to control costs, oversee payments, and revenue, improve productivity, and reduce error. In addition, it provides the information and tools you need to fully exploit outbound contracts and comply with their inbound contractual obligations.
3. The Business Risk and Financial Penalties of Non-Compliance Are Too High to Ignore
Failing to realize the financial benefits of your agreements damages potentially valuable revenue streams, while failing to adhere to their terms may lead to loss of bargaining power and damage to business reputation.
Research by KPMG has revealed that poor contract governance practices can result in losses of up to 40% of a contract’s value. Contract management helps to mitigate those risks by quickly identifying clauses or deadlines that may impact contract value.
4. Knowledge is Power in Negotiations!
Unifying contracts and agreements also help to put you in a stronger position when it comes to future negotiations. According to Goldman Sachs, contract management offers the potential to accelerate negotiation cycles by 50%, reduce erroneous payments by 75–90%, and cut operating and processing costs related to contract management by 10-30%.
5. Language Does Not Have to Be a Barrier
While centralizing contracts is a vital first step, the translation and localization of contracts also have a critical role for any global business.
If a contract is stored in a language that the team responsible for fulfilling or managing it does not understand, the cost and risk issues outlined above will still apply. Establishing a robust governance process or implementing a new contract management technology will be of little use here.
Even minor differences in formatting between jurisdictions––for example, in the presentation of the date and value fields––can affect a business’s ability to enforce or adhere to a contract’s terms or key events, such as auto-renewals or rate increases. Contractual obligations and rights can also be easily skipped over or lost in translation if entered in the originating language or poorly translated in the first place.
The good news is that it is easy to incorporate robust translation processes into your contract management and governance processes. BIG IP has supported law firms and in-house Fortune 500 legal departments for nearly 50 years, offering accurate and cost-effective translations for even the most challenging and complex contracts.
Get in touch with us today at [email protected] to discuss how we could support you in your contract management needs.