Procurement contract creation and management is the process of creating procurement contracts that has a legal aspect to it and shall be used as a medium of creating purchase transactions at the same time will help in forging relations with the vendor partners and clients. A contract management system enables the users to manage the contract lifecycle i.e. from the point a contract document is designed post negotiations with the vendors, getting it approved, and managing amendments, timely renewing it and taking these activities forward till the time the contract with the vendor ceases.
A contract management system helps you manage all your supplier contracts and make sure that best practices are followed by the vendors as mentioned in the terms and conditions.
Importance of contract management in the procurement domain
Contract is a vital piece in the whole procurement game. Creating an efficient contract will lead mutual benefits for all the stakeholder which includes your organization, suppliers and clients. Here are some positive impacts that a contract management process will have on your operations.
Easy fulfillment by identifying the routine requirements and designing a well contract cataloging all the item/service requirements.
Control Operational expenses by creating contracts with negotiated prices and have a better spend visibility and track the financial transactions
Better evaluation of the vendor partners by making sure that the vendors respect and abide by the compliance clauses agreed
Address other procurement related challenges like delayed delivery, non-compliance related issues etc.
Why contract management should be automated?
Businesses which majorly deal in procurement activities control their operational spends by closely keeping a track on the market prices of goods and services and by making timely purchases. Improving your SOPs will in turn help in streamlining the operations which will further lead to benefits like reduction in operational costs, improving client experience and reducing risks.
However procurement teams still rely on manual practices like managing excel sheets and following other outdated practices. Organizations can benefit more and have a strategic edge over their competitors by adopting digitalization in their fields of operations. A contract management system will help the buying team to manage vendor contracts electronically and centrally. There will be no need to maintain multiple excel sheets or follow up with the buying team to look up any contract related information with a contract management system in place.
Contract management plays a pivotal role in the procurement process. A system to automate your contract creation and management efforts will in fact help the buying team to create and execute contracts faster, reduce risks of delayed services and manage good working relationships with the clients and vendors by switching to an efficient contract management system rather than following the old rut.
Benefits of Contract management Automation
- Centralized Data: Having a CMS in place makes sure that all your contracts are available at a single place for you to check and verify. Manage global contracts signed with multiple vendor partners using a single module in a click of a button. Creating a centralized digital repository increases visibility and helps you make sure that your team is making purchases by referring to the latest contracts.
- Cut-down Approval Time: Contract Management Systems are designed to completely automate your routine tasks which includes contract approvals. Create dynamic approval hierarchies on the basis of contract type and enable the approvers to review and approve the documents digitally thus increasing efficiency and turnaround time. Automating this aspect of the procurement process also serves the luxury of timely intimations to the approvers about the contracts pending for their approval thus making sure that the approvers are alert and can take timely action on the contracts.
- Email Notifications: Renewing contracts that are on the verge of expiry is very crucial and should be done on a timely basis in order to avoid any risks related to product/service delivery. By recording the expiry date of the contracts, a contract management system makes sure that the contract owners/creators are well aware about the date of expiration and can take necessary steps to on time. Hence creating a digital contract management repository enables the team to have a better view on the contracts’ validity.
- No limitations: Create multiple contracts electronically based on your item or service requirements with no limitations. Manage contracts of all types using a single module and automate the entire procurement process. Having your contract files stored on a cloud based system enables you to access them on the go anytime anywhere. Businesses can now stop limiting themselves by relying on outdated and cumbersome processes by adopting the digital advancements in the field of procurement.