Contract Management: The Software Asset You Must Pay Attention to

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Are you struggling to manage your organization's SaaS contracts, licenses, and agreements? It's a common hurdle, especially for organizations drowning in paperwork.

Managing contracts can be overwhelming due to the constant influx of documents and deadlines. Missing renewal reminders for SaaS licenses can exacerbate the chaos, potentially exposing your organization to penalties.

Many organizations struggle with contracts getting lost in shared folders or buried in individual employee inboxes. This lack of centralized visibility makes staying organized and on top of important deadlines challenging.

However, there's a solution to this situation: prioritizing contract management. Organizations can regain control over their contracts by implementing effective contract management practices.

This article explains why you should emphasize contract management and how to select the right one to make the process easier for you.

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What is contract management?

Contract management is the process of overseeing legally binding agreements from initiation to execution. It aims to optimize operational and financial performance while minimizing associated risks.

This process helps organizations ensure compliance with contract terms, optimize vendor relationships, and streamline operations.

Let’s understand how this works.

Consider a scenario in which a company intends to procure a project management tool from a vendor.

• First, the company initiates the contract creation process, outlining the scope of work, deliverables, timelines, and other pertinent terms.
• Once both parties, the company and the chosen vendor, approve and sign the contract, it becomes active, and the company manages its execution.
• Throughout the contract duration, the company evaluates the vendor's performance to ensure adherence to the agreed-upon terms and conditions.

There are different stages in contract management. This table will help you understand the different states of a contract lifecycle:

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Why is contract management important?

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With proper contract management systems in place, you can:

1. Control cost: Contract management allows you to control costs by ensuring you're not overpaying for services or products. This involves negotiating favorable terms and diligently monitoring contract performance to minimize expenses and maximize value for your organization.

2. Risk mitigation: It helps you mitigate risks associated with contractual obligations. It helps identify and address potential risks, such as non-compliance with contractual terms, financial penalties, or legal disputes before they escalate.

3. Compliance assurance: The process ensures contract compliance with regulatory requirements, industry standards, and internal policies and helps monitor adherence to contractual terms such as service level agreements (SLAs), data privacy regulations, and intellectual property rights.

4. Efficiency improvement: These streamlined processes improve operational efficiency by reducing manual tasks, streamlining workflows, and automating repetitive processes. This frees up time and resources for more strategic activities.

5. Enhanced supplier relationship: Emphasizing contract management helps foster better relationships with vendors, suppliers, and partners. Clear communication, transparent terms, and fair negotiations build trust and collaboration, leading to mutually beneficial outcomes and long-term partnerships.

The hidden costs of poor Contract Management

If your organization doesn't have a proper contract management system, it can lead to efficiency issues and cause loss of productivity and efficiency, including misallocating resources.

Missed renewal dates and unexpected fees: When contracts aren't managed effectively, renewal dates can be overlooked, leading to late renewals and unexpected fees or penalties. These fees can accrue quickly and significantly impact the organization's budget.

Non-compliance with licensing terms leading to audits: Failure to comply with licensing terms, such as software license agreements, can result in audits by vendors or regulatory bodies. If non-compliance is discovered, these audits can be costly, time-consuming, and potentially damaging to the organization's reputation.

Difficulty tracking software usage and potential overspending: Without proper contract management, organizations may struggle to track usage and costs accurately, leading to overspending on unused or underutilized software licenses.

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How can contract management software help?

Leveraging contract management software can help organizations in various ways. It ensures better contract supervision, minimizes risks, and optimizes software procurement and management processes.

1. Centralized storage and easy access to all software contracts

When you opt for contract management software, you get a centralized repository for storing all software contracts. This helps you access contract documents whenever needed. It reduces time spent searching for files and minimizes the risk of losing important documents.

This feature is useful for organizations that manage hundreds of contracts with different clients and vendors. Instead of storing contracts in multiple folders or locations, the software can store all contracts in one secure database accessible to authorized users.

This centralized approach eliminates the need to sift through various storage locations to find specific contracts. It improves operational efficiency and ultimately saves time, which boosts productivity.

2. Automated alerts for renewals and upcoming deadlines

When managing numerous SaaS licenses, missing renewals can be a big issue if not tracked properly. Relying on manual processes might lead to overlooking several renewals.

To avoid this, contract management systems offer automated alerts for renewals and upcoming deadlines. This tool will send you notifications in advance, helping you prevent service interruptions and ensuring no renewal date is missed.

For instance, if a SaaS license is nearing expiration, the system can automatically send reminders to relevant stakeholders 30, 60, or 90 days in advance. With this insight, you can promptly take action and decide whether to renew or retire the software.

3. Improved license tracking and management

Contract management software helps organizations track software licenses more effectively. It monitors license usage and identifies opportunities to optimize and reduce costs.

But how does this process unfold? The answer is straightforward: through direct integrations. These integrations provide visibility into the licenses purchased for each application.

Advanced contract management tools offer detailed insights into license usage patterns, highlighting which licenses are frequently used and underutilized.

Armed with this information, you can make informed decisions about renewals, renegotiations, or reallocating licenses as needed. This proactive approach ensures that organizations can maximize the value of their software investments while minimizing unnecessary costs.

For instance, if it shows that certain applications are not properly used or underutilized, you can set up workflows to reclaim licenses from low-usage users, reallocate them to new users, or adjust them during renewals. Also, if you decide to retire some licenses based on usage, you can do so.

4. Streamlined contract negotiation and approval processes

When utilizing a contract management tool, you gain insights into software usage patterns and price benchmarks, enabling better negotiation with vendors.

Access to usage data and price benchmarks helps identify negotiation opportunities, such as volume discounts or flexible payment options. This clarity in conveying needs leads to more fruitful negotiations and contracts that effectively meet requirements.

Additionally, contract management software automates approval workflows, eliminating manual intervention and streamlining the contract approval process.

Slack-enabled workflows

Some advanced tools also offer Slack-enabled workflows. With these workflows, employees can raise purchase requests directly through Slack, simplifying the process.

These requests will be automatically directed to relevant stakeholders for approval, expediting the approval process and enhancing overall efficiency.

Moreover, contract management software provides real-time visibility into contract status. This allows organizations to track contract progress, monitor updates, and promptly address any issues that arise, ensuring stakeholders are well-informed throughout the contract lifecycle.

Some contract management tools offer additional services for vendor contract negotiation, helping organizations procure software at optimal prices.

If you lack a dedicated procurement team for SaaS buying, you can get help from industry experts who can help you secure the best deals beyond the listed prices, leveraging price benchmarks and negotiation strategies.

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Benefits of effective contract management

With an effective contract management system, your organization achieves:

1. Cost savings through automated renewals

By automating the renewal process, you can avoid costly contract lapses and negotiate better terms with vendors. This leads to cost savings and ensures uninterrupted access to essential software services.

Advanced contract management software keeps you on top of renewals at all times. You'll get renewal reminders via email and Slack 30, 60, and 90 days before the renewal date. You can create a renegotiation plan to optimize your contracts or make way for termination too.

2. Reduced risk of compliance issues and penalties

Effective contract management helps organizations comply with licensing terms, regulatory requirements, and industry standards. This reduces the risk of audits, fines, and legal disputes, safeguarding the organization's reputation and financial stability.

3. Improved visibility into software assets for better decision-making

Contract management provides a comprehensive view of software assets, including license terms, usage data, and renewal dates.

This visibility enables organizations to make informed decisions about software investments, optimize usage, and identify opportunities for consolidation or rationalization.

Furthermore, the software will automatically identify redundant, duplicate, and unused applications. You can then analyze the usage insights and make informed decisions to optimize costs effectively.

4. Increased efficiency in managing software contracts

Having a good contract management system helps a lot with software contracts. It makes managing things easier by putting all the contract info in a centralized place, automating tasks, and smoothing the whole process.

This means less paperwork, fewer mistakes, and more time for important stuff, making everyone more productive. For example, let's consider a software development company that manages numerous contracts with different vendors for various tools and services.

Without a centralized contract management system, tracking and accessing these agreements could be daunting, leading to delays and potential errors.

Another way to increase efficiency in managing software contracts is through automation. Contract management software often offers features such as automated alerts and reminders for upcoming contract renewals, milestones, or compliance deadlines.

By automating contract lifecycle management, you can ensure timely action is taken, reducing the risk of missed deadlines or overlooked obligations.

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Choosing the right contract management software

Choosing the right contract management software involves several steps to ensure that the chosen solution aligns with your organization's needs and goals.

1. Identify your specific needs and requirements

Understand what your organization needs. This could include contract storage, automated alerts, or reporting capabilities.

For example, if your organization deals with large, complex contracts, you may prioritize software that offers robust search and filtering functions to locate documents quickly.

Consider factors such as the number of new contracts you manage, their complexity, and the level of collaboration required among team members. This assessment will help you narrow your options and choose a solution that fits your organization's needs.

2. Consider features, functionalities, and integrations

Evaluate the features and functionalities of different software solutions and compare them against your requirements. Look for features like contract templates, electronic signatures, customizable workflows, risk management, and integration capabilities with other systems, such as CRM or ERP software.

For instance, if your organization relies heavily on Salesforce for customer management, you may want contract management software that seamlessly integrates with Salesforce to streamline processes.

Consider future scalability and whether the software can adapt to your organization's evolving needs as it grows. Choosing a solution with flexible integration options ensures compatibility with your existing systems and allows for seamless data exchange between platforms.

3. Evaluate ease of use, scalability, and security

Assess the software's user-friendliness to ensure that it will be adopted by your team with minimal training. For example, look for intuitive interfaces and customizable dashboards that simplify navigation and task completion.

Consider whether the software can scale with your organization's growth. Choose a solution that offers flexible pricing plans and can accommodate an increasing volume of contracts and users over time.

Prioritize security features to protect sensitive contract data. Look for encryption protocols, role-based access controls, and compliance certifications such as SOC 2 or ISO 27001. These measures help safeguard confidential information and ensure regulatory compliance.

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Conclusion

When you take the necessary steps to streamline your organization’s contract management process, you pave the way for increased efficiency and productivity with minimal bottlenecks.

To achieve this goal, thoroughly analyze areas where your current processes could be enhanced to manage contracts and subscriptions better.

Next, leverage the capabilities of SaaS contract management solutions to automate various processes, such as centralizing all contracts in one location and implementing renewal workflows.

If you need CLM software to assist you in this journey, consider CloudEagle as a reliable option. It is a SaaS management and procurement platform with a contract management module.

The tool offers the capabilities and best practices needed for effective contract management, from handling contracts to renewals. It provides a clear view of all your contracts on one dashboard, making managing contracts, invoices, and related workflows in a single location easy.‍

Book a demo today to discover how CloudEagle can transform your organization's contract management.

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