Neglecting The Contract Management Cycle: A Financial Executive’s Guide
Contract Management Cycle
Managing the contract management cycle is crucial part of the source-to-pay process for any business. Investing in software to govern the contract management process efficiently can ensure maximum returns on the financial investment, with enhanced data accuracy and minimal risk exposure. CFO, who is assigned the role of sourcing Softwaresolutions for the source-to-pay management cycle, should carefully evaluate the business requirements before committing to contract management solution.
To begin with, it is important that the software chosen should comply with all company regulations and legal requirements. Without adopting an effective Softwaresolution, it is likely that contracts become manually managed and stored, leaving gap in process that should be automated. Manual contract administration increases the risk of human error, which can be costly and time consuming, particularly when third-party contracts are involved.
Furthermore, when contracts are manually administered the change management process becomes prone to inefficiency and incorrect data. Manual processes can lack the necessary formatting, version control and terms and conditions for adherence to governing legislation. As result, initially imperceptible errors can lead to major discrepancies in the contracting process, resulting in erroneous payments and incorrect invoices. These errors may be only identified when discrepancies are brought to the fore and legal action is required, leading to severe financial risks.
Aside from compliance risks, there is also the risk of compliance failure. When contracts are manually managed and stored it becomes increasingly difficult to track financial progress, project progress and any potential breaches of contracts and payments. This can lead to possible delays in payments, missed deadlines and unsatisfactory performance metrics. In addition, reputational damage can be caused due to lengthy delays and inadvertent breaches of contracts.
Adequately monitored contract lifecycles and automated processes are able to detect any potential risks or contract compliance breaches when they arise. Utilizing software also ensures that contact records, including versions, formatting and legal requirements, are precisely maintained. It can also facilitate the efficient transfer of data, permit better financial visibility and ensure timely payments in order to support an effective contract management cycle.
The implementation of comprehensive and carefully chosen Softwaresolution can help organizations better identify and manage financial risks. Effective software can provide the necessary controls to help organizations to run contract cycles more efficiently, detect errors quickly and maintain higher standard of accuracy in the source-to-pay management process. Investing in the right Softwaresolution can provide invaluable assistance to the contract management process, and result in significant cost savings and minimal risk exposure.
