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How Costly Are Manual Contracting Processes...Really?

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 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 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. 


Ironclad, our contract management software, saves companies money by automating contract handoffs and organizing all contract-related information in a single system. See how today.

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