TM proactive contract management Six Reasons Why Contract Management Matters
Table of Contents Why Contract Management Matters 2 How Contracts Impact Your Business 2 Contract Data Determines Revenue and Costs 2 Contracts Simplify Business 3 The Six Reasons You Have To Firefight 3 The Real Cost of Firefighting 5 Increasing Revenue and Profit 6 Knowledge is Negotiation Power 6 Setting Up Your Contract Management System in Four Steps 6 About PACTA 9 Why PACTA? 10 Copyright 2016, PACTA inc. All rights reserved. 1
Why Contract Management Matters Contract Management is often considered something for lawyers or corporate counsel. But if you re responsible for closing deals you re more involved with contracts than you realize - be it sales purchasing, licensing or even NDAs. Why? Because contracts are binding, and they govern over 80% of your transactions and value as a business - even non-revenue driving contracts like NDAs are critical because without an NDA, your business is not covered. More than 70% of contracts are manually managed and fragmented across different teams and departments. Files are left as an email attachment, sometimes still pending the counterparty s signature. Files are saved in a shared folder with file names we later forget. Contract information like pricing schedules, renewal or expiry dates are added to a mammoth excel sheet or calendar invite, while other information might be in an accounting or ERP system. The amount of human error for each of these steps, let alone the manual work needed to keep an overview of what is going not only sucks time from other value-adding tasks, but exponentially increases the risk of missing something important. How Contracts Impact Your Business Contract Data Determines Revenue and Costs Contracts are the roadmap to your business deals. They determine what someone is paying you, how long they ll be paying you, if you are responsible for replacing broken products and for how long you re responsible how much support you re on the hook to provide, and when the customer is free to leave. Any mistakes in this process can increase your liability and have a significant impact on your bottom line. More than 80% of business transactions are tied to a contract and more than 10% of contracts can not be located The clauses within contracts are inundated with business critical governing terms. Start and end dates, payment terms, SLA terms, customer support levels, warranty periods and agreement values are all conveyed in your contracts. Having insight to these line items is not only critical, but can dramatically simplify everyday business for your legal, finance, sales, and executive teams. Copyright 2016, PACTA inc. All rights reserved. 2
Contracts Simplify Business Contracts offer explicit expectations and instructions for both parties involved in the deal. Because these terms are binding, companies with the right amount of visibility and foresight can use the data in their contracts to their advantage. This is a huge benefit because you can more accurately forecast incoming reve- nue or identify buying trends across your base. When you re managing your contracts appropriately, it s easy to find places to streamline and optimize both in your sales cycle and your revenue management. The Six Reasons You Have To Firefight Five Ways Contracts Makes Your Life Easier They establish clear expectations for all Parties They ensure control of resources They optimize revenue and cost streams They streamline your business processes and enable efficiencies They are the basis for the business relationshipcesses and enable efficiencies If contracts make your life easier, how come you constantly have to firefight? 1. Lack of Visibility If you can t see it, you can t control it. If you don t know what is in your contract, or even worse, you can t find the contract or don t know the contract exists, then you are forced to play a constant game of catchup. This becomes a major pain point because agreements outline the terms of the value exchange, and if you can t ensure you are getting the right value for your deals, money is slipping through your company s fingers. It becomes impossible to track expiring contracts, or renewal and renegotiation opportunities. 2. Information and Process Silos Managing all of your contract commitments internally across several departments is hard. The complexity increases exponentially when you have to do it across several office locations, time zones or continents. Often departments will create their own systems and processes making it impossible to have visibility, share or follow up on your commitments and contracts. It becomes critical to have the ability to have everything centrally located with standardized and streamlined processes, with important contract events tracked in real time. Copyright 2015, PACTA inc. All rights reserved. 3
6 Reasons Why You Have To Firefight 1. No visibility into your contract terms, commitments, and values 2. Information and process silos 3. Manual processes 4. Hard to understand legal language 5. No way to monitor contracts over time 6. Production, Procurement and Sales are at odds, and so are their systems and processes filing cabinet, dropbox, sharepoint or hrough pages and pages of excel tables, it s a struggle to keep up with contracted deliverables and timelines. How the contract process is managed today simply won t scale. Automating contract management helps companies mitigate risks and avoid bottlenecks bystreamlining the process and thereby improving control and visibility of critical information in much less time. Furthermore, this enables people to focus value-adding tasks that technology cannot solve. Modern contract management software is paving the way for online, automated processes that address the Achilles Heel of contract management: risk. 4. Hard to Understand Legal Language Legal language can be hard to understand. Not fully understanding what is in the contract and what you have committed to increases the risk of being non-compliant or leaving money on the table. 5. No way to monitor contracts over time 3. Manual Processes Doing business today means working with big data and a global marketplace. Effective contract management is critically important to the success of an organization, yet most still operate with manual processes and paper documents. When your contracts are managed manually, whether it s using a physical How the contract process is managed today simply won t scale. Your relationship with your customer only gets more valuable once the deal is signed. Your ability to manage the contract, particularly changes over time and any renewal process, will have a direct impact on your customer retention rate. Not living up to your end of the bargain risks damaging the relationship and your credibility. It s important to have a mechanism for managing changes over time and for keeping that cross-functional team of global stakeholders on the same page. Copyright 2015, PACTA inc. All rights reserved. 4
6. Sales, Procurement and Legal are at odds, and so are their systems Even if these teams work amicably together, often each team manages their own contracts in silos, with a separate filing system and a separate tracking system and even separate technology solutions. Common Problems with Contract Visibility: How many contracts do you have? Where are all of those contracts located? What terms and clauses are in those contracts? Which business processes rely on contract metadata? How do you maintain data governance? And if on top of this these systems and processes don t talk, a plethora of manual work ensues, which will introduce the potential for errors and missed opportunities. Sometimes a sales team might sign a template contract which the legal team never hears about. Another contract may not be returned fully executed, leaving the company exposed to risk. Someone might leave for an extended period or even leave the company, taking with them all the knowledge and background about certain files and processes. Not having a centralized and streamlined technical solution to enable cross-functional teams stay on top of what has been agreed and committed to, risks the effectiveness, efficiency and profitability of your business. The Real Cost of Firefighting When you are forced to firefight avoidable situations, instead of strategically managing the business, you lose track of the big picture. Money is left on the table, stakeholder relationships are tense and missed commitments means that you open your business up for commercial and legal liability and risk. With more and more contracts to manage, it s getting harder to manage them well. Research shows that the average number of contracts per company increased 20 percent over the last 5 years and among the Fortune 1000 companies, the average amount of current contractual files is between 20,000 and 40,000 (Institute for Supply Management). That s not even the worst of it. According to PricewaterhouseCoopers, an estimated 10 percent of all contracts are lost, regardless of the industry. What s considered by many as an inherent cost to business activities, is actually the result of a failure in contract management. Copyright 2015, PACTA inc. All rights reserved. 5
Increasing Revenue and Profit With more than 80% of all business transaction being covered by contracts and 70% of these contracts being stored in a filing cabinet or desk drawer it is not surprising that 10% of them get lost. The International Association for Contract & Commercial Management estimates that poorly managed and misplaced contracts directly impacts 9.15% of a company s bottom line. Compounding the opportunity comes by uncovering incremental contract value hidden in contracts through better visibility and timely enforcement. Having more visible and actionable contract information can increase revenue and profit in the double digit percentages. Knowledge is Negotiation Power If you have ever tried to negotiate a contract against a deadline (or after it has lapsed), then you know how little power you have. Knowing when your contracts are about to expire, or when pricing can be renegotiated before it s too late gives you a distinct advantage. Being able to quickly pull out historical pricing and contract terms could mean the difference between a win-win and lose-win situation. Setting Up Your Contract Management System in Four Steps The benefits of automating contract management are real. If your contracts are instantly accessible and automatically monitored, you ll be able to stay on top of not only your own commitments but also ensure that your counterpart delivers on theirs. You and your team will be able to focus both time and energy on adding value to the business, instead of worrying about trying to fix something that someone missed in a contract a year ago. Most of the contract management systems on the market are designed for F100 Enterprise companies, are complex, clunky and hard to navigate even with training and customer support. Because the number of contracts is increasing 20% year on year across industry, having a streamlined solution for contract management is becoming Collect Upload VALUE Track Analyze Copyright 2015, PACTA inc. All rights reserved. 6
a necessity for companies both big and small. This goes hand in hand with the trends of an increasingly mobile workforce, the movement to the cloud and the adoption by Executives of mobile solutions. With PACTA, managing and tracking contracts is only simpler and faster, but also more fun for you and your stakeholders. 1. Collect The first step is all about getting all your contracts together. This is the point when you decide if you want to include all contracts or only ones that are active. With PACTA s advanced analytics features there is great value in including your expired contracts in the system to capture trends over time. We recommend to start with active contracts and expand into expired when resources allow, this is especially true if your older contracts are only available in hard copy. 2. Upload Once you have all your contracts together it is time to start uploading them into the PACTA system, which we can also help you with. As you move your contracts from your internal IT system or physical filing cabinets into PACTA s secure electronic cloud repository, key information and commitments are automatically extracted using our Suggestion Engine. Once uploaded, and with approval from you, the system automatically starts tracking your commitments for you and your team. 3. Track This is where you will start seeing exponential business value, with an ROI of less than two months. With PACTA s proactive notification feature you will always be notified before important events such as expiries and renewal dates before they happen. 4. Analyze Having turned your latent contracts into smart contracts that act to support your business throughout the lifecycle of the contract, you can run tailored reports by leveraging your contract information. You can capture value from your new competitive advantage. By visualizing customer specific information, or contract compliance, for example, you can identify areas for improvement, more accurately forecast revenue, and increase your overall negotiation power Copyright 2015, PACTA inc. All rights reserved. 7
Why PACTA? PACTA allows you to stop firefighting and get back to doing actual business. The revolutionary system makes it fast and easy to manage contracts and commitments by automating the process, without any software install. Simplify and streamline your workflow pre- and post-contract signature. Save 50% of time versus current processes and enable teams across sales, legal, procurement and more to deliver added value to the business. Leave the mundane and frustrating paperwork work to us. Features Benefits Upload & Auto Summary All your documents in one place without spending hours of work getting them there. Instantly Searchable Secure Storage Find the right contract quickly and easily with just two clicks. Contract Event Calendar with Dynamic Text Message Notification Proactively plan your business and cut down the reactive firefighting and ensure business continuity Access to all contract information on any device from anywhere in the world Triple geo-redundant storage and two-factor authentication Make better business, stakeholder and financial decisions faster with valuable business intelligence. Speed up the audit preparation, process and negotiation preparations. Your documents and records are secured against fire, natural disasters and unauthorized access. Reporting Get an overview of your contract compliance, customer specific reports, and more. Collaborative structure Enable sharing of specific contracts across teams (ex. Legal and Sales), to ensure those who need the information can access it. All your contracts in one place Streamline where your contracts are stored and accessible across teams, departments, organizations and even geography. Copyright 2015, PACTA inc. All rights reserved. 8
About PACTA PACTA is the product of more than 16 years of combined Fortune 500 and SMB experience in Strategic Sourcing, Marketing, Business Development and Law. PACTA is based in Atlantic Canada s TechHub Halifax. For more information contact us and find out how you can stop firefighting and get back to doing actual business. www.pacta.io P+1(888) 834-0134 contact@pacta.io Headquarters PACTA Inc. 1505 Barrington street Suite 710 Halifax NS B3J 3K5 CANADA The PACTA logo and Simply Contract Better are trademarks of PACTA inc., other names used herein may be trademarks of their respective owners. Copyright 2015, PACTA inc. All rights reserved. 9