Complex contracts lend themselves to being managed efficiently with basic contract terms and features found in ERPs, and these tools need to be more flexible and scalable to manage contracts at increasing numbers efficiently.
Utilizing general-purpose technologies like ERPs for contract management comes with certain risks, including noncompliance issues, missed opportunities and security flaws. Contract managers can benefit from Enterprise Resource Planning contract management software in multiple ways, including increased visibility, collaboration, automation and analytics tools.
Given their non-contract related nature, contract managers often find it challenging to maximize the use of Enterprise Resource Planning (ERP) systems. This article will outline four techniques of contract management ERP software use during contracting business processes, as well as what functions it serves and its definition.
What ERP Software Solutions Exist For Contract Management?
Contract Management ERP Software encompasses any process designed to generate, negotiate, monitor, and administer contracts within an ERP.
ERP stands for Enterprise Resource Planning software tools used by organizations to automate and coordinate various management and operational functions, from contract management and purchasing, sales and finance through to customer business relationship management and CRM. These processes can all be efficiently completed using ERPs.
ERPs aim to give organizations greater control and visibility of their contractual agreements by eliminating manual processes throughout their lifecycle. Unfortunately, however, such systems don't always meet this goal due to being too weak and rigid to deal with the increasingly complex nature of modern corporate contracts.
Contract processes contain complex legal terms and duties that vary across industries and nations, making contract management essential. Basic features for managing them such as document storage, version control and approval workflows may be found within ERP systems - these key features may prove particularly helpful for contracts with simple requirements; once needs become complex they often lose effectiveness.
Contract management encompasses everything from initiating or initiating, writing, negotiation/redlining, and approval stages all the way through execution and signature stages, as well as tracking obligations, renewals, amendments, or expiration dates - this procedure should all come under its preview.
ERP Software Procedures For Contract Management And Contracting
Contract management comprises seven primary procedures. We'll briefly outline them all below-
Step 1: Submit Inquire Or Requests
Users within an organization should have the capability to request either a new contract or a review of an existing one, depending on their needs and situation. These requests could then be forwarded to legal, procurement, or both creating one central hub for request processing and review.
Step 2: Drafting And Concluding Contracts
Contract Development and Authoring refers to the practice of contract creation process using pre-approved document templates, clauses, and business guidelines to make legal contracts. By providing users with self-service features that enable them to freely draft within constraints established by legal teams, contract cycle time can be decreased significantly, and increased efficiencies can be achieved.
Step 3: Review And Negotiation Of Contract
At this stage, both parties to a contract management system should receive copies, and redlining and negotiations may commence. Working effectively with both internal users and third-party suppliers is key for its successful execution; furthermore, effective document comparison, version control, change tracking, and audit trails are critical elements in its successful operation.
Step 4: Approval And Execution Of Contract
Workflows for contract approval and contract negotiations ensure that everyone responsible is engaged, keeping the process moving quickly and seamlessly. Workflows may vary based on factors like contract type, area, quantity entity risk management, etc; serial or parallel workflows for all or just certain elements require review may also be set in motion based on these variables; additionally, using electronic signature technology ensures smooth execution to complete control this procedure in its entirety.
Step 5: Contract Performance Analysis
Since contracts become legally operative upon signing, events post-signature become just as consequential--if not more so--than those before. Therefore, understanding how well it operates after signature is vitally important; there will likely be milestones, responsibilities, payments, rebates or discounts throughout its lifespan that require tracking to achieve value in contracts; understanding these events requires allocating, tracking and finishing them efficiently while simultaneously evaluating risk at each step is also imperative because laws or business practices might alter to adapt with changing conditions, necessitating modification as laws or practices evolve to take account of changing circumstances.
Step 6: Change Of Contract
Amendments are an inevitable part of the entire contract lifecycle, whether we like it or not. Things don't always go as planned and modifications to contracts need to be handled swiftly without jeopardizing established policies or procedures. Tools designed for contract management make the procedure smooth and allow organizations to keep an accurate log of changes made over time.
Step 7: Renewal Or Contract Expiration
Legal teams can leverage automated alerts and notifications to effectively prioritize their time by keeping an eye out for contracts that will expire or renew soon.
Four Ways An ERP Software Can Assist In Contracting
Contract Management Platform With ERP Software
Automating contract lifecycle management with contract management ERP software streamlines contract assembly based on parameters related to geography, products or services offered or price terms; users can auto-build contracts according to business rules defined within powerful contract management ERP software; self-service contract formation reduces legal operational costs significantly while speeding time-to-income for contract users.
Contract Management With ERP Software
Most ERP solutions designed for contract management modules now come as SaaS products, meaning teams can collaborate remotely from any location around the globe to assess contracts. COVID-19 created an unprecedented challenge for businesses that desired to continue operations despite massive office closures.
Yet, they needed the means for continued functioning. Companies can take advantage of contract management ERP software to set up automated workflows to route contract details directly to the appropriate individuals, automate signature collection processes and monitor modifications made during contract creation for audit trials and any potential threats, such as adding unapproved clauses or changes.
Administering Contracts Data Associated With Contracts
After signing, an industry-leading ERP contract management software system may both use data to monitor commitment fulfillment as well as send contract data to other systems.
For instance, spend management can be integrated with supplier contracts in order to monitor bill compliance stopping unneeded spending while decreasing leakage while delivering data in sales contracts situations directly against contract portfolio ensures no obligations remain unfulfilled and improves partner status for business partners.
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ERP Software Makes Contract Data Readily Accessible And Actionable
Contract management ERP software enables users to understand KPIs easily through configurable dashboards. It continuously gathers contract data and integrates it into daily operations. One common statistic found on dashboards is contract risk scores, which business strategy and business tools can set using both internal and external data sources; users are thus able to detect when contracts may be at risk of errors and take appropriate measures early enough for mitigation.
How Does ERP Software For Contract Management Function?
Contract management ERP software assists sales teams throughout the contract lifecycle management software by automating some workflow processes that could otherwise eat into valuable time for stakeholders who otherwise spend it performing manual tasks that could easily be automated.
Understanding a deal's quoting, contract, and proposal stages is critical in managing contract lifecycle management. Unfortunately, the word "contract" often seems to cover all three contracting processes - first, collecting conditions related to price and product offerings; next, incorporating legalese into documents; and lastly, creating proposals - however, this definition of the word may be too narrow as well as too general in application. Here are a few essential tasks related to contract management you should be mindful of:
Template
Businesses often include standard legal or business terminology in contracts. ERP software designed for contract management will automatically insert this phrase. Furthermore, types of contracts containing clauses specific to any deal such as items being bought/sold etc can also be automatically included within these advanced versions of contract management ERP software.
Redlining
As part of talks, stakeholders often suggest modifications. Since this process can evolve over time and numerous agreements need to be created as new changes emerge, stakeholder suggestions for specific parts of a contract while leaving others unchanged are more practical we call this "redlining."
Version Control
When managing, changes to an original contract are known as versioning. As parties negotiate an agreement, many will make modifications that affect their original form; these manual processes could produce several versions over time due to different stakeholders requesting modifications independently of one another.
An ERP contract management solution automatically records modifications made by all stakeholders involved during negotiations, as it serves as one source of truth for revisions made across a document or agreement in real time.
Electronic Signature
ERP software for contract management emulates the paper-based contract signing process with digital signing capabilities that provide full legal force and effect as with traditional pen and paper contracts. Digitally signing any document using an e-signature grants its full legal standing and effect in law as though signed manually by pen and paper would.
Conclusion
A contract management ERP solution is a wide range of an integral component of business operations that ensures contract fulfillment while mitigating legal risks and cutting costs. ERP software designed specifically to manage contract life cycle management is packed with components. However, its potential advantages far outweigh the initial challenges, particularly where there is little documentation indicating existing practices.
There are various strategies available to reduce friction when it comes to implementing contract management ERP software including automating document preparation and storage as well as using legal technology specialized for contract management.
ERP contract management software is an indispensable human resource for modern enterprises, helping reduce risks while streamlining operations more smoothly. Other benefits of using such an ERP package for insights into contract performance management include automation tools to adhere to norms more strictly as well as seamless system integration that benefits many departments and business functions.
