Contracts are essential for any organization. They provide vital information and revenue for your company. The agreements also determine the success or failure of your business. So, for your business to grow, these contracts need to show excellent performance.
Establishing key performance indicators is vital to help you evaluate the performance of the contracts throughout their life cycle. These KPIs should be based on your company’s goals and objectives. They should measure the success rate of the contract management process. At the contractsafe UK, we offer you contract management software to help you formulate the Key Performance Indicators fast and evaluate the performance of your business.
Here are Key Performance Indicators you can leverage to improve the productivity of the contract management lifecycle.
The period of the contract
The contractual period between a company and its contracts may vary depending on the type of contract, geographic location, and clients’ situation. You will encounter situations where termination of the agreement occurs prematurely and those where the contract will be renewed. That’s why you need to track the period of the contract lifecycle. To evaluate the performance of the agreement, you will need to calculate the duration.
Ease of use of the software
This is a crucial key performance indicator. It is essential to determine if all parties can efficiently utilize the contract management software. If they are finding it hard to use, your company’s productivity may go down. When you find yourself in such a situation, test different software till you find a good fit for your team.
Contract risk management
KPIs for contract management is beneficial when it comes to managing risks. Contracts are legally binding and involve financial commitments. That’s why you need to keep track of the contract lifecycle to ensure you don’t miss an important deadline and other alerts. For example, missing essential aspects such as renewal or cancellation of a contract results in legal complications and financial losses for your company.
The KPIs help your team to monitor and measure every aspect of the contract. This mitigates losses and effectively manages contracts’ compliance, deal closures, and enhances efficient performance.
Are your contracts approved?
It will help if you strive to ensure that the number of approved agreements is higher than that of unapproved ones. You can achieve this by having an objective conversation with the party delaying the approval process. This will help you save revenue that would have otherwise gone to waste due to unclosed deals. It would be best to focus on this KPI because excellent management software will reduce the number of unsigned contracts.
The number of canceled agreements
Monitoring the number of canceled contracts will help you analyze the process and act accordingly to reduce the cancellation rate. You will be able to make changes to create room for improvement in your company.
Deviation of standard clauses
Standard clauses in contract management software are an excellent strategy to mitigate risks. The clauses use terms and friendly language that all parties understand. Additionally, it allows contract compliance by all stakeholders and maintains your company’s values.
High-standard clauses will alert your team and contractors when there is a potential risk and the remedial action taken. Continuously monitor the clauses to ensure they don’t deviate from their standard.
Compliance is a necessity for effective contracting. Noncompliance can lead to huge fines, expensive legal claims, and damage to your company’s reputation.
Research shows that companies with clearly defined contract compliance save 80% compared to non-compliant companies. This KPI allows you to see if your organization needs improvement with regard to contract repositories and contracts
What is your order value variance?
Order value variance evaluates contract losses caused by errors of the management. This KPI gives a summary of the overall performance of your contract management system. A margin of error above 5% indicates significant risks within your contract management system.
Consistency in quality is a crucial contract management KPI that you should measure. High quality creates strong relationships between the contracting parties. Poor quality can affect the objectives and goals of your organization which may result in significant losses. So ensure you are continuously analyzing quality to keep it on top at all times.
The contract management KPIs must be specific, measurable, attainable, realistic and timely. The KPIs help you meet the objectives of contract management which results in increased profits and productivity in your organization. Automated contract management software will help ineffective leadership, monitoring, and executing contracts to speed up the process.
Additionally, the contract management software uses powerful tools to enhance the use of Key Performance Indicators. The software further helps you choose specific and flexible KPIs to meet all your business needs.