5 Key Tips for a Growing Contract Portfolio Management
According to research, average business organizations have tens of thousands of active contracts at a time, making accurate contract portfolio management 10X challenging.
Regardless of the company’s size, businesses may face trouble managing their ever-growing portfolio. With each contract adding up to your portfolio, the chances of mismanagement double up, causing long-term damage to your organization.
Increased use of technology such as shared drives, emails, and Word docs helps you work with ease. However, they may also contribute to the overwhelming nature of contract portfolio management when not managed effectively.
Hence, taking full control of your contract management processes is crucial to ensure healthy contract portfolio growth.
What is a Contract Portfolio?
A contract portfolio is a holding space for the collection of agreements and contracts an organization enters into. The portfolio may include various agreements such as procurement contracts, sales contracts, licensing, or lease agreements. The contract portfolio is maintained to ensure that all regulatory compliance and obligations are being met effectively.
What is Contract Portfolio Management?
Contract portfolio management involves the systematic organization and execution of a contract’s lifecycle from start to end. It involves the use of effective instruments to collaborate with all the stakeholders. It’s an ongoing process that ensures fulfilled deadlines, controlled expenses, operational efficiencies, and better contractual relationships.
Impact of Poor Contract Portfolio Management
According to statistics, 9% of a business’s annual revenue cost is spent on poor contract management practices. Here are the impacts of poor contract management.
● Increased Risks: Mismanagement of contract portfolios leads to financial, legal, reputational, and other contractual risks.
● Expense Overruns: Neglected contracts and lack of monitoring may lead to added costs on legal fees and other reputational fixes, resulting in a lower return on investments.
● Lack of Compliance: Poor portfolio management may cause non-compliance with crucial obligations, resulting in fines, penalties, and reputational damage.
● Loss of Contracts: Weak contract portfolio management may eventually lead to the termination of contracts and loss of professional relationships.
Why is Effective Contract Portfolio Management Essential?
Around $215,000 is lost by large enterprises daily if the contract management process drags on. Therefore, effective contract portfolio management is vital to ensure predictable costs, improved compliance, and better contract outcomes.
Effective portfolio management allows you to oversee the potential risks and their successful mitigation. Additionally, it facilitates enhanced visibility into essential information, expiration dates, contract value, KPIs, and other components.
Key Tips for Effective Contract Portfolio Management
The tips below enable organizations to take full charge of contracts and their execution.
1. Use a Central Contract Repository
Disorganized documents make processes way more time-consuming and cumbersome than they are. According to a study, 71% of businesses can’t locate their contracts. Hence, maintaining a central contract repository is critical to gather all your crucial contract documents in one place.
Businesses typically rely on software like Microsoft Excel or emails to keep a record of their documents. However, they might be inadequate to keep your confidential data. It is advised to opt for a cloud-based repository instead, as it provides a more sophisticated and secure route to contract portfolio management.
Contract repositories not only make the data more accessible and workable, but their centralized and controlled features save your data from getting exploited by unauthorized users.
2. Implement a Consistent Organization Scheme
Proper naming is one aspect that often goes neglected during portfolio management, resulting in unwanted hassle you may face when you are pressed for time. Hence, implementing a dynamic naming and organization scheme to access and manage your files is equally important.
Imagine a file saved with a super random title such as “file100021.doc”. Would you be able to locate the file? On the contrary, a file titled “HaloLightFinacialRequirement_Feb_23.doc” would be easily visible.
Using contact management software, you can streamline your contract portfolios by deploying intelligent features like tagging, highlighting, notifying, and much more.
3. Set up a Dedicated Notification System
Most of the significant losses organizations face often happen due to missed deadlines. Having plenty of contracts on their list, sometimes contract managers lose track of important dates and forecasts. Similarly, often a contract exceeds its limit and goes unnoticed, eventually causing financial damage.
Therefore maintaining a centralized repository and labeling system wouldn’t be enough. You need to go ahead and set up a dedicated notification system to ensure all relevant parties get scheduled notifications regarding critical upcoming events.
A dedicated notification system lets you configure customized notifications for specific events such as deadline renewals, contract expirations, etc. Moreover, it also helps set the method such as emails, in-app messages, sms, etc.
4. Leverage Contract Templates & Rules
Although alerts and notifications provide a solid solution to deadline management, they may require you to manually set up the dates and frequencies, which may go overlooked.
Therefore, you must utilize an innovative contract management system capable enough to extract the important dates from contracts using automated rules and metrics. Once these rules are set, you can apply them throughout your contracts to uplift your contract management procedures.
You can also leverage preset and editable templates to simplify your contract portfolio management process. They save you time and energy and accelerate your contract workflow, from contract generation to negotiation and approval.
5. Examine Contracts for Risk Compliance
You must examine your contracts for risk compliance to safeguard your organization’s interest. Routine analysis helps you ensure that the terms and conditions outlined in the contracts align with the applicable laws and industry standards.
An automated tool with an interactive contract analytics dashboard allows you to examine your contract lifecycle deeply. Having complex data, trends, and KPIs in front of your eyes in an organized and optimized manner enables you to make informed, data-driven decisions.
In other words, an automated system makes routine and periodic assessments easier, eliminating the risks that may negatively affect compliance with crucial obligations.
Effective contract portfolio management is essential for your business to maintain a healthy contract lifecycle. Following these fail-proof tips, you can accelerate contract review, reduce potential risk and ensure better compliance with regulations.
Remember, having a lot of information in front of you wouldn’t be enough if you could not quickly sort and interpret it. That’s precisely where automation tools come into the picture and streamline the entire process.
Automated software helps you organize and expedite your contract lifecycle using scheduled alerts, preset templates, real-time collaboration, and actionable contract portfolio analytics. Hence businesses must adopt automation for seamless and successful contract portfolio management.