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The effectiveness of Contract Management Sysytem

by anonymous

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Contract Management is an issue of strategic importance both organizations and to projects. Through successful contract management organizations can increase control, increase effectiveness and reduce costs and also provide strategic and competitive advantages. This applies to all kinds of organizations regardless of size or line of business. An organization that fails to pay attention to the contract process is often not collecting the revenues they could and they are paying too much for the services and assets it buys. Poor management of contracts means huge risk-taking and lots of excess costs. Running a large enterprise involves running several smaller, process-specific business units and coordinating their activities, together with activities of many outside contractors. The common factor in all present and future businesses is the pace of change. The change can be seen in many ways: as increased  competition,  increased  regulation,  increased  innovation,  as  well  as  in  other  ways. As enterprises wish to become more adaptable, they are being transformed into ‘projectised’ organisations .  In a networked world these projectised organisations are essentially about managing groups of information, people, assets and financial assets linked together, and governed by contracts. Contract management is in the core of running competitive enterprise whether it is a private or a public.



Business environment is getting more complicated and so are the laws. In the past contracts needed only to deal with the laws in one country. Nowadays international trade laws, EU laws, Indian laws etc. have to be taken into account. On the other hand the creation of enterprise value is ever-increasingly dependent on network of suppliers, business partners and other stakeholders. This changes operational risks into contract risks which are easily outside the control and audition of management team. This risk to enterprise value is even increased by the fact that customers are becoming more aware of their rights and responsibilities, thus demanding and negotiating better contracts for themselves.



Given this background it is impossible to imagine running an enterprise without an adequate contract management process. According to a recent study IACCM, contracting often is a series of disconnected activities, rather than a process. This leads to poor visibility and metrics for the control. These common inefficiencies relate closely to access to information and to workflow. According to the IACCM study senior managers state that improvement would contribute to better risk management (69%) and reduced costs (89%). Some of the senior managers (23%) also believed that better contract management would lead to higher revenue. Hence the importance of robust Contract Management Software can’t be denied.



Demand for a process-view on contract management has been raised by management, compliance teams and auditors as well as they should be raised by owners of the company. Contract approval, tracking, storing and management needs to be shown to use audited workflow. To cost-efficiently facilitate these demands enterprises need contract management processes and supporting tools. These allow better contracts to be created in less time. This will lead to decreased costs, increased profits, better risk management, and increased value for the entire enterprise.


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