Contract Management Automation vs. Manual Processes: Which is Better?
As global businesses are increasingly facing disruptions and troubled by the pace of change, they have no choice but to transform themselves. Responding to the disruptions can truly be empowering; it can help the organization manage the changes and challenges while building strong capabilities to adapt to the changes. It has now become imperative to integrate both digital and conventional products to create value from the digital economy. This blog discusses how contract management automation can be an ideal solution to inform your contracting.
When it comes to contracts, though they are an essential part of the day-to-day activities of any business, they were untouched by digitization for a long time. Even now, after the wide adoption of digital transformation initiatives, contracts are mostly handled manually. There are companies that still find it comfortable working manually and are still doubtful of the efficacy of large-scale transformations. And, on the other hand, are companies that want to improve their contract management by jumping into the digital space but have no idea how to do that. So, which is better? Traditional manual processing or intelligent automation that can fundamentally transform contract management?
What’s Wrong With Manual Contract Management?
In a recent report from KPMG on contracting, only 11% of organizations considered their end-to-end contracting process to be ‘very effective.’ The increasingly complex contract processes are forcing global companies to rethink how they see manual processes. As the number and complexity of contracts increase across businesses, operations around them become more difficult to handle.
Let us look at the lifecycle of a contract. The initial stages of designing a contract and evaluating its details may seem an easy-to-do job. It may seem to be purely a transactional flow. But as it goes deeply into the next phases of assembling the data, approving it, and negotiating the terms with the vendors, it involves and requires a sound business strategy. At this stage, the contractual data is analyzed when the interests of stakeholders must be reconciled without any ambiguity.
The real problem is, this complex set of processes does not work efficiently when manual processing is thrown at its paths. It is very costly and it creates much delay. Throughout the process cycle, no one owns it as it creates no clear visibility as to who does what at each stage. This lack of visibility creates unaccountability and costs companies a trusting business relationship.
Companies end up with diminishing returns as the manual contracting processes are constrained by siloed functions, complex legacy systems, and ever-changing regulatory requirements. In the end, even large businesses go extinct as they are overtaken by companies with strong contract processing capabilities.
As a solution for this, some companies had tried a little updated contract management software systems. Though they can solve some basic problems like storage, they cannot go beyond that. When it comes to reporting, for example, these basic solutions are inefficient and the entire process gets complicated.
Why Do Businesses Need Contract Management Automation?
Everything is going digital:?the paradigm shift towards digital transformation initiatives in the last few decades has made it more urgent to digitize contract management systems. Digitization is the first key to successful contract management for digital solutions that can enhance enterprise-wide agility, speed, and data-driven decision-making.
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Setting up a holistic, automation-driven environment, it can help them avoid separate, bulky, archaic tools and processes and ensure better transparency and improved governance.
Contract management is incredibly complex:?A contract is a complex entity. Processes like contract tracking and monitoring, execution, reporting, and review can be tiresome and demand profound coordination, collaboration, and information.
Companies that want to redefine their contract management should blend digital and automation capabilities and apply them to all aspects of contract processing. It is important to craft an integrated strategy that focuses on improved processes and business values. As poor contract management is no longer viable as they expose organizations to inefficiency, companies should start looking at ways to prioritize their digital strategy.
Traditional Contract Management Systems Fall Short. Now What?
For companies that scramble to find technologies that will help them compete in today's fast-changing business landscape, a digital-first strategy is vital. It empowers them to profoundly address their most pressing contract management challenges quickly. A suitable solution must be enterprise-wide, touching every aspect of how businesses manage contracts and agreements.
In that way, businesses that aspire to digitize their contract management should consider the following characteristics when choosing an ideal contract management automation system.
As companies desperately search for the next strategic growth area to boost, digital solutions foster collaborative efforts across departments. In addition to this, deeper visibility into hidden risks in the contracts can only be possible through deeper insights, which only contract management automation can deliver.
The complex contracting landscape requires an unparalleled emphasis on data quality and controls. Timely contract data can effectively optimize the contracting processes, increase and extend revenue streams, and deliver businesses a competitive advantage.
Contract management automation can efficiently collect information from the organization’s entire contract ecosystem by capturing data in different formats and from multiple data sources. The analytical capabilities ensure continuous improvement and position companies more suitable for data-driven contract management automation.