Software companies are expected to be the first to embrace the latest technological innovations, be it a groundbreaking programming approach, project management strategy, or new delivery software. But when it comes to contract management, too many companies tend to run their legal operations in the old-fashioned way and, as a result, stumble upon a series of problems.
IACCM research suggests that without proper contract management, businesses lose about 9% of annual revenue on average, let alone the opportunities. Contract management issues are not always obvious for companies, so we prepared a self-assessment checklist. If one or two problems from the list sound familiar to you, it is high time to revise your company’s budget to save that 9% from leaking.
Without proper contract management, businesses lose about 9% of annual revenue on average.
Problem #1. Wasted time without self-service documentation
Let’s start with a simple question. Is each document you provide to your clients worth the time and effort that your team spent on it? If most of your documents are generic and require only slight changes, you have a remarkable opportunity to fully automate the contract management processes and liberate your team members from doing manual fixes. To see how much time your team spends on routine tasks, check their current performance and working processes. You’ll see that administrative and legal costs can be cut down, especially today, when AI and machine learning are taking the software industry by storm.
One of our clients – a software company – used to spend 30 minutes generating each Data Processing Addendum manually. Multiplied by the number of their customers, they ended up wasting five months’ worth of time a year, which, multiplied by the operation costs, led up to a hefty sum of money. AXDRAFT successfully automated this process, so now it takes them zero minutes since all documents of this kind are generated automatically.
Problem #2. Slow hiring and onboarding
Getting a new talent onboard is an important matter. A newcomer’s journey always starts with paperwork from the company’s and the employee’s sides. But it can be easily disrupted by poor document workflow. When your HR team has to spend hours preparing and mailing a batch of documents for each team member and then new hires have to fill them in and sign them (sometimes even by hand), that’s not the first impression you opted for, is it?
These days, the IT industry is quite dynamic, with new job opportunities popping up all the time. The way you onboard your employees and address their contract needs reflects the state of your company’s internal processes. All of that might indirectly impact the relationship between the company and the hires affecting their loyalty and your financial performance.
Problem #3. Losing track of dates and deliverables
Due to poor contract visibility and governance, contracts can lose up to 40% of their value. So, here’s a question for you: how often do you revisit your contracts to check their validity and delivery compliance? Without an intuitive document repository, how easy is it to check whether you are meeting, over- or underdelivering your budget expectations? Doing business in IT is not a cakewalk, we should say. Service level agreements are a valuable asset defining customer service in your company, so it is crucial to keep them in sight. It becomes critical when you have hundreds of such contracts. Introducing document automation can save you way more time and resources than you can imagine.
Due to poor contract visibility and governance, contracts can lose up to 40% of their value.
Problem #4. Poor management of freelancers
Today, lots of companies hire freelancers and, thus, need to collect and keep a pile of supporting documents: service agreements, certificates of work completed, payment, and tax forms. It takes nothing to lose one of them while doing paperwork. If papers are not properly structured and systematized in a single database, say hello to a mindless task of searching and browsing to retrieve the necessary data. Another side effect is the poor quality of service, as there might be disagreements, misunderstandings, or violations of the initially agreed terms.
Problem #5. Poor reputation management
As trendsetters and drivers of change in the digital industry, software companies should also manage legal documents properly. Quite often, contracts are prepared by non-legal teams. No wonder that errors creep into documents calling for a greater legal involvement than you originally budgeted for. With missed deadlines or imperfect service delivery on top of that, you might get stuck in the mud of a bad reputation.
The way you handle contracts can tell your clients, business partners, and employees much more about your company than you can expect. So it is a smart decision to invest in contract management, among other things.
The way you handle contracts can tell your clients, business partners, and employees much more about your company than you can expect.
Problem #6. Lack of process compliance
How clear are your company’s processes? Are they easy to follow? If there is more than one person involved in the contract lifecycle management, roadblocks are more than likely. To avoid them, corporate processes must be clearly structured and polished, so each document’s status is transparent to every involved party.
However, given the human factor and a heavy workload, when many people are involved in a particular process, it often takes longer than necessary to negotiate contracts and get approvals. Without proper contract management software, these bottlenecks will inevitably lead to missed opportunities and financial losses.
Problem #7. Inadequate data security policies
Data privacy is of the utmost value for software companies, as information is the core of their business. Many companies invest endless hours into data encryption, creating the most resilient security protocols, and yet disregard risk management and data breach policies. In case of cybersecurity violations, such software companies do not have an operational plan at hand. That, in turn, can not only harm their reputation but also incur massive financial losses. Contract management software for IT companies makes it much easier to develop risk policies and adjust them to match the current environment.
Good work results and the use of cutting-edge technologies are not enough to make a strong impression. Making a mess in your documents, you can easily damage your hard-won reputation in the eyes of your clients and employees.
Now, think about your business and answer one simple question. Is saving 9% of your annual revenue worth cleaning up a mess in your contracts? If yes, check out how AXDRAFT helps software companies avoid pitfalls in their contract management.Tags: Legal Software