Customer contract management is not a CRM task, it is a CFO and Director level responsibility, because the risk of poor governance of contractual commitments has far reaching and serious consequences. Death and personal injury in contracting carries personal risk for those involved in managing the contract, and poor contract management has a direct impact on reduced revenues, profit margins, and the likelihood of litigation occurring.
Contract Life-cycle Management (CLM) software on the sell side helps us get a better handle on what our organisation has committed to in customer agreements by providing visibility and access to agreements and pre-emptive alerts as trigger points approach. This mitigates the risk of non-compliance.
Quite probably you are not the person who negotiates and drafts the contracts in your organisation, but you manage customer accounts. If this is the case, then there may be important clauses in customer agreements that you need to know about, but don’t. One such clause is a possible right to raise the value of your contract by CPI every 12 months. There will be a limited opportunity before a contract rolls over into a new period where you are required to give notice that you are increasing the value of the contract, and if you miss the cut-off date, then you miss the revenue. There are many other possible reasons for cost increases that you may need to pass on, and these all have notification deadlines.
Compliance to customer contracts is business critical. Are you delivering what you have promised? (Remember a promise is a contract and vice-versa). If you don’t have a system that monitors deiverables and milestones, then you may not be in compliance with your commitments, and how would you know? You would not know until your customer tells you so. Delays or non-delivery can mean it takes longer to get paid, or you don’t get paid at all. Delays in some large contracts can make you liable to pay liquidated damages to your customer as a penalty for late delivery. Late or non-delivery can also lead to termination of an agreement, and possible litigation, costing your organisation millions in lost revenue and damages.
CLM can help you mitigate your risk of non-compliance to customer agreements by automating contract management processes using workflow and electronic approval routing. If you have contract management processes in place, or are developing them, CLM can make these processes available to your whole organisation as detailed process checklists that provide corporate consistency, accountability, and auditability.
One of the biggest risks we face is not knowing what our commitments are. How can you manage your risk if you do not even know what contracts you have? How long does it take you to locate a contract, its amendments, history, and associated correspondence and file notes?
