Benefits of Contract Management: What the Research Says

Contract management has come a long way since the days of word processors, manual spreadsheets and paper documents. Even just fifteen years ago, it was common for most if not all corporate contract management activities to happen offline; indeed, some companies today still perform contract management using nothing more than a file folder and a printer (of course, they are the exception in today’s mostly-digital workplaces.)

It goes without saying that there are many downsides to managing contracts using a manual system, even if that system includes online elements (such as using email to exchange Excel spreadsheets.) Today, businesses large and small are increasingly adopting cloud-based contract management solutions that come equipped with powerful functionality to create, share, track, audit and review contracts throughout the procurement process.

But are there hard data to show that contract management really delivers time and resource savings for organizations? Fortunately, the answer is yes.

Approval time

Finalizing a contract and obtaining approvals from all relevant stakeholders is a time-consuming process that can seem to take longer than it should. According to Aberdeen, organizations that use a contract management solution enjoy an 82% average reduction in contract approval times compared with manual contract management processes.

This reduced approval time can make a world of difference in how organizations do business. By shortening the creation-to-approval cycle, companies can free up time and dedicate resources to what’s next in the pipeline, rather than playing the waiting game.

Shorter contract creation time

In many organizations, it’s normal for the contract creation process to take around seven weeks and up to 15 weeks in some cases. While these long creation times may be common, they certainly don’t have to be the norm for every contract an organization creates. Research from Forrester found that for organizations using a contract management solution, the average time needed to create and approve a contract was only 3.4 weeks. This massive improvement in efficiency can directly impact the bottom line by ensuring that contracts are created swiftly and accurately.

Improved renewal rates

Contract renewals can be just as tricky to navigate as the creation of the initial contract, if for no other reason that multiple stakeholders often have to sign off on the process, increasing the time it takes to obtain approval for renewal. According to research from Aberdeen, organizations using Contract Management solutions typically enjoy 90% renewal rates, a fact that may be influenced by the ease of use and simplicity that contract management delivers for all stakeholders. When contracts are easier to create and manage, stakeholders are happier – it’s as simple as that.

So the next time someone in your circle wonders aloud what the data say about the benefits and ROI of contract management, you can confidently say that shorter approval times, a high renewal rate and shorter contract creation time are just a few of the proven wins that accompany adopting a contract management solution.

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