In enterprises that use manual processes, contract management can be a loosely structured and resource-intensive process.
Large enterprises typically handle a substantial volume of contracts, ranging from complex agreements with numerous stakeholders, such as vendors, customers, and partners, to intricate legal terms and compliance requirements.
Due to their larger operations, these businesses face greater legal, financial, and operational risks. Having visibility, control, and compliance across the contract and vendor lifecycle becomes critical.
What is enterprise contract management?
Enterprise contract management can be defined as the comprehensive process of creating, drafting, reviewing, negotiating, executing, tracking, and managing contracts throughout their lifecycle. It is nuanced in comparison to the approach taken within smaller businesses, as the challenges enterprises face are on a much larger scale.
Challenges of Manual Enterprise Contract Management
Many enterprises tend to treat contract management and vendor management as separate entities. However, understanding that these two aspects are closely interconnected is vital for overall business success.
As we delve into the challenges of enterprise contract management, it becomes clear that addressing both contract and vendor-related issues together is crucial for improving efficiency, ensuring compliance, and achieving operational excellence."
Imagine a large manufacturing enterprise that produces automobiles. They often deal with numerous contracts with various suppliers, from the ones providing raw materials like steel and rubber to those supplying electronic components. These contracts govern the terms, pricing, and delivery schedules of these essential supplies.
Now, consider the company's vendor management. They not only need to track these suppliers' performance and adherence to contractual obligations but also ensure that the suppliers meet stringent industry regulations and quality standards.
In this scenario, treating contract management and vendor management as separate silos can lead to inefficiencies.
For instance, if the company faces delays in its production line due to a supplier's non-compliance with contract terms, it impacts not only the contractual aspect but also the overall vendor relationship and operational efficiency.
Let's take a look at some other enterprise contract management challenges:
- High Volume of Contracts and Vendors: Enterprises often deal with many contracts, ranging from procurement contracts and sales agreements to complex legal contracts. Manually managing this sheer volume, along with vendors, can be overwhelming and error-prone.
- Compliance and Risk Management: Ensuring that contracts and vendors comply with legal and regulatory requirements and managing associated risks is a significant challenge. Non-compliance can lead to legal disputes, financial penalties, and damage to an organisation's reputation.
- Inefficient Processes: Manual contract management processes, including drafting, approval workflows, and document storage, are time-consuming and prone to bottlenecks. This inefficiency can result in delays in contract execution and missed opportunities.
- Lack of Visibility: Many organisations need help to maintain a clear overview of their contract and vendor portfolio. This lack of visibility makes it difficult to track contract milestones, obligations, and performance, which can lead to missed deadlines and underutilised resources.
- Version Control and Collaboration: Multiple stakeholders are often involved in contract negotiation and approvals. Keeping track of contract versions and ensuring effective collaboration among these stakeholders can be challenging.
- Renewal Management: Forgetting to renew contracts, especially with critical vendors or customers, can have detrimental consequences. Managing contract renewals efficiently is crucial to maintaining positive business relationships.
- Cost Control: Inefficient contract and vendor management can result in unnecessary costs, such as missed discounts, overpayments, or penalties for non-compliance.
- Data Security: Contracts often contain sensitive information, and ensuring the security and confidentiality of contract data is essential to prevent data breaches and protect an organisation's intellectual property.
- Scalability: As businesses grow, so does their volume of contracts and vendors. Scalability is a challenge, as manual processes may become even more unmanageable without proper systems in place.
These issues can be addressed by using enterprise contract management software. This solution sits within Gatekeeper’s Vendor and Contract Lifecycle Management platform, which helps enterprises streamline contract and vendor processes, safeguard compliance, reduce risks, improve vendor relationships, and increase revenue.
What is Enterprise Contract Management Software?
Enterprise Contract Management Software, often referred to as Contract Lifecycle Management (CLM) software, is a powerful digital tool designed to streamline the creation, negotiation, execution, and monitoring of contracts throughout their entire lifecycle.
It helps organisations overcome the challenges associated with manual contract management, ensuring compliance with legal and regulatory requirements while minimising risks and maximising the value of contract outcomes.
Who Needs Enterprise Contract Management Software?
Businesses Handling Large Contract Volumes
Large enterprises often handle a significant volume of contracts, crucial to their operations. As businesses grow, managing contracts manually becomes chaotic.
Effective contract management requires detailed, repeatable steps throughout a contract's life. Manual processes, especially when relying on spreadsheets, waste resources, increase errors, and make finding key details like contract clauses a hassle.
Enterprise contract management software centralises and standardises contract handling at scale. It offers a secure, centralised vendor and contract repository for easy access, increased visibility and improved searchability. Combined with workflow automation, every step taken can be standardised and recorded.
Larger businesses often have teams spread out across the globe, a trend accelerated by remote work during COVID-19. Now, many businesses have returned to a hybrid working arrangement and issues caused by manual processes - such as the development of silos - become more evident.
In this scenario, localised databases spring up all over the place, leading to inconsistent practices, inaccuracies, and costly mistakes. Collaboration suffers, especially when contracts must pass through multiple departments such as Legal, Procurement, and Finance."
For success, consistency across divisions is essential. The solution? Cloud-based enterprise contract management. It centralises data and enhances accessibility, allowing teams to securely access contract information from anywhere. Silos are dismantled, processes are standardised, and teams can collaborate within a single platform on the same contract version and with the most up-to-date vendor record.
Certain industries, like Healthcare, Pharma, and Financial services, face the dual challenge of managing numerous contracts while meeting stringent regulations.
Compliance is crucial - contracts and vendors must be monitored meticulously to ensure certifications and insurance documents remain up-to-date and risks are minimised.
For regulated organisations juggling thousands of complex contracts, managing compliance with spreadsheets is impractical. It's time-consuming, resource-draining, and inherently increases risk.
Enterprise contract management software in regulated industries ensures compliance by aligning contracts with specific regulations, automating compliance monitoring, protecting sensitive data, maintaining audit trails, mitigating risks, and providing insightful reporting.
Features and Benefits of Enterprise Contract Management Software
Enterprise contract management holds undeniable importance in ensuring the legality and effectiveness of agreements, but your business shouldn’t let it overshadow the significance of vendor management.
Vendor relationships are intrinsic to your enterprise’s operations and extend beyond the terms stipulated in contracts. Recognising the crucial relationship between contract and vendor management is vital for enterprises to protect their businesses.
Gatekeeper, which offers comprehensive vendor and contract lifecycle management capabilities, empowers your enterprise to efficiently navigate both sides of this coin with the following:
- Centralised Repository: Establish a centralised and secure digital repository for all contracts, vendors and related documents, ensuring easy access, version control, and minimal risk of data loss.
- Standardised Templates: Use uniform contract templates and clauses to reduce negotiation time and errors, promoting consistency and alignment with business objectives.
- Automated Workflows: Implement automated workflows for contract creation, review, approval and vendor onboarding, reducing manual intervention.
- Contract Authoring: Simplify contract creation with authoring tools, featuring pre-approved clauses and templates for legal compliance, resulting in faster contract development and vendor sign-off.
- Collaboration: Promote cross-departmental collaboration among stakeholders to streamline negotiations and approvals, expediting contract execution. Work with vendors in a dedicated portal where you can delegate data input to improve compliance.
- Vendor Analytics: Utilise balanced scorecards for insights into performance, risks, and opportunities, enabling data-driven decision-making and risk mitigation.
- Compliance Monitoring: Automate compliance monitoring with risk intelligence feeds to ensure vendors adhere to regulatory standards and internal policies, reducing legal risks.
- Alerts and Notifications: Set up automated alerts for contract milestones, renewals, and compliance deadlines to prevent missed obligations and enhance efficiency.
- Contract Auditing: Maintain a comprehensive audit trail of all contract activities and vendor communications, ensuring transparency for compliance and dispute resolution.
- Data Security: Prioritise data security through access control, encryption, and secure storage, safeguarding sensitive contract information.
- Contract Version Control: Implement robust version control to track contract changes, ensuring accuracy and reducing confusion.
- Scalability: Choose a scalable VCLM solution, with unlimited licences, to accommodate growing contract and vendor management needs throughout your enterprise.
- Integration: Integrate VCLM software with other business systems, such as Netsuite, to facilitate data sharing and enhance operational efficiency.
If you’re ready to find out about how Gatekeeper can help you improve your enterprise contract management processes, book your demo today.