Your vendors are at the heart of your procurement cycle. You need those vendors to supply the vital components you need for your business and ensure a high level of customer satisfaction. Unfortunately, many companies struggle in several aspects of their vendor contract management process. Vendor contract management is just one element we suggest you reevaluate to improve your contract management in 2020. Consider these key areas where most businesses struggle and how more effective supplier contract management software can help.
1. Your company loses track of vendor contracts in the general sales contract system.
Your vendors are just as important as your customers. But it’s much easier to lose track of them in the general sales contract system. As a result, you may find yourself losing or neglecting those contracts altogether. You might fail to remember exactly when you expected your vendors to deliver, or you might not realize until it’s too late that your vendors haven’t met the terms of their contracts. Legal contract management software, on the other hand, will separate your vendor contracts from your general sales contracts. Then your procurement team and facility manager can ensure that those vendor contracts are just as visible and carry the reminders and reports you need.
2. Your company is failing to score the risk vendor contracts effectively.
Your vendor contracts are every bit as important for your business as your sales contracts, and in some cases, they may carry just as much risk. If a vendor fails to deliver on time, for example, it could set an entire project up for failure. Likewise, you may find that ineffective vendor performance can jeopardize your business’s reputation. Just like you need to score the risk associated with your sales contracts, your business needs to carefully evaluate any risks associated with accepting a specific vendor’s contracts. This may include:
- Checking contractual deadlines to ensure that they fit with the deadlines you already have for working with your customers.
- Providing an assessment of the cost of vendor services or offerings and ensuring that it fits within your budget for a given project.
- Evaluating the quality of vendor products to ensure that they fit your business’s needs.
- Determining how a vendor’s reputation could impact your own and the likelihood that the vendor will deliver a high-quality product on time.
Your vendor contract management software shouldn’t just score the risk of your sales contracts. It should also have a different system for evaluating vendor contracts than sales contracts. With this simple strategy, you can avoid costly errors that could cost your business valuable time and money.
3. Your company can’t keep track of vendor contract renewal dates.
Sure, your vendors will likely remind you when your contracts are up for renewal. They want to keep your business. But if you’re waiting on your vendors to remind you about contract renewals, you could be leaving your business at risk. In some cases, vendors might not have effective contract management systems of their own. Then you may fail to renew contracts on time. The subsequent disruption of services can cascade to impact your bottom line. Recognizing that it’s time to renew a vendor contract early gives you the advantage. Contract tracking will also give you a chance to evaluate the effectiveness of that contract for your business. This includes determining how:
- The service fits your current needs.
- Your business may change during the future term.
- You may need to change the way that the contract is handled to reflect the changing needs of your business.
4. Your company can’t see when vendors are out of compliance.
When you work with vendors, you need the assurance that they are taking just as much care to meet basic compliance standards as you are. This is even more crucial if your vendors or subcontractors work directly with your customers. Your vendor contracts need to include clauses that reflect basic compliance requirements. These range from maintaining data security to ensuring that your vendors meet safety and privacy regulation. Every industry has to meet slightly different standards — that applies to both you and your vendor.
If you don’t include those clauses in your vendor contracts, that’s a problem. You may open your business up to legal trouble when your vendors fail to meet those basic requirements. Your vendor contract management software should include templates that automatically include those compliance standards that can impact your business. Enterprise contract management systems should also ensure that vendors meet those standards when:
- Working with your clients directly.
- Delivering products that you use in client interactions.
5. The business misses important deadlines because of a lack of attention to vendor requirements.
In order for you to meet your deadlines, you need to know that your vendors are going to meet theirs. When your vendors don’t deliver on time, you may face a loss of revenue or even fees due to your own missed deadlines. Not only that, you may lose time as you try to sort out problems with your software and systems. With effective supplier contract management systems, however, you can ensure that you can:
- See your vendor deadlines.
- Include them in your contracts.
- Keep up with the terms throughout each contract life cycle.
If your vendor contracts aren’t visible, that’s a real risk. You may be missing out on potential revenue streams for your business and even costing your business money. If your contract management software doesn’t focus on vendor contract management, too, it’s time to make some changes. Contact us today to improve your business’s ability to produce the high level of quality your customers expect.