ERP software contains a variety of features that vary from vendor to vendor. Some ERP features are pretty standard across the industry, but there are additional modules and add-ons available on a case-by-case basis that can assist your business with more specific needs. ERP contract management is one of these special features that can speed up manual workflows and increase revenue.
Because contract management isn’t a standard feature in all ERP systems, you will need to be upfront about this need when reading more about software and eventually looking at potential solutions. But first, let’s examine what exactly ERP contract management is.
What Is ERP Contract Management?
Contract management functions are integrated with ERP software to ease business processes such as developing contract templates. ERP software itself is a database of information and workflows that are meant to automate and quicken business processes such as inventory management and accounting. One of the main things that attracts companies to ERP systems is that it’s a solution that takes many disparate departments and functions and packages them together. The software can then measure data analytics across a business while automating interdepartmental workflows.
In other words, ERP systems can reduce the number of communication failures and human errors that take place within a business. By automating document movement across departments and creating a centralized data hub for business, workflows can be simplified and employees can spend their time on other tasks.
Contract management is similar to an online filing system where you can manage contracts, develop templates and measure how contracts could affect sales revenue. Because contracts are used in multiple facets of a business — whether it be vendor relations, sales contracts or anything in between — finding an efficient way to manage and measure these documents can be extremely helpful to streamlining business functions.
What Exactly Does ERP Contract Management Software Do?
The exact components of an ERP contract management software solution vary by vendor, but there are some general components that you may wish to look for when you are reading about solutions that might be a fit for you.
Develop and customize contract templates
With ERP contract management software, you can create custom contract templates to use for various aspects of your business and along the supply chain. For example, some companies might create a standard sales contract for conducting business with vendors of a certain size. This reduces the amount of time it takes to onboard a new vendor because a completely new contract doesn’t have to be created with each new deal.
Establish company-wide contract terms
Common contract terms for your entire small business or enterprise can assist in the coordination of base requirements. Some contract aspects that may be standardized include applicable pricing and discounts, which are factors that usually remain relatively consistent. With company-wide contract aspects, you can convert sales quotes to contracts while maintaining basic information such as pricing and timelines.
Measure company impact on sales, materials, billing, etc.
Contract lifecycle management software can help provide visibility of how a given contract will impact other aspects of the business. This visibility assists in making sure that your company can adhere to a given schedule and pricing amount as mandated in a contract. This is made possible through the integration of contract management and revenue management with processes such as accounting and sales.
Integrate material and service requirements easily
ERP software is a centralized system for maintaining data and conducting business processes across the various departments and subsets of a company. For this reason, integration is a key benefit associated with ERP that can make tasks such as contract management simpler. For example, some contract management solutions might allow you to use the scope and pricing information included in a contract to then create a project template using integrated project management software.
Detail cost information
With ERP software that contains or is integrated with a financial suite, you can look at the actual cost of a project during the project lifecycle to measure how it stacks up to budgets and initial estimates that are marked in contracts. This can help reduce the number of projects that go over budget by increasing awareness of mounting costs and improving contract performance.
Should I Use ERP Contract Management Software or a Standalone Contract Management System?
There are some pros and cons to using an ERP contract management service as opposed to buying contract management software on its own. Let’s examine some of the benefits and downfalls of choosing ERP software with a contract management module.
Pros & Cons of ERP Contract Management Software
- Easy integration with other business functions: Integration with other business functions can reduce communication errors and help you keep track of relevant metrics such as actual project cost. ERP software pulls all of your relevant data and connected business processes and helps them work together to develop actionable insights. Standalone contract management software can be connected to other systems, but the key benefit of ERP software is that integrations are more seamless and require less effort. This is because connectivity is built into the program itself through modularity.
- Existing IT support: If you decide to add a contract management software module to your existing ERP solution, one benefit is that you already have a relationship with the software support staff associated with your current software. Therefore, onboarding would be simpler.
- Training resources available on-hand: Similar to the benefits of having an existing relationship with software support staff, your internal IT team is already familiar with your current ERP solution. So, training that team should be less labor intensive than if you were to implement a completely new system.
- Can contain fewer features than standalone software: An ERP contract management software add-on may provide fewer features than a standalone solution. ERP modules tend to span many different business functions but don’t always go as far in-depth as needed. Depending on how extensive and detailed your contract management needs are, you might opt for a standalone solution that you can then customize or configure to fit into any existing software that you might use.
- Expensive: I’m not going to sugar-coat it — ERPs can be quite expensive. Cost ranges due to a wide variety of factors such as business size and the number of features included in the program.
- Less subject matter expertise: Because ERP support teams need to be knowledgeable in a wide variety of areas, representatives may be less informed about detailed contract management software needs than a representative from a standalone solution whose sole job is to understand and help others with contract management.
Why Should I Integrate Contract Management With Other ERP Modules?
One of the key benefits of ERP is that different tools and modules can be easily integrated. This means that various functions can coexist and share a centralized data hub. Additionally, this allows various business processes to work together automatically. For example, your contract management module and distribution tool may interact by requesting and sending templates for distributor contracts at the touch of a button. Here are some more benefits of integrating contract management with other ERP modules:
- Data access – When interdepartmental teams have access to relevant contract data, your business is more likely to use insights to boost revenue. For example, you might collect data regarding contract performance and how much money you can get away with charging vendors for a specific type of deal. By using this data across departments, your entire business can be streamlined to boost revenue through future contracts and sales deals.
- More strategic contract development – With ERP integration, your company will have the ability to look at past contracts to analyze successes and failures. Armed with this information, your company can avoid pitfalls or use positive examples to increase profit margins.
- Reduced risk – Contract management software can reduce the likelihood of a breach of contract by keeping employees aware of specific requirements. Employees in multiple departments have to deal with contracts, so this benefit is essential in helping with contract compliance.
- Accurate financial systems – By integrating your contract management software with your financial reporting system, you can reduce your risk of sending incorrect payments or missing payment deadlines. These errors can negatively impact your bottom line, so it’s helpful to have your system integrated so that contract financial details are not entered incorrectly and deadlines aren’t missed.
- Efficiency – Automation of business processes can greatly speed up day-to-day tasks while also reducing manual errors. Additionally, by using an integrated platform, your employees can eliminate duplicate work because of increased process visualization.
What Type of Businesses Use an ERP Contract Management Module?
Contract management tools can be beneficial to a wide range of businesses. Some of the industries that prominently use this type of software in their day-to-day business include:
- Home furnishings
- Food and beverage
As common users of enterprise resource planning software, companies in the above industries frequently implement ERP contract management tools. The benefits of contract management software differ from business to business. Document management, which includes the ability to keep contracts in a location where they are centralized, secure and easily customizable, is one of the heavy hitters. These bonuses are compounded by the ability of some ERP contract management software to integrate with sales teams in order to measure the feasibility and profitability of a given contract.
To Wrap It Up
ERP contract management is a useful tool for many companies. When coupled with ERP modules such as accounting and human resources, this feature can prove especially beneficial to the bottom line and timeliness of a company’s efforts. This tool is available both as an ERP add-on and standalone software, which enables you to select the type of integration that you prefer and potentially sync the tool with your current software solution.
What do you think is the most exciting benefit of ERP contract management software? Let us know in the comments below!