Contract Management Software Blog & News

The Cost of Contract Management

Description of Contract Process

Choose a business process in your organization to analyze. Now estimate the volume of contracts that are published on an annual basis, pertaining to the process.

Contract Preparation Costs

Questions to consider:

• On average, how many minutes does it take to prepare your contracts, before they are ready to be sent out?
• What is the salary (plus cost of benefits) of the employee(s) in your organization who prepares your contracts?

The first step is to create a contract. Using a desktop word-processing solution (Word, Google docs, PDF, etc.), an administrator populates the contract with relevant data for each transaction, such as names, dates, dollar values, and so on.  

For example, sales agents in a wealth management firm or an ISO will create and mark-up a contract every new time they open an account or sign up a new merchant. They are likely given a set of standard contracts and are required to fill in the relevant information for each new customer.  

This completion task is time-consuming, expensive and susceptible to data-entry errors.
 

Shipping Costs

Questions to consider:

• Which methods do you use to send contracts: E-mail, fax, regular mail or by courier?
• Do you pay to ship your paper contracts to signatories?  
• On average, how many times a month do you ship the contract for each transaction in the signing process?
• What is the average cost of the shipment method, if by mail or courier?

Shipping paper has a number of shortcomings:

• Costly: The actual cost of shipping is significant
• Slow-moving: Physically shipping paper to and from signatories
• Lack of visibility: Once contracts are sent, the publisher has no idea of their status. Are they in transit to or from signatories? Are they sitting unsigned on someone’s desk? Or has the prospect moved onto a competitor?

 

Error-Checking and Correcting (“NIGO”) Costs

Questions to consider:

• How often are contracts returned not in good order (NIGO)?
• What percentages of contracts are returned NIGO?
• On average, how much time is spent working on fixing your NIGO contracts?
• What is the salary (plus cost of benefits) of the employee(s) responsible for managing your NIGO contracts?

A percentage of completed contracts that are returned will have missing or incomplete information — either data errors in the forms, or missing supporting documentation, such as void checks or bank statements.

 

Data Keying or Scanning into System of Record

Questions to consider:

• How much time and how many resources get allocated to keying or scanning information from competed contracts into your internal back-office systems?
• Does this same contract information also have to be keyed into additional external systems - i.e., underwriter, processor, etc.?
• On average, how much time does it take to load a contract into the required system(s)?
• What is the salary (plus cost of benefits) of the employee(s) who manages getting the data into these systems?

Once the contracts are complete and in good order, organizations often need to key or scan them into their internal system of record.
 

Increased Revenue Potential

Often the resources employed to fill in, mail and track contracts, are the revenue generators of an organization. But paper contracts are time-consuming and clumsy to monitor and manage for your sales people, while they are “in-flight.”


IMPROVED REVENUE PRODUCTION DUE TO SALES PRODUCTIVITY
If sales people are filling in your contracts, then they must allocate a percentage of their time to creating and chasing paperwork rather than driving revenue.

Questions to consider:

• If your sales people are completing contracts, what would be the estimated percentage of administrative time saved and re-directed to pursuing increased sales, if contracts were made more efficient to complete or completely off-loaded to customers to fill in?
• Average annual value of a closed deal?

 

EXPECTED REVENUE INCREASE FROM REDUCTION OF ABANDONED CONTRACTS
For this process, is there a challenge to get contracts completed, and in a timely manner? Are contracts being sent out and your sales people are at a standstill waiting on customers to fill out and return?  Do your prospects shop around and move onto competitors?

Questions to consider:

• What is your current contract abandonment rate?
• What would you estimate your abandonment rate to be after automating the contract process?
  
  

E-mail us today to find out how much operational cost reductions your organization can realize with Contract Management Software 

• How much your current paper-based contract process is costing your organization per month
• The operational costs your company will save by automating your contract process