Without the assistance provided by nonprofit organizations today, many underprivileged communities would not receive the daily necessities they need. The positive societal impact of nonprofit organizations goes without saying – however, many are unaware of the economic importance of these organizations.
The Relationship Between Nonprofits and Contracts: The Current Research
Nonprofits must institute standardize procedures in order to successfully accomplish their overall missions. However, according to a report published by Guidestar in 2018, a whopping 50% of nonprofit organizations in the United States function on less than one month’s cash savings. Nonprofits face unsurmountable pressure daily to operate under tighter financial conditions, and the technology of today is one way to achieve this end goal. While an initial investment into a contract lifecycle management system may seem like a large and costly undertaking, the solution pays for itself in the way of time and costs savings over time.
Today, nonprofit organizations far and wide are recognizing the utility of contract management software and how their capabilities can support them in fulfilling their societal goals and missions. Because resources and finances in nonprofit organizations are typically spread very thin, nonprofits tend to be the most vulnerable to crumbling under the tight funding conditions. Additionally, due to the tax-exempt status of nonprofit organizations, they are often under high levels of scrutiny and are usually under the microscope in terms of spend transparency. In this manner, nonprofit organizations are required to minimize excess spending anywhere possible in order to continue to operate. In turn, visibility and accountability into contracted obligations and legally bound partnerships is insurmountably important. This concept is expressed by the National Council of Nonprofits, stating how they “hope that practices reflecting accountability and transparency, prudent fiduciary oversight, legal, ethical, and responsible fundraising, and effective governance will be reinforced through sound practices at every charitable nonprofit. Voluntary adoption of such practices is a demonstration that your nonprofit deserves the public’s trust, is serious about advancing its mission, and is striving towards excellence.”
The Urban Institute reports that in 2013, an estimated 1.41 million nonprofit organizations registered with the Internal Revenue Service, contributing to the U.S. Economy an estimated $905.9 billion. This figure represents 5.4% U.S. GDP. And while nonprofit organizations are certainly not money-driven, they, like commercial organizations, seek to use their finances wisely and allocate funds appropriately according to a strict budget. Nonprofit organizations can improve their bottom line by adopting contract management software, as these digital solutions provide tools in the way of cost-effectiveness and time-efficiency that allow NPOs to cut costs and increase margins when it comes to contracts.
The Aberdeen Group conducted research that was later shared in a report by the International Association for Contract and Commercial Management (IACCM) how companies lost anywhere between 5% and 9% annual revenue because of suboptimal contract management. In comparison to for-profit organizations and commercial businesses, nonprofits are largely underfunded in the broad scheme. This means annual losses in revenue are likely much higher due to the lack of funding and resources.
Similarly to for-profit organizations, nonprofits function on the backs of contracts and legally bound agreements. From employee agreements to leasing agreements, nonprofits rely on contracts just as for-profits do. Hidden costs that nonprofit organizations commonly face are those that are found within contracts. For example, contract provisions that are high-risk and provisions from suppliers like arbitration and exclusivity can drive costs substantially. In addition, nonprofits oftentimes deal with grants, which are a large resource for many NPOs. Grants also come with a host of contractual terms, provisions, deliverables, and more.
3 Ways to Use Contract Management Software to Improve Your NPO’s Bottom Line
Convenient Contract Access and Secure Storage
Contract management software solutions today provide nonprofits with a secure, digital location to store all of their important contracts and associated documents. Many of these solutions include Optical Character Recognition (OCR) technology for efficient, rapid searches. OCR scans through the organizations contract repository, storing every document according to tags and categories designed by the contract manager. From the repository, users can rapidly retrieve exact documents from any digital device. This removes time wasted searching for metadata or contracts manually, so you’ll never have to be the source of a delay because you’re sifting through boxes, emails, or filing cabinets for the contract you need.
Increased Contract Security
Risk mitigative contract management is synonymous with secure contract management. We recommend that you adopt a contract management system that includes the following security features to protect your sensitive data and to eliminate the costs that come from a data breach:
- Audit trails
- Data encryption (in-transit and at rest)
- Multi-factor authentication
- Single Sign-On (SSO)
- User permissions access controls
- A cloud infrastructure
- Electronic signature integrations (more secure than traditional signing)
- System vulnerability testing
Advanced Search Capability
Gain insights into the contracts that might pose the most risk to your organization within seconds. Using text-based search, you can locate exact agreements that contain specific keywords and clauses. For example, if you’d like to find all the contracts that include high-risk clauses such as liability clauses or indemnification clauses, you can easily do so with a few clicks. Within your digital repository, you can also design and save customized filters for repeated use. We recommend that you design separate filters for different contract types so you can easily locate your agreements at any time.
Contract Management Software as a Solution
Contract management software streamlines and automates contracts for nonprofit organizations, which can otherwise be a very disjointed, time-consuming, and frustrating process. Through automation of many manual procedures included in the modern contract lifecycle, nonprofits can gain transparency into spending, save time during each contract lifecycle, manage risks, improve contract security, increase organization of documents, and accurately track all of their agreements in a single, cloud-secure platform.
Because nonprofit organizations have numerous concerns outside of contracts that they must regularly address, allowing contract management software to take care of several contract responsibilities can support nonprofits in gaining efficiency and in saving time. The automation of lower-level, repeatable contract tasks additionally offer significant returns in the way of cost savings.
Contract management software can eliminate several administrative responsibilities pertaining to contract execution, as well as increase the accessibility of contracts to authorized users. Less time spent on contracts ultimately means more time for your nonprofit to spend on serving the community and achieving its overall mission. Keeping documents in a cloud-based digital repository inclusive of text-based search functions and customizable filters means that contract lifecycles can stay bottleneck-free and current. You will also find it’s harder for key dates and tasks to slip through the cracks due to workflow automation and automated reminders and notifications, allowing you to create a proactive environment surrounding your contracts. Your entire team will stay in-the-know of approaching key dates, ensuring that nothing is overlooked from contract drafting, all the way to contract renewal and/or expiry.
Nonprofits are often demanded by the Internal Revenue Service, the Attorney General, donors, foundations, associated parties, and by general public opinion to provide evidence of spending. With these demands placed to give exact answers regarding the use and the receiving of finances, contract management software can alleviate the tension by providing exact metrics and data regarding spend transparency. Due to this simple solution offered by contract management software, nonprofit organizations are making the choice to prioritize accountability and are adopting these solutions in masses. In this manner, nonprofit organizations can meet the objectives of their mission while maintaining transparency and adherence to demands for spending oversight.
Dock 365 for Nonprofit Contract Management
To gain control over your contracts without sacrificing your bottom line, Dock 365 offers proven, productive contract management software specifically designed for nonprofit organizations. Built on Microsoft Office 365, you can capitalize upon your current Microsoft Office 365 subscription and leverage a platform full of familiar digital business applications and solutions provided by Microsoft, making it an easy to use and easy to adopt contract platform that requires minimal training, if any. Dock is cost-effective and includes a feature set that will support your nonprofit organization in saving time with contract monitoring, tracking your finances, and in overseeing your portfolio of contracts. Today, you can gain the confidence you need to confirm all your contracts are categorized, protected, accessible, and accurate, so that your team is constantly prepared for routine system audits and opportunities.
Learn more about the Dock 365 Contract Management System.
Click below to schedule a free demo!
