Businesses of all sizes collect data every day. These company data assets are related to financial transactions, sales, customer information, e-mails, contracts, and other important functions. The phrase “Data is the oil of 21st Century”, even though already a bit worn, has turned companies’ focus on their own data assets and more and more effort is put into both extract and use this source of value. Master Data Management, Big Data, Machine learning, Artificial Intelligence – these all are buzzwords related to this new oil.
Let’s view a typical company’s data assets from the IT system viewpoint: transactional data (financial transactions, inventory transactions, etc.) are well managed in ERP systems. Customer-related data (contact info, activities, deals) is managed in CRM systems. Master Data (such as Customer, Vendor, Item) is managed in one (or both) of these systems, or possibly in a separate MDM system.
But there is one asset category that stands out – and stands out because of the poor support it typically has from the system point of view. This data asset is Contracts. Hands up all who have spent countless hours fine-tuning a single contract and its every detail with another party, and when you finally reach consensus on everything and put ink on the dotted line, the process ends. The signed paper copy of this contract is stored in a binder that is then forgotten in a dusty office cabinet in the archive room. Some details of this carefully crafted masterpiece might be entered into some IT systems, but the passages which required most of the attention are just lost in the archive.
The main question is how to control contractual obligations and responsibilities buried in the existing contact base?
The early phases of the Contract management life-cycle are typically well established and run by legal and administrative professionals. Let’s call this the “creation” phase. As described above, the creation phase ends when the contact is signed. After that, the newly signed contract is moved into the “maintenance” phase, where it should remain as long as the contract is in force. In many organizations the maintenance phase has a lot of challenges. The main question is how to control contractual obligations and responsibilities buried in the existing contact base? To be able to control, you first need to understand what the contract base is. If the contracts are scattered around in file servers and different company entities and even in binders, it is almost impossible to gain control. How good is your “maintenance” phase for contracts?
Why should a company treat its contracts as a valuable asset?
The pace of business is getting faster and faster. More and more often a company faces improvement initiatives, production transfers, business consolidations, etc., which require a holistic understanding of the responsibilities and obligations – all described in the current contract base. Poor contract management may greatly hinder pursuing these initiatives, resulting in failed efforts, delays, and a lot of excess expenses. In many cases, it is such an initiative that for the first time reveals the true state of the company contract base. Typically the true state is not a positive surprise. Suddenly, the initiative’s original schedule must be revisited due to the huge effort required to collect all the necessary information from the contracts.
The contract base may also contain hidden cost-saving possibilities. As an example, think about an automatically renewing contract, signed by an employee who no longer works for the company. This contract might auto-renew itself several times before someone reacts to it and either terminates the contract or negotiates better terms.
Are electronic signatures legal? Do they hold up in a…Read More
Let us guess – you have a lot of contracts…Read More
2020 truly was an exceptional year. For us, we were…Read More