Contracts are not only legally binding documents, but also essential tools that clearly define the expectations, goals and obligations between business partners, customers and employees. They set the framework for successful collaboration, provide security in volatile business scenarios, and act as guidelines in the event of disagreements.
Adequate contract management is therefore not only desirable, but essential.
Despite their central importance in everyday business, however, contracts are often neglected, incorrectly archived and lost after they have been created - a risk that no company should take. Therefore, it is crucial to implement an efficient and reliable system.
In this guide, we present a comprehensive overview of the basics of contract management and how companies can optimize their contract management.
Whether they are agreements with suppliers, employment contracts with employees or business agreements with partners, they form the foundation on which business relationships are built. From this, it becomes clear why active contract management is not only desirable, but essential for business success.
Poor contract management can, at best, lead to longer search times for contracts. At worst, contracts can be lost and missed contract deadlines which can have a dramatic impact on a company, both financially and reputationally.
According to a study by World Commerce & Contracting, simple contracts cost about $6,900, while contracts of medium complexity are $21,300, and complex contracts can cost as much as $49,000. Much of this cost comes from missed contract deadlines, as companies that fail to meet their contractual obligations risk claims for damages. Apart from the financial consequences, this can also damage the company's image if customers and business partners lose confidence.
According to research by World Commerce & Contracting, companies can lose up to 9% of their total annual revenue as a result of inadequate contract management. This loss results, for example, from automatic contract extensions, unused contract provisions, and inadequate monitoring of contract terms.
Repeated failure to meet contractual deadlines can quickly lead to business partners terminating the cooperation. This can not only mean immediate financial losses, but also lead to difficulties in new business relationships in the long term.
According to the Journal of Contract Management, about 71% of companies cannot locate at least 10% of their contracts. The reason for this is that finding a specific contract detail can become a tedious challenge in a company that manages hundreds or even thousands of contracts. If a company does not have an efficient contract management system in place, it is not uncommon for employees to spend valuable work time searching for contracts and specific details within them. This not only costs time, but also money and can lead to further delays in urgent situations.
Given these potential risks and burdens, it is imperative for any organization to give contract management the attention it deserves and ensure it has the resources and tools to operate efficiently and effectively.
Many companies manage their contracts via email histories, GDrive, other SharePoint solutions, or sometimes still in analog folders. Although active management of contracts offers many benefits, traditional solutions often cannot meet the specific requirements of contract management in terms of security, quick retrieval of information and the volume of information. This can lead to employees gaining access to sensitive or classified information, losing or overlooking important information, which can have not only legal but also financial consequences. It is therefore essential that companies that manage their contracts digitally place the highest priority on compliance with all contract management standards.
In the analog world of contract management, physical contracts can easily be misplaced, damaged or even lost. A common problem is that contracts are filed in the wrong place or left on a desk. This seemingly innocuous mistake can have serious consequences, especially if confidential information falls into the wrong hands. It requires an effective and secured system to ensure that all analog contracts are kept safe and proper.
Contract management software is crucial for the proper management of contracts in modern businesses. These digital solutions streamline the management process by automating and organizing numerous tasks. These include centralized archiving of contracts, intelligent analysis of contract information, integrated reminder functions, notification systems, an advanced search function and filter options, and detailed access control. Overall, contract management software provides a powerful solution for contract management.
With professional contract management software, you can ensure that you never miss a contract deadline again. Most software solutions send automatic notifications of upcoming deadlines, so companies don't have to suffer the consequences of missing a contract deadline.
Another advantage of digital contract management is the ability to store all contracts in one central location. Searching through physical file folders or confusing SharePoint structures is a thing of the past. With just a few clicks, the desired contract can be found and accessed.
Furthermore, contract details can be found more efficiently, as the contractual information is presented, analyzed and sorted more clearly.
Digital contract management systems ensure that your contracts are optimally protected from unauthorized access with advanced security features, security certifications (such as ISO27001 and ISO9001), and customizable access rights.
By integrating software that can be accessed by multiple employees simultaneously, the collaborative work process is significantly optimized. This system promotes a transparent working environment in which everyone involved has a clear and comprehensive overview of all contracts. The centralized platform ensures that all employees are always up to date and that misunderstandings or gaps in information are avoided. This not only facilitates internal communication, but also ensures efficient and consistent contract management.
Through AI-supported contract analysis, all contract details are automatically integrated into the contract management software. For customers, this results in significant time savings. With hundreds of contracts, for example, whose details would otherwise have to be entered manually into the software, the time required would be enormous. Thanks to the automated transfer by AI Contract Analysis, this effort can be avoided.
ContractHero is characterized by its simple and intuitive user interface, which makes the program particularly clear. Regardless of their technical background, users can quickly find their way around. The system is designed to grow with your business. It is particularly suitable for medium-sized companies with 50 or more employees, but is flexible enough to meet the needs of larger organizations. As your business grows, ContractHero adapts as well.
To reduce the likelihood of human error, ContractHero emphasizes effective contract management. ContractHero minimizes these risks by automating processes, ensuring that all deadlines are met, and providing an optimal overview of all contracts. In addition, it offers the possibility of optimally adapting the system to the specific requirements of your company through the individual fields.
Professional contract management is essential to operate successfully and securely as a business. ContractHero not only provides the tools to ensure this, but also the ease of use to make the onboarding process as smooth as possible. In addition, excellent customer service is consistently provided and included as standard for all customers.
If you would like to learn more about how ContractHero can help you, we offer a free demo available. Let us show you how simple and effective contract management can be.
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