For any business, Contract Management Software is a big investment. For companies with small contract collections, a software package can prove to be a significant financial outlay. For larger corporations with contracts numbering in their thousands, the implementation of Contract Management Software can represent a hefty investment of both finances and personnel resources. In both cases, it is essential to measure the ROI of Contract Management Software to ensure that your business is getting optimal value from the installation.
What is ROI?
When we refer to ROI in business, we mean Return On Investment. This is the ratio between net income and the investment of resources into the specific project in question. For any investment, it is favourable to see a high return on investment, because this means that the outlay has not only been recouped but has exceeded that level in terms of money coming into the business as a result of the project. In other words, your business wants to see significant financial gains as a direct result of the implementation of Contract Management Software. Your Contract Management Software package needs to clearly demonstrate that it is earning its keep.
The calculation of ROI is not straightforward, however. It depends on a number of factors, each of which change according to the nature of the investment itself, and the type of project that benefits. When it comes to Contract Management Software, the return on investment is calculated not simply by determining whether the overall profitability of the company has increased since the implementation of the platform, but rather by drilling down into all related areas and analyzing specific gains. The ROI of your Contract Management Software requires working to understand the entirety of the ongoing contribution the platform makes to your business.
Measurement criteria for the ROI of Contract Management Software
When your business implements Contract Management Software, it is invariably because you understand that there is a need within your operation to bring your contract collection under tighter control. You are also trying to boost profitability through increases in the efficiency of processes across your organization using a high degree of automation. It is easy to assume, therefore, that broad efficiency gains within your business are the only metric by which we should measure the return on investment of Contract Management Software. In fact, Contract Management Software is designed to create a broad range of gains related to both efficiency and profitability throughout your business operations, and any comprehensive ROI analysis must drill down through these layers of detail if an accurate overview is to be gained.
Time spent on contracts
Contract Management Software is designed to streamline your administrative processes, as they relate to Contract Management. This should result in a reduction in time spent working on or with contracts - a gain that should result in several benefits:
- Existing contract documentation is easy to find.
- Editable templates speed up contract creation.
- Standardized language is readily available for inclusion.
- Manual handling is eliminated.
Time spent on obligation management
- Obligation management is the collection of processes maintained by an organization to meet its contractual obligations. If an organization is efficient and working in a streamlined way, a reduction in time spent on obligation management should be evident. For example, a business should be able to meet each of its obligations – the deliverables, milestones, and renewal deadlines – without resulting in any workflow bottlenecks occurring at any point in the organizational structure.
Time spent on missed renewals
- When a business is having to play catch-up with its Contract Management processes, it is working inefficiently. Missing renewal dates is an indicator of inadequate Contract Management and incurs costs in both resources and in poor performance, in the case of those contracts that are not functioning in an optimal way. If the implementation of Contract Management Software has led to a reduction in the time spent on missed renewals, therefore, then it is creating efficiency in the form of a proactive approach to Contract Management.
Time spent on audits
- Audits are a vital element of business management. They are an integral part of compliance processes, while also serving to bolster data security and accountability among personnel. Audits require evidence of activity, proving full adherence to policies and procedures, and this involves a lot of administrative tasks. Contract Management Software incorporates a high degree of automation, including in the area of audit trails. Without it, audits must be dealt with entirely manually, consuming a significant amount of resources. This means that a Contract Management Software package that delivers a high return on investment will greatly reduce the time that staff have to spend completing audit-related tasks.
Reduction in contract dispute costs
- Increasing efficiency in Contract Management processes is an effective risk management strategy because it involves the adoption of a proactive approach to the task at hand. A proactive approach ensures a higher level of responsiveness, and therefore a higher instance of conflict prevention rather than conflict resolution. Proactiveness enables your business to identify potential areas of dispute before they occur, allowing the organization to minimise the costs associated with legal issues. Contract Management Software is designed with risk management in mind, which means that a platform delivering a high rate of return on investment will significantly reduce contract dispute costs.
- Compliance is not just about audit trails. Audit trails are the means to prove compliance. Internal compliance is both the consistent adherence to company policy and procedure, and the level to which the business itself is shown to be meeting its contractual obligations. When Contract Management Software is performing well and generating a high rate of return on investment, audits will show that there is an increased level of internal compliance.
- Contract Management Software centralizes your contract collection and transforms it into a unified data pool, from which comprehensive, customized reports can be generated. This reporting delivers actionable data that informs decision-making in the business, and when this is functioning in an optimal and efficient way, this leads to better, more cost-effective sourcing choices. Your contract collection contains a wealth of information about third party relationships that can help to complete due diligence and refine vendor selections so, when Contract Management Software is providing value for money, it is creating an environment in which improved sourcing is happening.
Third party compliance
- The compliance levels of third parties indicates the instances of vendors meeting – or failing to meet – their contractual obligations. Your business contracts essentially regulate your business relationships, so it is important to ensure that these agreements are working in a productive way from the perspective of both parties. Combined with analysis of internal compliance, third party compliance can provide insight into efficiency levels in these relationships and, consequently, their value contribution to your business. Analyzing third party compliance can help to create and amend standardized language going forward, while also helping to mitigate the risks associated with an approach to Contract Management that is not proactive. Effective Contract Management Software will provide analysis of your entire contract collection, past performance trends, and process efficiency. Overall, this will lead to enhanced relationships between your business and third parties.
- Efficiency in Contract Management leads to an increased rate of sales simply by shortening the sales cycle. A contract is not generating revenue while it is being negotiated, drafted, signed and enacted, so the longer that part of the contract lifecycle takes, the longer it takes for your teams to be free to make the next sale. Streamlining the contract lifecycle means that everything moves faster, and sales can be made more frequently. When the rate of sales for a business is increased after the implementation of Contract Management Software, the platform is creating a high rate of return on investment.
Generation of new opportunities
- The reporting and data analysis functions of Contract Management Software are intended to help generate new opportunities – that is, business opportunities that would otherwise not necessarily be apparent in the normal course of your business operation. This is achieved because of the powerful, customizable filtration facility that transforms your centralized contract collection into a single pool of data. This resource is then processed to deliver actionable data that informs decision-making for your business. Connections, information and ideas are surfaced that can help to take your operation in new directions, while new and unexploited intellectual properties are also identified. An increase in these types of new opportunities specifically indicate a high return on investment generated by Contract Management Software.
Quantitative versus qualitative ROI
Further complicating the calculation of return on investment for Contract Management Software is the contrast between quantitative and qualitative ROI. While quantitative ROI can, by definition, be determined using metrics specified according to the type of business in question, qualitative ROI can be just as important, and can make just as significant a contribution to your business as anything else. Indeed, qualitative ROI will ultimately translate into quantifiable revenue boosts, but its origin is decidedly less easy to measure.
When Contract Management Software is installed and implemented, the impact that gains in efficiency can have on teams of staff and personnel should not be underestimated. Firstly, there is the straightforward streamlining of administrative tasks that would otherwise fall to employees to complete. Releasing those team members from the more repetitive, unchallenging tasks involved in Contract Management can deliver a notable boost to morale and motivation. This, in turn, can lead to increased output from personnel, making increased profitability more likely.
Secondary gains, such as reductions in the carbon footprint of the business, can also contribute to an increase in staff motivation. When a business demonstrates progressive, forward-thinking in all of its policies and corporate goals, a more positive working environment is created. The nature of the corporate culture of your organization can have a significant impact on the commitment of those working within it, and the more engaging it is, the more engaged staff will be in making it a success.
The Symfact ROI
When you install and implement Contract Management Software designed by Symfact, you can expect a high rate of return on investment. This is because every feature of the browser-based platform has been created with valuable ROI in mind. Efficiency is first increased with the creation of a centralized contract repository, for example, which allows for all contract documentation to be pooled as a unified, thoroughly catalogued data source. A contract template library enables the application of standardized language and clauses, thereby mitigating risk associated with such legal agreements.
Time and resources are saved with the automation of basic administrative tasks, including audit trails and workflows. Deadlines, milestones and renewals are handled in a proactive way that ensures risk is minimized and staff are motivated to remain engaged and productive. Actionable data and business insights delivered by customized filtration and reporting generate new opportunities and quantifiable improvements in sourcing decisions. Indeed, third party due diligence is supported to such a comprehensive level that the risk management protocols for the entire business are enhanced and improved by Symfact Contract Management Software and its proactive and innovative approach to the full process of the contract lifecycle.
These effective future-proofing strategies are taken further, with language, currency, and sales territory functions that enable global market flexibility for businesses. This means that the actionable data delivered by the analysis and reporting function can be applied for business expansion purposes. Meanwhile, the browser-based design with Cloud technology incorporates operational scalability, ensuring that authorized personnel can access the documentation and system areas they need, from any web-enabled device in any internet-connected location. This allows the business to weather any type of disruption. Overall, Symfact Contract Management Software has all the tools needed to provide a high level of return on investment in a way that can be measured effectively.
Contact Symfact today to learn more about the return on investment you can expect from Contract Management Software, and to arrange your free demonstration.