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  Importance of Effective Enterprise Contract Management
 
Contracts management is necessary whenever companies enter into legally binding business relationships that are usually governed by a contractual document. Buy-side contracts typically govern the purchase of goods/services and sell-side contracts typically govern the sales of goods/services. A "generic" contract management process begins with negotiation to agree upon terms and conditions that are then captured in the contract. Contracts are then activated, typically requiring a signature, and subsequently enter ongoing management for the life or duration of the contract. As the contract approaches expiration, the parties may chose to either renew or close out a contract via a termination or expiration process.
 
More and more companies are requiring contracts to get even "basic business" done, for example servicing a photocopier. This means that the sheer volume of legally binding contracts that businesses much manage is increasing drastically. According to the "Institute of Supply Management", companies are managing 20% more contracts then they did just 5 years ago, and this number is only growing. Therefore, companies should look for ways to automate contract management processes in an effort to eliminate redundant processes and increase overall efficiency.
 
In most corporations, the contract management process is broken. Trading partners interact manually and multiple individuals get involved in the physical and uncoordinated negotiation, creation, handling and execution of contracts. During these processes, multiple conflicting versions often are created and then circulated for approval, and so forth. And finally, when contracts are executed, most companies physically file them away in one or more hard copy, file cabinet repositories. The end result of all this is manual, fragmented, and error-prone contract management operations. Companies planning on moving away from this ineffective model would benefit from automating their contract management processes and integrating functions across various departments, such as Legal, Sales and Customer Service, that touch the same customer in different ways.
 
Automation and increased visibility into the overall contract management process brings about several specific benefits. Through automation, contract negotiation and cycle times can be drastically reduced. According to Goldman Sachs, contract cycle times can drop by as much as 50% through automation. This is extremely important because lengthy negotiations typically reduce the momentum and enthusiasm for the business relationship on hand. In addition, automation can reduce operating and processing costs by as much as 30%.
 
Contract automation and increased visibility into all contracts in the enterprise can also bring about increased revenues for the organization. Especially in this economy, any and all contribution to revenues is most welcome. One surefire way to increase revenue is to prevent contract leakage; or oppositely stated, make sure that you receive all the revenues to which you are entitled. Effective contract management can also enable companies identify new sources of revenue by better sales into the installed base. And finally, effective and automated contract management enables companies to ensure that compliance is maximized. Since contracts contain legally binding terms and conditions, it comes as no surprise that business and governments impose financial penalties or sanctions when parties fail to comply with what they have agreed to. Additionally, many governments continue to conceive and impose stricter regulations that govern many contractual business relationships.
 
It goes without saying then, that automated and effective contract management can enable companies to increase the efficiency of their contract management processes, increase revenues by using contracts as sources of critical information, and reduce the risk of non-compliance though better contract execution management. Remember, the heart of every business relationship starts with a contract.