Successful contract management isn’t achieved solely by implementing an efficient platform like Zeal. An organization’s tools and strategic vision play mutually supportive roles. In many cases, companies mistakenly expect technology adoption alone to solve efficiency and financial issues without defining a clear direction to solve existing issues. In 40% of organizations, there’s uncertainty about who is responsible for various contract management tasks, impacting costs and time efficiency. Establishing a well-defined framework for CLM software to function seamlessly is crucial, much like a synchronized orchestra.
How does this lack of synergy look in numbers?
After the uncertainty comes to the realization. 89% of organizations do not consider their contracting process to be “very effective.” This diagnosis demonstrates how organizations experience challenges in contract efforts, making the need for better tools and frameworks palpable.
The Impact of contract management on costs
When it comes to contract costs, complexity is a crucial factor. Drafting a primary contract averages $7,000, while complex agreements can soar to $50,000. This wide range highlights the financial risk of mistakes, especially for organizations with high contract volumes or interconnected agreements where the accumulation of costs often comes from a broader pattern of inefficient or error-prone processes across multiple contracts.
Safeguarding these contracts, ensuring their accuracy and enforceability demands substantial time and resources. Yet, companies continue to lose an estimated 9% of annual revenue due to contract leakage. Investing in contract lifecycle management (CLM) tools, such as Zeal, is not merely a protective measure to increase revenue, but a strategic move to optimize processes prone to errors and inefficiencies.
After a contract is signed, the work doesn’t stop. Ongoing management is necessary to track key dates and milestones, ensure compliance with obligations, monitor performance, and make any necessary amendments. These tasks require dedicated resources and may incur costs related to software, personnel, and potential legal consultations.
The impact of Inefficiency in Contract Management
A lack of framework or vision can have far-reaching consequences that extend beyond financial losses, significantly impacting a company’s operational efficiency, relationships, and overall agility such as:
- Isolated Information: Contracts scattered across various departments or systems create information silos. This fragmentation prevents teams from easily accessing the latest versions of agreements or understanding their full context, leading to miscommunication and delays.
- Lack of Visibility: Without centralized contract visibility, tracking approvals, identifying bottlenecks, and ensuring compliance becomes a cumbersome task. This lack of transparency hinders collaboration and increases the risk of errors or oversights.
- Limited Access to Data: When contract data is not readily accessible or searchable, it becomes challenging to make informed decisions based on past agreements or market trends. This can lead to suboptimal choices and missed opportunities for optimization.
- Non-Compliance: Inefficient tracking and monitoring of contract obligations can lead to non-compliance, exposing the company to penalties, legal disputes, and reputational damage. Missed deadlines or overlooked clauses can have serious consequences.
Many organizations struggle to create a unified system for managing contracts. This lack of organization leads to confusion about roles and responsibilities, disjointed processes, and too much reliance on manual tasks. The results of this disorganization are serious, including financial losses due to errors and oversights, as well as hindered collaboration and missed business opportunities.
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