With rapidly changing and the growing complexities of the sourcing environment, expectations out of procurement organizations are way beyond cost savings. To accelerate, protect, and optimize their business, it is about time they completely transformed how they thought of procurement. This article aims at reinstating how the Procurement function will transform and achieve high levels of efficiency with proper Contract Management software in place.
A Contract Management software with advanced analytics functions prepare procurement functions to strengthen key supplier relationships, stay agile towards untapped opportunities, and have complete visibility in the supplier agreements to give insights on the following:
- If the terms and conditions of any agreement need re-negotiation due to a change in priorities
- If the products and services offered by the vendors can be potentially acquired at a lower cost from different vendors
- If there are opportunities to cut costs by terminating or re-negotiating contracts that are no more vital to the organization
A resilient supply chain resilient, efficient, and sustainable supply chain has the best contracting process driven by collaboration to ensure risk-free operations.
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Contract Management addresses several procurement processes, including:
- Proposal development
- Risk assessment
- Approval/review (including final signatures)
- Analysis and reporting
The above processes are very important right from authoring to auditing. So, contract management plays a huge role in streamlining the various procurement processes. However, in spite of the benefits of automated contract management, only 25% of procurement teams have adopted the technology, and another 47% still plans to upgrade in the future. The top-notch procurement teams already automate their contract management processes 40% more than the others, thus, leading to improved price, contract, and transaction compliance rates.
How Contract Management Streamlines the Procurement Process?
Now that we know how the procurement teams can benefit from an advanced contract management process, let’s look at the ways in which an advanced Contract Management solution can return the favor:
Managing supplier relationships with better visibility – Contract Management solutions offer in-depth visibility into the performance of vendor agreements. With real-time insights into which suppliers are complying with the terms and conditions and which aren’t, the procurement team can act accordingly and manage supplier relationships more effectively.
Tracking contract data with dashboard and reports – Contract Management solutions allow procurement professionals to monitor and track spend against supplier agreements. This data is captured into dashboards and is also available through customizable reports. This makes insights available to the team at their fingertips and ensures that they’re reporting accurate data.
Better budget management and forecasting – A CLM platform provides quick and accurate data regarding the total value of all contracts with a supplier, the number of agreements signed for a product or service, etc. This information helps in forecasting exercises. Also, the automated alerts and notifications prevent auto-renewal of an agreement that was planned to be canceled, thus, helping the procurement team to manage the budget.
Always prepared for compliance audit – Contract Management solutions allow the users to track and save all the changes made during authoring, negotiation, and approval stages. It provides detailed historical data regarding what exactly was changed, the time when was it changed, the person who changed it, etc. With this comprehensive audit trail, organizations will always be ready to face a compliance audit.
Prevents from heavy penalties due to regulatory violations – The first and foremost challenge faced by the procurement department is to track if their organization is complying with all the contractual obligations, failing which results in serious financial penalties. Advanced AI solutions like Zycus’s Merlin Protector constantly monitors contract milestone and performance and notifies the users in case of any discrepancy, thus, preventing non-compliance.
Shortens the pre-contracting phase – Slow contract creation and approval uses up the procurement resources that could’ve been utilized on working on future agreements. Zycus Merlin Guide speeds up contract authoring with pre-approved clauses and a comprehensive template library. Automated alerts notify relevant stakeholders for revisions, redlines, and approvals, thereby increasing flexibility while driving faster approvals.
Ability to evaluate the merit of deals – A deal might seem favorable under certain circumstances, but that might not hold true for other situations. The procurement teams often lack all the information they need in order to analyze if a deal is a favorable one. A CLM repository makes this information available through access to historical contracts. Hence, the teams can identify terms associated with strong ROI and compare the proposed agreements with the archived ones.
Identification of revenue opportunities – With organizations having to manage hundreds of contracts, unclaimed entitlements or loss of revenue opportunities is a common challenge faced by the procurement teams. AI tools of modern CLM solutions capture the terms of products and services, prices, discounts, rebates, and incentives after interpreting the entitlements, thus, enabling the enterprises to obtain the full potential of the contracts.
To conclude, it can be said that considering the benefits, procurement teams should take advantage of robust contract management systems like Zycus iContract. These solutions speed up the entire contract management process while driving more visibility and reducing the impact of potential risks. Thus, it improves the performance and compliance throughout the procurement process and allows the procurement teams to focus on capitalizing their time and resources.