- Financial losses
- Non-compliance with the Sarbanes-Oxley Act of 2002
- Lawsuits and regulatory fines
- Inaccurate revenue and expense forecasting
- Incorrect packaging
- Incorrect product specifications
- Incorrect quantity shipped
- Late shipment
- Invoicing errors
- Billing errors
In today's challenging and competitive business landscape, savings associated with avoiding these problems can make the difference between profit and loss.
Myth 5: Contract management only impacts a few people within the organization.
The basis for this myth is the fact that traditionally only a limited number of individuals had access to the firm's contracts, which created the illusion that only a limited number of people used the contract. Many employees may not know where to look for the information, as a result, or they may not even associate the contract with a source of critical information.
Contracts impact departments and functions throughout the organization and are therefore important to virtually every person in the firm. However, not every element of the contract is equally important to all areas of the company, which makes it is important to have a contract management system that stores the contract in a repository with role-based access. In this way, groups like legal, finance, purchasing and shipping can access those elements of the contract that are relevant to them.
To many it may seem that only major strategy agreements between firms are classified as a contract, but when a broader definition of contracts is used, it becomes apparent that contracts have a wide impact across the enterprise and drive a significant part of an organization's business. Some representative contract types found throughout organizations include:
- Advertising//PR Agreements
- Agency Agreements
- Asset Purchase Agreements
- Broker Agreements
- Commercial Lease Agreements
- Confidentiality Agreements
- Contract Sales//Research
- Distribution Agreements
- General Proxy
- Intellectual Property License
- Joint Marketing Agreements
- Joint Venture
- Leasing Agreements
- Limited Liability Certificate of Formation
- Material Transfer Agreements
- Outsource Services
- Partnership and Strategic Partnership Agreements
- Patent Applications
- Power of Attorney
- Research Agreements
- Security Agreements
- Strategic Consulting
- Supplier Agreements
- Termination of Lease Agreements
- Value-added Reseller Agreements
In addition to those contract categories, there are other agreement types that are handled by contract, such as a purchase commitment, returns and replacement, incentives and discounts, payment terms, and duration and expiration. Contracts extend to all corners of a corporation and affect all employees.
The Power of Contracts
Believing these myths surrounding contract management is a common misconception without the proper information. Fortunately, armed with the proper details about what contract management can do, companies can save time and money without risk or loss of opportunity.
In the present market environment, especially with new reporting requirements mandated by the Sarbanes-Oxley Act of 2002, increasing competition and tighter margins, companies must explore every possible opportunity for improving business processes and ensuring the accuracy of their financial transactions. For many companies, unlocking the power of the contract is an excellent place to start.
Mark Smith is the general manager and vice president of I-many