To create value in an ever-expanding, industry-agnostic competitive landscape you must focus on improving performance, reducing spending and analysing the data available to you. With significant budget locked into contracts, the following four strategies can help you maximise contract value:
Strategy #1 – Creating contract value through accountability
Contracts cross-departmental lines, facilitate business relationships and help organisations like yours meet economic and ethical standards, and realise business goals. Accountability at individual, departmental and organisational levels can increase contract value by:
- creating contracts for long-standing relationships to protect all parties
- supporting collaboration and showing the connection between managing contracts and organisational impact
- constructing a contract management system that fosters responsibility through every stage of the contract lifecycle
- employing contract management professionals with the proven technical skills to navigate complex contracts, negotiation and project management, balanced with the softer skills of tenacity, persuasion and listening necessary to build relationships
- establishing uniformity by embedding concise and standardised contracting policies, templates, terms and conditions.
Strategy #2 – Creating contract value through performance analysis
Contract value is dependent upon contract performance. To keep abreast of how you’re doing, you can build awareness of the competitive landscape and your own organisational effectiveness by establishing and analysing contract management benchmarks and KPIs.
Standard contract benchmarks include:
- cost analysis: are costs going up or down? Is there an opportunity for price reductions or clear indication of product service quality or quantity improvement?
- supply chain: how are your suppliers performing? Are there enough supplies to meet demand? Are there any pending policy/law changes that may drive up prices?
- customer trends: are sales and rebates opportunities being realised? What are customer retention rates and ROI?
- internal resource analysis: how many internal resources are used and how much time is spent managing low complexity and low value contracts? How much time is being spent on training and skills development to position personnel to drive contract value?
Prevalent contract management KPIs include:
- length of contract lifecycle: review to reveal bottlenecks within stages such as drafting, negotiations, approvals, signatures, and contract closeout
- monitor counterparty performance: look for supplier delivery and reduced costs. Measure usage level and resources used. Compare contract terms against milestone adherence.
- contract renewal rates: it’s important to investigate unauthorised auto-renewals that lock organisations into services and products that are no longer needed. Missed renewals may cause issues when terms aren’t renegotiated, or there is a delay in delivery.
Strategy #3 – Creating contract value with emerging technology
Many businesses still manage their contracts with spreadsheets, email and shared drives. This lack of contract oversight makes it overwhelming, if not impossible, to effectively manage tens of thousands of contracts annually. This approach not only exposes you to lost contracts, approval bottlenecks, longer contract cycles, increased risk, compliance issues, regulatory challenges and missed opportunities, but when it becomes embedded behaviour, your contracts will lose value. Contract lifecycle management (CLM) software can position organisations to capture value from pre-award to post-award contracting. Improve CLM by:
- implementing leading contract lifecycle management software with artificial intelligence to drive contract value, starting with requests then moving all the way to post-award contract management and renewals
- optimising contract economics through the overall cost identification of contract management, and the use of contract management benchmarks and KPIs to understand the impact on profit and revenue
- extracting contract data with bulk imports of legacy agreements to increase visibility for searching, comparing, reporting etc.
- automating contract workflow to include task performance monitoring that supports deadlines through bottleneck eradication and status enquiries for easy tracking
- performing contract reports and analytics based on quality data so you can make informed decisions. This method enables more control, transparency, and visibility into contract portfolios.
Strategy #4 Creating contract value through risk mitigation
Risk can impact beyond specific contract stages – it can present challenges around:
- sub-optimal contract terms
- process bottlenecks
- reputation management.
You can decrease risk and correspondingly increase your contract value by:
- creating a unified contract management system which includes a secure repository where all contracts can be tracked and audited
- leveraging contract management technology that supports customised fields to track high-risk contracts and automated alerts for any changes made to the contract
- incorporating contract management artificial intelligence to assess contract language based on rules-based sentiment and risk ratings, sensitive data screening and alert notifications, and agreement monitoring
- creating a risk assessment program that administers contract management software to analyse contract data and assess any contract-associated risks. The contract management technology should be able to identify sensitive data in keywords, phrases and clauses while providing contract visibility reports using real-time data to send instant warnings and proactive recommendations.
Maximising the value of your contracts can be challenging as you work to find opportunities to improve business relationships, streamline operations and reduce costs, mitigate risk, and work towards your business goals. The solution is intelligentcontract management software.
Cobblestone’s Contract Insight from Four Business Solutions
With Contract Insight® CobbleStone has pioneered contract lifecycle management since its inception. This intelligent contract lifecycle management software is relied upon by thousands of contract, risk, sales and legal professionals worldwide, and it benefits thousands of users in large and small organisations throughout the public and private sector. Its plethora of features empowers businesses like yours to:
- manage contracts more efficiently
- mitigate risk
- oversee compliance
- draft documents quickly
- track costs
- receive alerts
- sign documents with E-signatures
- reduce contract management costs and lost productivity due to outdated contract administration procedures.
If you’d like a demo of Contract Insight or simply to find out more about what we do, please call John O’Brien at Four Business Solutions on 0800 6250 025.
Four helps small and multi-national organisations enrich the way they work. From supply chain to procurement and contract management, we have decades of experience helping companies forge ahead in the global market.
John O’Brien is the CEO at Four Business Solutions, global business consultants and software integrators providing business processes improvements in Finance, Supply Chain and Operations, across a broad range of industries.