Assessing the financial and operational heart of any organization, contracts play a massive role in determining revenue, procurement, compliance and the relationships you have with your suppliers. As the volume of contracts and their complexity grows, getting a handle on them is crucial for financial success and risk reduction, and manually filing and tracking simply won’t cut it anymore.
Today’s organizations require real-time data-driven insights that are made possible by monitoring the right metrics. Focusing on key performance indicators, legal, procurement and financial teams can spot bottlenecks, areas of inefficiency and new ways to boost the performance of their contracts.
Well-chosen metrics drive strategic decisions, knock down the walls of resistance in negotiations and enable businesses to maximize value out of their contracts. Here are the top metrics that businesses need to be tracking through a contract management platform:
Contract Cycle Time
Contract cycle time (how long it takes for a contract to go from initial proposal to final signing) is an important measure of how efficient a company’s workflow is. When this time starts to drag out, it can mean there are approvals being stuck in a queue, sluggish negotiations, or manual tasks that are causing unnecessary delays. Reducing cycle time leads to faster revenue realization, lets suppliers get set up more quickly, and gives companies the edge they need to be more adaptable.
Renewal and Expiration Management
If you don’t know what’s approaching in the cycles of your contracts, you’ll miss out on new opportunities, automatically renew contracts with unfavorable terms, and get into compliance issues. Monitoring the percentage of contracts that are renewed on time, the number of missed renewals and the value of lost contracts will help companies stay on top of their business and prevent problems.
Compliance and Obligation Fulfillment
Compliance measures how well both parties stick to details of the contract. This includes reaching delivery targets, achieving performance goals, accurately pricing goods/services and meeting regulatory requirements. Assessing the effectiveness of contract management, organizations should look beyond document storage, and towards metrics that cut through the noise to deliver real value.
Tracking legal and financial aspects of contracts can be monitored through the adherence of service-level agreements (SLAs), invoice accuracy and vendor performance scores. Strong compliance management not only mitigates risk but also contributes directly to contract value and ROI.
Contract Repository Utilization and Data Accuracy
By tracking financial performance, organizations can see if their contracts are working the way they should be, and identify chances for further improvements. Access to clear financial information also gives you the ability to plan, predict and map out long-term plans for your suppliers.
Another important feature is the contract repository, a centralized database that stores all your contracts. Accurate contract data improves reporting accuracy and strengthens decision-making, making this metric essential for long-term ROI.
Using Metrics to Strengthen Contract Management Value
There’s much more to managing contacts than just storing documents. Cycle times, renewal performances, compliance levels, financial effects, and repository usage, gives companies the insights they need to pinpoint where they can streamline and maximize their contracts. By monitoring these KPIs consistently, organizations strengthen processes, reduce risk, and unlock higher contract value.
