Legal agreements are the backbone of business operations. That is why contract risk management is the top priority for any organization. Not only does it help enterprises to avoid unnecessary risks, but it also enables them to derive maximum value from their business agreements.
It is unreasonable to rely entirely on the legal team to mitigate buy-side or sell-side contract risks. The legal departments require all the help they can get to ensure that contractual agreements progress through the contract lifecycle without causing trouble for the company. Integrating Microsoft 365 Business Central with contract management software is one surefire approach to guarantee that. The integrated system enables other departments to contribute to the contract risk management process.
Risks are an unavoidable part of contractual agreements. There are bound to be influential variables beyond your control when you enter a business agreement with a party. The best any organization can do is identify these risks beforehand and limit the consequences. Some of the leading risks associated with contract management include:
Security issues in contract management typically occur when unauthorized individuals access confidential data. Or the contractual agreements getting stolen or lost.
Financial risks occur when companies face monetary loss due to inefficient contract management. It includes failure to renew or terminate contracts on time. Also, if businesses extend unprofitable legal agreements without proper analysis or strategy, it can lead to the loss of revenue.
When organizations do not keep up with the terms and conditions stated in the legal agreement, they are likely to cause a breach of contract. Legal risks include not complying with industrial, environmental, and judicial regulations.
Brand image and public perception are crucial components of an organization's ongoing survival. Any hit to the company’s reputation can lead to loss of business and harmful relationships.
Now that we have covered contract management risks, let us examine how they affect your company.
Handling contractual risks is vital to healthy business operations. The consequences of oversights in contract management do not stop with the legal team, it disturbs the functioning of the whole organization. One of the biggest repercussions of contractual risks is loss of revenue. Prolonged negotiations, violations, and missed milestones can erode annual returns.
Apart from monetary losses, contractual risks can also damage the social standing of an organization. A company with inefficient contract risk management is less likely to draw in quality employees, vendors, and customers.
Any breach of contract or violation of terms can lead to legal consequences. The company can end up with countless litigations, fines, and terminated agreements. This in turn adversely affects the company’s business relationships. The challenge with contract risks is that once you make a mistake, every other aspect of the business starts to go wrong. Hence, enterprises must take extra care to assess and mitigate contractual risks.
Microsoft 365 Business Central is a cloud-based ERP solution that connects departments across the organization. Sales, finance, legal, and procurement can work together to deliver results faster and better. Integrating Business Central with contract management software allows teams to collaborate on contract risk management. The relevant departments get to oversee the entire contracting process to assess risks before the situation becomes insurmountable.
Inaccurate contractual agreements are the undoing of any business operation. They sour the relationship between the organization and the party. Hence, the first step is to create an effective legal document without any errors. Integrating the Business Central platform with contract management software is one reliable approach to accomplish that.
The integration enables organizations to initiate contract requests within the Business Central platform. Moreover, the system also allows the legal department to import sales and vendor data directly into CMS (Contract Management Software) to create accurate legal documents. Thus, there is no need for repeated data entry during the contracting process. Organizations can reduce the likelihood of human error and the risk that goes along with it. It gives businesses the ability to draft only competent contracts and gain the most out of them.
An organization’s responsibility towards a business agreement does not cease with the signing of the contract. They need to constantly oversee the document to keep track of all the contractual terms and obligations. Failing to follow through on the stipulations stated in an agreement can result in legal and financial repercussions. For scaling organizations with countless agreements, legal cannot be expected to keep track of them all.
Thanks to Business Central contract management, the other departments can contribute to the contracting process and keep tabs on obligations. They can determine relevant terms and conditions and assign automated trackers. With the integration, sales and procurement can get notified of relevant obligations. When it is a combined effort, it's less likely for the essential stipulations in the contract to slip away.
Every firm strives to prevent excessive access when managing important contractual agreements. They do not want private contract information mishandled or getting into the wrong hands. Organizations must therefore take care to facilitate collaboration without allowing room for data leakage.
Microsoft 365 Business Central’s integration with contract management software offers enterprises a centralized platform to manage the entire contract lifecycle. So that other departments can collaborate with the legal team to streamline the contracting process. But thanks to the integrated system, organizations can assign role-based access to contracts. The customizable dashboards and workflows make it possible to ensure that contract-related information reaches the right person. It also helps to instill accountability in the contracting lifecycle management. Thus, organizations can avoid mismanagement and unauthorized transmission of contract data.
One of the biggest risks organizations face is the lack of control over financial data and performance to perpetuate informed decision-making. The legal department requires extensive knowledge of payments, balances, costs, and orders to optimize contract creation. But most of the time, departments function as information silos without information continuity. It leads to late deliveries, increased costs, and dissatisfied clients.
Business Central contract management promotes team connectivity and enables enterprises to facilitate a single source of truth. The legal team can access real-time financial summaries within the contract management software platform. They can utilize comprehensive information on orders and payments to advance contract management. Whether it is sell-side or buy-side contracts, access to financial performance can go a long way to hone the negotiation and renewal processes. The legal department will be better equipped to hash out a beneficial business arrangement for the organization.
As we have already discussed, the integrated system offers insight into the financial viability of each vendor and customer. It also allows the legal team to stay on top of the revenue and order history. Thus, with Business Central contract management there is no scope for missing payments and organizations can achieve financial optimization.
Additionally, Business Central’s integration with contract management software equips the sales and procurement team to oversee the key contract milestones. They can set automated notifications for contract renewals and termination dates. Thus, every invested department can ensure that organizations do not face the risk of missing deadlines. Moreover, they can prevent needless fines and never lose a good business opportunity.
Contract reporting is one of the most efficient strategies to mitigate contract management risks. The process involves collecting, analyzing, and sharing actionable insights from the contractual agreement. Whether it is the sales or procurement department, there is a lot they can achieve with easy access to contract data. But, more than often, other teams are heavily dependent on the legal to gain information. And it is too little, too late.
Integrating Microsoft 365 Business Central with contract management software allows other departments to directly access all contract-related information. Moreover, the integrated system accumulates data from Business Central and the contract management software platform to generate comprehensive reports. Thus, organizations can easily obtain real-time and accurate reports on contract value, duration, performance, deadline, payments, and so on.
Profitability is the primary goal of any business endeavor. No company can achieve its true value without taking the necessary steps to identify and mitigate risks throughout the contract lifecycle. Integrating Microsoft 365 Business Central with contract management software offers enterprises an opportunity to incorporate every department in contract risk management.
They can utilize the capabilities of both platforms to improve every phase of contract management. Create accurate contracts, establish compliance, track obligations, and generate efficient reports to make smart choices. The centralized platform ensures that every department is on the same page, so there is no room for miscommunication or errors. The integrated system provides additional tools, controls, and context for the organization to optimize the entire business operation.
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