Procurement departments need to have best practices and standardized processes in place. That’s the only way to create loyal vendor relationships that supply affordable, yet high quality, services and goods for a company. Procurement teams are heavily involved in an organization’s contracts. So, a slow or error-laden procurement process can affect an entire organization. In our “What Is Contract Management Software?” guide, we talk about the benefits of CLM software for your whole company. Here, we talk about the benefits and uses of contract management software for procurement teams. Below you will find some ways procurement departments can use enterprise contract management systems to manage vendor agreements and limit risk for your entire organization.
1. Implementing a Clear Negotiation Process
Different members of the procurement team use different incentives or leverage during contract negotiations. But this can cause inconsistencies among vendors. You can be sure different vendors speak with one another, even if only during service or product delivery. If outside vendors sense that they are each being treated differently by a company, it can damage business relationships.
Procurement teams can create a clear negotiation process within a vendor contract management system. Then every team member has access to standard practices, negotiating guides, and contract templates. Although many different features can add to this process, creating one or two standardized documents that specifically outline negotiable and non-negotiable items will have the biggest impact.
Additionally, procurement supervisors can trigger alerts when specific terms of a vendor contract go out of the approved range. This ensures all terms in a vendor contract meet organizational needs in terms of location, cost, quantity, and time — but team members still have room to negotiate.
2. Utilizing Vendor Contract Templates
Traditional vendor contract management might include creating a new contract for each new vendor. Not only is this time consuming, but it leaves organizations open for risk if the language is loose. It can lead to a dropped deal if drafting the contract takes too long.
Whether by an internal legal department or external firm, you can create legally sound vendor contract templates. This eliminates risk by ensuring only approved language is used in a vendor contract. This allows the procurement team to access the template they need and input client-specific data rapidly from anywhere. Contract management software for procurement teams can automatically generate vendor contracts that fit the product type, order specifications, and more.
Supplier contract management software also allows companies to manage specific vendor contacts. That means the addition of client information is automatic or as simple as a click or two. The time savings from using pre-approved vendor contract templates also reduces the time of the entire contract management life cycle. At the end of the day, your company can get the goods and services it needs more quickly.
3. Taking Advantage of a Centralized Contract Database
Contract management systems are centered around a repository of a company’s contracts and accompanying documents. That includes vendor contracts and documents. This gives procurement teams easy access to vendor contract templates. It also provides easy access to current and previous contracts. With a centralized contract repository, procurement teams can look for new vendor opportunities and opportunities to reduce organizational costs. For example, they can look at previous years’ rates, see if there are overlapping vendors, or ensure price increases fit within the terms of the contract.
When the procurement department has user-friendly, organized access to a company’s contracts, they can create reports and search the repository, too. Supervisors can also see an entire contract workflow and ensure their team members are completing tasks in a timely fashion. Remaining compliant with the organization’s standard procurement processes and goals is just one of the uses of contract management software for procurement teams.
4. Tracking Contract Renewals & Termination
Traditional methods of contract management make it difficult to track contract renewals and termination of contracts. That can cause gaps in service or missed opportunities to renew or drop contracts.
With the right features in contract management software for procurement purposes, however, it gets easier. The procurement department can set alerts to ensure they don’t miss important milestones in a vendor relationship. Once the dates are entered, procurement teams don’t even have to manually monitor the dates. They’ll just receive an email when the deadline starts to loom. This can preserve business and save money, depending on the situation.
For example, procurement teams can set one or more alerts when contract renewal approaches. This gives the team time to audit and evaluate a relationship with a specific vendor. They can take the time to ensure product or service delivery is still necessary and still falls in line with organizational goals. Without pre-planning for the renewal of a vendor contract, companies might automatically continue to spend money on goods or services which they don’t need or want.
Additionally, the procurement team can use a contract management system to send alerts if a vendor terminates a contract. This will prevent the team from automatically issuing a purchase order or making payment for a product or service they are no longer receiving.
But You Don’t Have to Invest in Contract Management Software for Procurement Teams Alone
Contract management systems have powerful tools to help procurement departments mitigate risk and manage vendor agreements. This benefits an entire organization. ContraxAware offers a comprehensive CLM software solution that has features for every department in your company. Contact us to learn more about how our software solutions can help your procurement team and sign up for a free trial.