When companies think about contract management, especially in terms of considering contract management software, they often think of their procurement department, legal department, and their sales team. But there are several contract management software benefits for finance departments, too. (What is contract management software? Find out with our in-depth exploration article.) Ultimately, contract management software makes jobs and tasks easier for all departments. Some ways finance departments can use their company’s contract management software to streamline their processes are provided below.
1. Automated Approval Trees
In some companies, finance teams need to approve the financial arrangements on each contract. Contract management software allows qualified users in the finance department to create automatic approval trees. An automatic approval tree is an organized tier of approvals. Once a member of the sales team submits a contract for approval, the system automatically sends the contract to the right approval parties in the right order.
For example, the contract system can automatically approve a standard contract with no changes to the terms. The finance department can set parameters that trigger alerts when terms of the contract change. This can include setting alerts for non-standard discounts, non-standard timelines for payment, or any other non-standard terms that involve the finances.
One of the biggest contract management software benefits for finance departments is the flexibility it gives your team to determine your own rules. When users create parameters for these alerts, they also designate who gets notified when an alert gets triggered. This ensures a request for approval goes to the right person. A 10% discount may only need to be approved by the sales manager. But a 30% discount may need to be approved by the manager, the billing representative, and their manager.
2. Tracking High-Revenue Deals
High-value deals are what keep the lights on at your organization. It’s essential that each individual and team involved in the life cycle of a high-revenue contract, including the finance department, have contract tracking power. Finance teams can benefit from a number of contract management system features to track high-revenue deals.
For example, users can group contracts by revenue account, assign specific approvers or users to high-value contracts, and set alerts for important due dates related to the deal. Users can also set alerts for things such as contract expiration and contract renewal dates, making it easy to movie high-value customers to the top of the list.
3. Ensuring Payment from Customers
Accounts receivable are among the most important functions of a finance department. Automating accounts receivable with a contract management system streamlines payments, making it easier to keep track of whether or not customers are paying in accordance with the terms of their contract with your organization.
Traditional accounts receivable methods involve manually entering payments into a bookkeeping system or spreadsheet, and manually check if customers are following terms. Contract management system users can create:
- Payment due date alerts
- Grace period alerts
- Triggers for an alert when the payment amount differs from what is stated in the contract.
Not all accounts receivable errors stem from customers who don’t pay their bills.
By ensuring payments are in line with the terms of the contract, the finance department can catch any errors which can impact the company and the customer. This preserves a healthy business relationship.
4. Monitoring Vendor Costs and Payment
Finance teams can get frustrated when departments spend too much on vendors. They need to ensure the company meets its financial obligations with its vendors. Much like accounts receivable, automating accounts payable can prevent errors that can damage a relationship with a vendor. Maybe even more importantly, the finance department can reduce company costs related to vendors.
Some contract management software benefits for finance departments that can help with accounts payable include:
- Creating documents for relevant users that outline approved vendors.
- Creating approved pricing guidelines and/or spending limits.
- Setting reminders and alerts for payments to avoid paying a vendor late.
Finance teams ensure compliance with company purchasing limits. They can also save money in late fees or lost discounts because of late payments.
5. Keeping Detailed Records of Slow Pay/No Pay Clients
Finance departments need to know which customers are paying on time. Contract management software benefits for finance departments should help measure cash flow, not just revenue. Finance departments can integrate their accounts receivable with other contract data to make notes about clients who don’t pay on time. Additionally, they can automate a number of different processes, such as:
- Sending a client to collections after they have reached a certain threshold of late or outstanding payments.
- Putting a stop on automatic contract renewal when clients aren’t paying.
- Communicating information about non-renewals or cancellations to other departments.
These alerts can help save your organization money. Also, they can automatically stop services to clients who aren’t paying in accordance with their contract.
Why Are These Contract Management Software Benefits for Finance Departments So Important?
Contract management systems are powerful tools for finance professionals. The right enterprise contract management software will help finance departments automate and streamline tasks. This makes their job easier. Also, it saves money for your organization. So contact us to learn more about how our software solutions can help your finance team and sign up for a free trial.