Contract management must not end with the signature!

Many companies pay the utmost attention to contract management - until the contract is signed. What then happens to the contract documents is often tragic: they disappear somewhere and are forgotten. This is all too human - but uneconomical.  

Why many companies neglect contract archiving

Why does contract management end with signing for so many companies? Why is the archiving of contracts treated so stepmotherly? There are three main reasons for this:

1. reason: there is no contract archiving department

Companies work in departments. In silos. Each of these silos has its own agenda, its own contract management requirements and, ultimately, its own way - or naughtiness? - of storing contracts. The nature of contracts differs by department.

While purchasing primarily concludes supplier contracts, sales has to deal with customer contracts, commission contracts and the like. Product Development purchases its own material and concludes contracts with

external laboratories. - And each of these departments is interested first and foremost in the issues before the contract is signed:

  • Who do we want to buy from?    
  • What exactly do we want to order or offer?      
  • How should the conditions be defined?    
  • How do we evaluate or design the prices?    
  • What deadlines should be in the contract?      
  • Who must / should approve the contract, who should co-sign?  
  • Etc.

When the contract is finally signed, the interest of most of the parties involved is abruptly extinguished. The contract disappears in a Leitz folder or - worse - in the second top drawer of the desk. After all, there is no "contract archiving department" to which the signed contract can be forwarded. No one is really responsible. Hence the second top desk drawer (or even the bottom one on the left).

Reason 2: High workload

Every controller can tell you a thing or two about it: about the structured collection of contract data for evaluation purposes. That is hard work. Not only is there a lot of different information contained in the contracts, but it is also often difficult to categorise. (Example: into which categories do I group the GTC of SaaS?) This is probably also the reason why there is hardly a central contract archiving department in any company: The expertise needed to evaluate the contracts is in the "silos". Only the purchasing department knows the contract parameters of the supplier contracts in detail. The ideal solution would therefore be a contract archiving system that is centralised but can be operated directly from the individual "silos". Without any contract archiving department secretaries ;)    

Reason 3: Resistance to change

The rule of thumb is still: "What we have always done this way will still work quite well tomorrow". Companies have habits. They call these "structures and processes". Changing these habits is as difficult and cumbersome for companies as it is for people. Even if many employees are annoyed by inefficient contract management, there is usually no interest in fundamentally rethinking the structures and processes. Nobody wants to burn their fingers on it. However, changes can be initiated if the economic added value of the new solution can be made visible.    

The economic added value of central digital contract archiving  

Hand on heart: Who hasn't discovered an "old" contract in their drawer (the one at the bottom left) and had to realise with regret that they had never exhausted the services promised there? Who hasn't been caught off guard by a bill for contract renewal because they overslept the cancellation period? As long as companies do not have dedicated contract managers in the departments ("silos"), such omissions will continue to be a regular occurrence.

Because employees have better things to do than check "their" current contracts every month. Reminders such as calendars, Todoist, Asana or Trello are also of no help if they are not fed with the necessary entries in a disciplined manner. The only thing that really helps is a well-functioning, centralised digital contract archiving system.  

The added value of a well-functioning contract administration lies mainly in three areas:

Exploit contract value

Some contracts contain special provisions which only apply in certain cases. The best known are volume discounts (discount scales) and additional services. To take advantage of such contract provisions, you need to know them. And to know them, one must have easy and quick access to the contract. You only have this access if the contract is not in your colleague's drawer and he is on holiday.    

Meet deadlines  

As already mentioned: Missing the notice period is the classic deadline sin. In addition, there are many other omissions: The right of objection, subsequent delivery, price reduction, etc. - ultimately, almost every contract contains one or another deadline that costs the company cash if it is not observed.  

Save working time  

"Order is half of life - the other half is searching". Companies have probably wasted more man-hours searching for documents or their contents than they have searching for a new CFO. Contracts are tools like screwdrivers: if they are at hand in the right place, they serve well. If they are in a drawer somewhere, the search begins.

How ContractHero helps

ContractHero is the central digital contract repository which, thanks to artificial intelligence, makes the recording of contract parameters incredibly efficient. All important information from the contracts is Contract management software automatically: Contract partners, prices, deadlines, etc.

Of course, the contract details can also be added manually. Thanks to the structured recording, the contracts can be listed in clear tables and sorted according to different criteria (contract partner, contract category, prices, deadlines,...). In this way, companies ensure that contracts are recorded in a standardised form, regardless of which department they come from and what they contain. With ContractHero, all departments can access the same contracts. This facilitates communication within the company enormously.

Finally, a word about costs: Unlike traditional document management systems, ContractHero works as a cloud solution (SaaS). This means that prices are adapted to the size of the client company. Those who start small pay small prices and still get the full functionality of the software. Scanning and importing into ContractHero is child's play. If you are looking for a particularly convenient solution for scanning, you will find it at CAYA, a partner company of ContractHero. ContractHero makes it very easy to manage contracts digitally from a central location. And that is a good thing. Because this way, contracts will never again disappear in a drawer - neither in the second from the top nor in the one at the very bottom left.

Sebastian Wengryn

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