Right now, most organizations are trying to finalize budgets and plans for 2012 and it’s more challenging than ever. These times of financial turmoil and uncertainty put unprecedented pressure on revenue planning, cost-control and investment during 2012.
Critical planning assumptions will be based on the judgment of which contracts can bring in revenue and what cost has been contracted already.
Knowing and understanding all of your contracts is vital to your organisation being able to plan proactively and accurately.
A monumental effort goes into creating contracts and negotiating favorable terms and conditions; without systematic controls in place much of this negotiated advantage is squandered.
Budget and planning are critical to your business and yet many companies still lose control of their contracts and pay the price. The objective of tightly controlled budgets and controls is to put the business in the driving seat;. the worst scenario is to discover an unavoidable contracted cost that has not been included in the new budget. I think we’ve all been there.
Can you answer the following questions?
- Do you have visibility of all contracted costs?
- Which customers have the right to terminate their contracts this year?
- Which supplier contracts are due for renewal; can you terminate or re-negotiate?
Poor contract visibility creates lack of tactical and strategic intelligence
Contracts today typically don’t reside in a central repository and are not accessed via formal retrieval procedures. More likely, they reside in multiple locations, in both digital and hard copy, often outside the companies’ physical boundaries.
Contract management creates a paradox for most organizations. On the one hand, contracts must be accessible to ensure data accuracy and integrity, contractual compliance and monitoring, with the flexibility for the contract owners to make revisions, addendums, measure contract performance and support internal and external audits. On the other hand,data protection, contract access monitoring and security is of paramount importance.
Large and midsize organizations have thousands of contracts spread across countries, divisions and departments. It’s not hard to imagine the scale of the challenge in pulling together the relevant contract information that proactive business planning requires.
Resolving the issues of contract visibility, security and risk management with fragmented manual processes is a recipe for failure.
Ineffective monitoring, reporting and management of compliance
Most companies have not implemented a system to monitor contracts from a compliance and financial perspective. The lack of such a system typically results in rear-view monitoring and ‘brushfire management’ with little chance of avoiding increased operational cost and risk as consequence of non-compliance.
Inadequate analysis and follow-up of contract performance
“What you don’t know can’t hurt you,” might be a successful strategy for your personal life, but in business it’s a strategy for going out of business! This haphazard approach to performance management leads to under-the-radar problems of hidden costs and liabilities that can remain undetected within a company for years. These time bombs can have a crippling effect by reducing profitability, increasing cost through inefficiency and leaving the company exposed to unexpected disputes and litigations.
So how do we avoid these problems and address the challenges surrounding contracts?
“What you can’t measure, you can’t manage.”
This classic performance management quote is the corner stone of a proactive contract management solution. While some contracts may still be simple many that are pivotal to the day to day running of the business are multidimensional. These complex contracts have tremendous impact on the bottom line and a company’s competitive position in its industry. Proactively managing contracts requires a system with the following key functionality:
- Discover: Automated discovery of existing contracts currently in both paper and digital form. Search for key terms and load into contract management system.
- Store: Central secure searchable electronic repository for all contracts
- Report: Sophisticated management reports and alerts connected to electronic calendars.
The above is a minimum requirement for you to be in control of your budget and destiny during a challenging 2012.
To learn more about our unique and market leading solution of Contract Discovery and how it can help you within a couple of days, take a look at our online demo.