Contracts are an essential part of every organisation’s operations, hence taking control and opting for management solutions is a step in the right direction.
WHY MANAGEMENT SOLUTIONS ARE KEY FOR ORGANISATIONS
But despite the effort that companies put into negotiating, drafting and understanding contracts before they’re signed, they often lose track of them post-signature, says Norman Kretzmer, the founder and CEO of Contract Understanding.
“The documents get filed away in a cabinet somewhere or scanned for storage on a server, then forgotten about, exposing the business to a range of significant risks.”
Kretzmer
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He says some of these include losing track of the actual paperwork, missing deadlines to renew or cancel contracts, failing to take advantage of incentives or discounts due under a contract, and incurring penalties for non-compliance with terms and conditions.
“That’s why most businesses that manage more than 50 documents can benefit from a formal contract management process,” Kretzmer explained.
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Here are a few tips about how you can implement an approach to contract management that will help you to maximise the benefits of the legal agreements you have signed while minimising risk:
1. Understand where your contracts are
Many companies don’t have a clear view of which contracts are in force, what the terms and conditions are, or how they’ve been changed through amendments over the years. They often also lack information about who holds internal accountability for a contract, the risk profile associated with the contract, or who their contacts are at the counterparty.
Thus, taking an inventory of the contracts you have signed over the years is a good starting point for a formal contract management process.
2. Categorise your contracts
The next logical step is to start sorting contracts into categories such as agreements with vendors and service providers, sales agreements with customers, leases and rental contracts, employee contracts, contracts for subscription services such as telecoms, insurance policies, and non-disclosure agreements.
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3. Identify the pain point
Once you’ve made sense of which contracts are in place, you can begin to identify the associated pain points. One of the most common and expensive mistakes companies make is to lose the opportunity to renew, cancel or renegotiate contracts when they reach the end of their term.
4. Choose a software solution to streamline the process
While it’s theoretically possible to keep track of contracts using a manual system like spreadsheets, it’s far from optimal. There are affordable software solutions that can help you improve the visibility of your post-signature contracts. Look for an artificial intelligence-driven, software-as-a-service offering that supports a wide range of contract types.
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5. Start uploading contracts
Once you’ve selected a solution, you can start capturing your contracts. Begin with the most business-critical contracts or those that cause the biggest headaches. Start small, especially if you have hundreds or thousands of contracts. Most solutions will use optical character recognition (OCR) to extract and repurpose text from scanned or emailed PDF documents.
6. Automate workflows
With the right software in place, you’ll have visibility of involved parties, obligations, deadlines, and distinct clauses of your contracts. This, in turn, enables you to set up automated workflows to better manage post-signature contracts.
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