What Is Contract Lifecycle Management?
Organizations, both small and large, have to manage contracts. But this responsibility, while critical, is easier said than done. At any given time, a business can be committed to myriad contracts with a host of suppliers.
Such a balancing act can be difficult to navigate. At what stages are each of those contracts in? Are you aware of when contracts are being fulfilled and when they aren’t? Who is responsible for monitoring and enforcing contracts?
If these are questions you ask yourself regularly…you need a crash course contract lifecycle management.
What is contract lifecycle management? According to Protiviti, an international consulting and audit firm, contract lifecycle management is:
“…the process of managing contract creation, execution, monitoring and analysis in order to maximize financial and operational performance while minimizing risk. The types of contracts managed through this process include all third-party contracts, such as purchase agreements, outsourcing agreements, sales agreements, lease agreements and licensing agreements.”
So, what are some of the negative impacts of not instituting a contract lifecycle management system?
Here, courtesy of Protiviti, is a list of just a few of those repercussions.
- Inability to track or enforce contract compliance (performance or pricing);
- Inconsistent and/or incorrect use of terms and conditions, impacting the ability to track and manage exposure effectively;
- No single database or repository to store and search for contracts, changes, and/or amendments;
- Failure to leverage volume rebates or negotiated terms, the increasing total cost of ownership;
- Lack of necessary internal review or approvals;
- Noncompliance with laws and regulations;
- Services/goods purchased not aligned with company objectives;
- Failure of services/goods sold to meet customer expectations (or standards unable to be met);
- Inconsistent process, leading to excessive cycle times, inefficiencies, and/or bottlenecks.
Establishing a contract lifecycle management process is difficult, especially when an organization is structured with multiple departments over many locations. Getting “buy-in” from departments can often require some deft footwork, and communication with people in different time zones can be a challenge particularly during busy periods.
But all is not lost. Adherence to a contract lifecycle management process across an organization is possible – with the help of an e-procurement software solution.
How can e-procurement help?
Implementing an e-procurement software solution will go a long way in establishing a contract lifecycle management process.
Simply put, e-procurement solutions (the good ones anyway) are designed to promote the best procurement/purchasing practices. Chief among those best practices is e-procurement’s ability to electronically create and store purchase orders, and catalog all received orders.
With e-procurement, a company will never miss or lose a purchase order. Furthermore, the fulfilment of each and every purchase order is easily ascertained because the receipt of each and every good is also cataloged in the system. If deliveries from a certain supplier, for instance, routinely arrive late or in less-than-satisfactory conditions, then an organization has will have real-time data with which to determine whether or not to continue a contract.
E-procurement promotes accountability, controls, and best practices – all hallmarks of successful lifecycle contract management.