Is your contract management process making favorable returns as you think? Do you find any bottlenecks that may affect the contract process at the very bottom line?
Every contract management strategy focuses on accomplishing success metrics like enhanced performance, improved visibility, reduced contract risks, boosted productivity, reduced costs. But depending on different organizations, their objectives, and processes, the contract management procedure also stands out as unique. Contract performance measures, therefore, need to be analyzed based on every organizational goal.
The finest solution for this is to keep a check on the whole contract process using the key performance indicators (KPIs). Contract Management KPIs measure whether the objectives of contract management are effectively met or not. Starting from renewal requests, contract managers need to regularly compute the contract performance measures like minimizing risk, sustaining compliance, and increasing productivity. These contract performance measures can be calculated using KPIs to readily know the success rate of a contract management process. Broadly speaking, the ideal contract management KPIs are the “SMART” ones.
Here in this blog, we have discussed the 3 most important contract management KPIs that you can’t miss calculating your contract management ROI.
Duration of Contract Initiation Lifecycle (CIL)
Annualized Contract Value (ACV)
Contract Initiation Lifecycle (CIL)
How long does it take to close a deal?
The timespan that takes to complete an entire contract lifecycle differs based on the contracting types, scope, demands from both the parties, negotiation phases, contract designing, and execution. The sooner you can close a contract deal, the quicker the revenue returns. For that, a satisfactory time range from contract initiation to sign-off phase needs to be decided prior by the stakeholders.
In such situations, an automated contract management solution can be used to keep track of the live contracting process to decide and rectify the areas of improvement based on time and profits. Moreover, the CLM system can effortlessly reduce the duration for accomplishing the objectives of contract management by using e-signatures, automated drafting, and clear monitoring to produce immediate results. CIL is therefore considered as one of the most important contract management KPIs used to measure your contract management ROI.
Annualized Contract Value (ACV)
Another important contract performance measure is annualized contract value which is the average annualized revenue per customer contract. This is considered vital because the revenues of the contract agreement and requirement for timely renewal are analyzed under this KPI. Overall profits earned in respect to all the agreements made annually by an organization are evaluated here. You can easily compare this annual contract value against the organization’s revenue data to calculate how the overall business revenue is affected. In this way, ACV is beneficial for comparing recurring contracts against lost contracts and new contracts.
Quality check is another important contract management KPI that needs to be measured. Maintaining a consistent quality on time, add value to the contracting relationship. If a particular stakeholder fails to meet the desired quality in objectives of contract management, then there will be a crack in the overall contract process and dealings for the short-term. However, if one phase of the whole contract process is affected, gradually it will affect the long-term objectives of the entire contract process too. Therefore, promptly keeping up with the quality check of the contracting process is a vital factor for analyzing the contract performance measure.
Does your company get the most mileage out of CLM?
The contract management KPIs help to effortlessly meet the objectives of contract management thereby helping an organization to close contract deals profitably and in a timely manner. Implementing an automated contract lifecycle management system for your organization can easily help you attain these objectives to make the most out of your contract management process. Feel free to book a free demo to know more about the best contract management solution for your business!
Written by Linu Mohan
Linu Mohan is a Content Developer who loves to create content with deep business insights. She provides businesses with solid ideas that can put them in a good position even in tough times. She believes in business strategies backed by intelligent technology solutions.