We previously explored the many things a commercial contract management (CCM) department can contribute to enhancing a company’s financial position in the pre-execution and post-execution phases of the contract lifecycle. This post will look at some of the things we can do with automation and efficient contract administration.
Automation – If done properly and with the right sponsorship, automating the contract management function, to the extent practical, is a significant cost and labor saving activity. While there is some up-front cost to implement systems, the payback should be pretty rapid. The labor hours saved in just locating contracts, especially in a global organization, can be substantial. Add to that the cost of drafting contracts, managing obligations, deliverables and renewal dates, reporting and research in an automated environment and the savings begin to pile up. Delays in the time it takes to execute a contract results in delays in revenue recognition.
Efficient Contract Administration: Many companies are realizing the financial and operational benefits of implementing best practices in contract management organizations. Consistent application of contracting practices through adherence to effective contracting policies is an important element in any contract management organization. Other areas where efficiencies and benefits can be seen are through utilization of low cost contracts shared service centers to perform contract administration activities where resources can be leveraged, and aligning the appropriate resources and skillsets to the various activities performed in a contract management organization. Each one of these warrants its own study and focus.
For organizations going through a transformation, it might be beneficial to work with a consultant who specializes in implementing contract management efficiencies. To initially understand how a company measures up to global contracting standards and world class performance as well as whether the contracting department is in alignment with corporate goals and strategies, the International Association for Contract & Commercial Management (IACCM) has a beneficial tool called the IACCM Capability Maturity Model. This tool “identifies the characteristics defining world class performance, and provides the capability to assess the status of commercial contracting functions” (per the IACCM). Based on first-hand usage, when the output from this model is coupled with a change program that is aligned to the business, the financial and efficiency results can be significant. Those organizations that don’t go through these periodic assessments tend to get left behind.
I invite others to share their ideas on how contract management can help a company’s bottom line.
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