The more customers and prospective customers we speak to, the more we understand the drivers for them coming to market and what's driving investment in contract management.
Signs your business needs a contract management system
- Your business is growing quickly
- You've missed a key renewal
- Your legal team spends too much time on administration
- You're looking at taking on funding
- There's new legislation coming in for you or your suppliers
In this article we examine these six common scenarios, some of which may be familiar to you and your business. We then show how effective contract management delivers the right solution.
1. You’re growing (fast)
Congratulations, you’ve got a growing business on your hands. You’re increasing headcount, revenues are rising and you’re serving more customers.
Now would be a good time to do an audit of all your suppliers and contracts to see who they are, how much you’re spending with them. There are bound to be some surprises.
This, in itself, shouldn’t be a surprise though. Contract management is not something that’s typically applied rigorously in small businesses. The cost/benefits of putting a dedicated solution in place don’t add up until businesses grow in size.
You’re also unlikely to have the freedom to put dedicated human resource into managing the whole lifecycle either and you're aware that digital transformation in the contract management function could support your growth.
One thing to be aware of is that there generally isn’t a clear milestone where it does suddenly make sense. At Gatekeeper, we have customers getting material benefit from using our platform with as few as 25 contracts in place.
The point is, it’s easy to miss as your business grows.
However, growing businesses naturally develop more formal business relationships and a lot of them will result in contracts that will need to be managed effectively.
And it follows that the more contracts you have, the more business risk you have as well as more scope to grow.
If you're taking the first step into managing your contracts, or your looking to move beyond managing your contracts through excel, a simple contract management system such as ContractNow would benefit your business and help you to manage your risk.
2. You’ve missed a key renewal
This can have significant implications for your business, particularly if the renewal is with a key supplier.
It might be that you have a contract with an auto-renew clause in it and, without proper focus on the dates, you miss the opportunity to cancel or to renegotiate.
Alternatively, a key contract may have lapsed, leaving you exposed to the business risk of it not being in place.
It’s so easy for this to happen if businesses don’t have a centralised process for managing contracts.
Someone signs a contract on behalf of one team or entity, keeps the confirmation in their email account and then subsequently leaves the business, forgetting to hand it over to their successor.
Before anyone realises it, the contract has renewed or lapsed.
Any time you’re managing contracts using email accounts, spreadsheets, Sharepoint or even filing cabinets you’re exposing your business to risk.
Watch the webinar below to discover how you improve your renewals process with contract management software.
3. Your legal team spend the majority of their time on administration
This can be an easy one to check. Ask your Legal Team to keep track of their work over a two week period and to report back what proportion of it actually requires them to use their legal qualifications.
In SMEs, the responsibility for managing contracts can often fall to Legal Team.
People from around the business submit potential new contracts to the Legal Team for review, agree revisions and final terms before signing, and then send them back to Legal to look after them. The Legal team tends to spend more time on contract administration vs management.
While this may seem logical, as the number of contracts increases, if the Legal Team doesn’t scale accordingly, they can find themselves overrun with contract admin.
What’s more, this is generally the kind of admin that doesn’t actually require legal qualifications but is instead about chasing people for signatures, feedback and other details relating to the contract lifecycle.
You can create your own threshold but certainly your Legal Team is spending more than 25% of their time on non-specialist work then it could be time to invest in a dedicated contract management solution.
That way, they can focus on adding the value that they’re being paid for.
Watch the webinar below to discover how in-house teams can save 7.5 hours a week with contract management software.
4. You’re looking to take on funding
Another key development for a business is when it’s considering taking on funding to accelerate growth.
Any potential investor will want to have a clear view of all the existing business relationships, where the money is being spent and what kind of return is being generated. Central to this view, is a clear summary of existing contracts.
Not only does this give a reassurance about the current financial position, it can also help identify areas for possible consolidation.
Whether funding is secured or not, having this information to hand can help streamline the business’s operations and supply chain, helping to improve margins.
5. There’s new legislation coming in, which you and/Or your suppliers need to comply with
GDPR is a good recent example of this as it places heightened responsibilities on those holding or processing the data of EU citizens.
With this in place, businesses can help themselves achieve and retain compliance by recording the status of their suppliers. If this process can be automated and compliance be reassessed periodically, then the business can go a long way to ensuring that it minimises the risks it’s exposed to.
And again, having a contract and vendor management solution in place, will make that process much less onerous
6. One of your senior employees is leaving or has left your business
So much of business comes down to personal relationships, so it’s vital to have continuity plans in place for when people move on.
A good exercise is to think about a key supplier to your business and to ask yourself the following questions:
- Who is the key contact on their side that we liaise with most regularly?
- Who is the corresponding person on our side?
- Who can we escalate to if something goes wrong?
- When was the last time we met with that supplier and who else was there?
Now, it might not be a key part of your role to know the exact answers to these questions but are you confident that if the key person on your side left the business that it wouldn’t have a detrimental effect on the overall relationship?
Remember, if this is a key supplier to your business then you can’t afford for the success of that relationship to be entirely dependent on one person.
Having a contract management system in place gives you a central place to record and store names and details as well as the minutes and documentation from periodic reviews.
At a glance, you’ll be able to see which employees are responsible for which relationships and which relationships need to have additional resource assigned.
This simple step helps prevent issues arising down the line when people inevitably move on.
You might be looking at this list and recognising some of these themes from your business.
If you're interested in finding out how Gatekeeper could help you manage your business's contracts effectively then get in touch today.
You can also access our contract management resources and read some of our related articles including: