Contract management reporting is a competency that allows businesses and organizations the data analytics they need to control revenue leakage, comply with applicable laws and regulations, and achieve other beneficial outcomes. All of this is achievable if the contract management process is proactive and well-organized.
Businesses that optimize reporting with contract lifecycle management software throughout the contract lifecycle stand to gain the most from their contract management practices.
Developing a Contract Management Plan
According to data from Healthcare Finance, roughly 60% to 80% of an organization’s transactions are governed by contracts. Contract agreements impact day-to-day activities within a business, from the price of supplies to factors that control challenging project timelines. Creating contracts with a solid plan for tracking success may significantly impact daily operations.
The National Association of State Procurement Officials (NASPO) suggests holding kick-off meetings and preparing a contract administration plan. Kick-off meetings serve as opportunities for businesses to clarify details like who will see the contracts, which tasks one is responsible for, how a draft will be created, and possible issues in contracts that require close monitoring.
Specific departments will have a chance to voice concerns or priorities in contracts before a draft is complete. Lastly, there should be a clear understanding of who will conduct milestone reviews and communicate updates to related parties before a contract renewal.
Identify Pain Points
Programs within an organization all have their strengths and weaknesses. A company seeking to optimize contract management reporting may wish to address a prior system’s weakness. A few common contract management problems include:
- Slow negotiation or payment cycle turnaround time
- Revenue leakage
- Compliance failures
- Unexpected costs
- Delayed project timelines
Identifying specific issues your business plans to address can help guide processes in contract management reporting. A company that is worried about compliance and timeliness might want specific reports for each new stage of a project, primarily when the contracts change complete steps in the negotiation or approval process. Contract management reporting lets the legal team know that they are, for example, taking three weeks to approve contracts, that team member A is reviewing 2X as many contracts as the rest of the team, that 30% of the contracts have language in them that puts the organization at risk of being out of compliance or risk of liability, or that contracts A-G are coming up for renewal next month. Creating reminder alerts for contracts and reports can help keep leaders from missing important review dates.
It is not uncommon for branches or departments within a business to operate independently in enterprise organizations. Even if specific divisions work with the same contract at specific points, there may not be many opportunities for the legal department to provide or gain insights from another team within the organization. The risk is that legal departments may start to behave as silos, using contract management software systems that do not communicate freely with other systems across the enterprise.
Transparency and shareability is key. General counsel, financial officers, and strategic project leaders require readily accessible reports, data analytics, information and materials. Working within a shared system of data analytics and information like a contract lifecycle management system can ensure you get access to performance data across different departments.
Using KPI Metrics to Track Contract Performance
The chief financial officer of an organization may not spend much time directly managing contracts and reports. However, this executive may be interested in understanding the ROI that contract management software systems provide. Effective contract management reporting collects data that top executives can use to assess the value of contracts and the contract management system itself.
What are the key elements to quantify contract performance? The first piece to think about is the contract agreement. Defining and rating acceptable performance requires KPIs (key performance indicators) and standards for:
- Contract goals
- Risk mitigation and information security
- Contract terms
Contract management reporting plays a critical role in a contract’s success. Ineffective or non-existent reporting makes it easy to overlook potential cost savings or miss potential risks until they become a problem. Staying involved with real-time reports throughout the contract lifecycle helps both the contract owners and organization complete successful projects. To assess contract progress effectively, it is recommended that you clarify:
- Contract monitoring methods
- Reporting frequency
- Milestone and performance metrics
- Process for dispute and claim resolution
- Contract closeout checklist
Get a straightforward process for conducting KPI reviews linked to contracts.
Prepare for Unexpected Developments
One of the essential benefits of effective contract management reporting is the increased ability to create and identify necessary changes to contracts. Ideally, any contract would proceed smoothly and follow every original agreement line. In reality, businesses aren’t always that lucky.
Sometimes, organizations may wish to amend a contract due to an unexpected positive development, like a newly available grant.
Contract management reporting doesn’t predict the future, but it can help organizations manage, prepare and respond effectively to unexpected circumstances. Thorough reporting can provide insights into why a contract requires an amendment or which parties may be subject to consequences. Leaders can track and report progress quickly, so they are informed when correcting issues. If a business has access to reports on contract amendment processes when drafting contracts, they can use these as a guide to approve future contracts and deals.
A broad approach to contract management and its administrative usefulness can reveal the new potential for reliable reports to improve a business’s operations. Contract management reporting that uses performance metrics and assessment of contract management methods is a valuable business tool that can provide benefits across the enterprise.
To explore how a CLM system and contract management reporting can benefit your organization, schedule your free custom demo here or contact us at +1 650 459 5637 or email@example.com.