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Or perhaps that question should be ‘Do you even have one?’ We’ve been running some webinars on contract strategy recently, and in a straw poll, we were surprised to discover that less than a third of the attendees had an effective contract strategy. Furthermore, only 14 percent had a fully implemented contracts workflow.
Does that matter?
Yes, it absolutely does. Historically, companies only consulted their contracts when things went wrong but in today’s world, you need to view your contract portfolio as an asset with real value. Forward thinking companies are managing their contracts using a risk versus opportunity-based approach that not only releases value from legacy contracts but also manages the ongoing contract process.
Contracts are no longer just the remit of the legal department. There are stakeholders in procurement, finance and compliance, so a structured strategy for managing contracts can benefit the whole business. It will allow your contract team to apply the right resources, at the right time, to deliver an optimal outcome that aligns with your corporate goals.
We recommend the introduction of a five-step process that can be used to extract value from your contract portfolio. This will build into a comprehensive strategy for managing your contracts from day to day:
- scoring and prioritizing
- human resources
- systems/workflows
- monitoring and alerts
- analytics
Initiating this type of workflow will deliver tangible benefits. Your contracts can be coordinated from a business needs’ perspective, and you’ll be able to track, manage and predict dates, times and outcomes. This injection of efficiency will boost your bottom line. Some of the main advantages of a structured strategy include:
- reduced contract risk
- increased consistency of approach
- better use of resources, with outsourcing as an option
- a demonstrably efficient and measurable process
- improved revenue and profit boost
Taking the historical view of contracts—as a means of enforcement when deals go wrong—is no longer adequate. Having a strategy in place that extracts value from your contract portfolio is an essential step forward in managing resources. You need to introduce a plan that cost effectively tackles the legacy contract portfolio while dealing with the ongoing and future contract process in a way that contributes to your bottom line.
To read more about how you can manage contracts to drive profit, download our latest thought leadership paper: Building Your Contract Strategy for Bottom Line Benefit
