There’s a light bulb moment that we’ve seen over and over at our customers — it’s when companies realize just how much money they’ve been spending on processing contracts, and why that matters.
The average company spends almost $7,000 processing a low-risk contract, according to the International Association for Contract & Commercial Management (IACCM). Think about that. If your company signs a $100,000 contract, 7% of the contract value is out the window before contract fulfillment begins.
But here’s the thing — not all companies have experienced the same pain. The IACCM also reports that while average companies have seen contracting costs increase by about 40% over the last six years, the most efficient companies have only seen costs increase by 9%.What separates high performers from low performers? As I’ve written before, the main reason for high contract costs is fragmented processes, which can lead to bottlenecks and delays. But that’s only part of the answer.
It’s only part of the answer because fragmented processes are inevitable when your company’s people, processes, and tools don’t exist within the same infrastructure. Fragmented processes result from lack of guidance around what tools to use.
Perhaps your finance team uses Google Drive, while your Legal team uses Dropbox. Maybe you have data that starts in Salesforce but needs to be emailed back and forth or dropped into a redline software. From generation to signing, the typical contract goes through dozens of handoffs and tools. Not only is this process error-prone, it siloes information within different parts of your company.
So the real reason that contracts cost so much to process is that your sales, legal, ops and procurement teams spend too much of their time coordinating and looking up relevant information (e.g., new rules on data protection or supplier due diligence) and not enough time moving contracts forward.
The benefits of contract automation
The most efficient companies help their teams succeed by minimizing the number of tools, amount of manual review, and email handoffs involved in the contracting process. They codify contract policies and regulations into smart software that facilitates contract automation and use a single platform to orchestrate handoffs between different teams. This approach accelerates contract approvals, gives leadership visibility into the contracting process, and consolidates all contract-related data in a central location. It also makes your company more resilient to change, as contract renegotiations and regulations can be handled centrally rather than over email threads.
Taken together, the IACCM estimates that these measures can decrease the cost of contracting by about one-third. With Ironclad, we believe that the savings can be even greater. Our software not only automates contract handoffs and puts all contract-related information in one system, it also generates reports on contract processes to ensure that you get the added benefit of data-related insights.
It’s not hard to see why contracting has gotten more expensive in recent years. The increase in domestic and international contract-related regulation and the proliferation of different tools for creating, processing, reviewing and negotiating contracts have made the process a nightmare for most big organizations. Fortunately, working with a central workflow and document management platform can bring the contracting process — and bottom line — back to earth.
More about Ironclad
Ironclad is the leading digital contracting platform for legal teams. By streamlining contract workflows, from creation and approvals to compliance and insights, Ironclad frees legal to be the strategic advisors they’re meant to be. Ironclad is used by modern General Counsels and their teams at companies like Dropbox, AppDynamics and Fitbit to unlock the power of their contracts data. Ironclad was named one of the 20 Rising Stars as part of the Forbes 2019 Cloud 100 list, the definitive list of the top 100 private cloud companies in the world. The company is backed by investors like Accel, Sequoia, Y Combinator and Emergence Capital. To learn more, visit our homepage.
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