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Contract Management Reporting: Selecting the Right KPIs

Contract Management Reporting: Selecting the Right KPIs | Exari

March 22, 2018 Scott Mars Contract Management  

Choose the Right KPIs for Effective Contract Management Reporting

When you use a contract lifecycle management system, one of the most significant benefits is the ability to run reports and gain insight into all aspects of your company’s contracts. Reporting functions allow you to keep your finger on the pulse of what’s happening across your entire organization, something that’s all-but-impossible to do manually. For example, if you’re using a series of spreadsheets to track your contracts, would you be able to easily identify where bottlenecks in the process are occurring? You might be able to spot trends over time, but it would require significant time and effort. Spotting anomalies, or potentially problematic contracts is even more difficult, and could end up costing your company more money.

Effectively using contract management reporting does require that you choose the right things to measure, though. By choosing the right Key Performance Indicators (KPIs), you gain more accurate insights into your contract performance, which can drive more strategic actions and improve results. So how do you choose the right contract KPIs?

Selecting KPIs for Maximum Performance

According to the National Association of State Procurement Officials (NASPO), there are several areas to consider when quantifying the performance of your contracts. In their best practices guide, the organization highlights two specific areas to focus on when evaluating contract performance.

The first area to consider is your contract management process; that is, how does your organization manage contracts throughout their entire lifecycle. Simply using boilerplate templates or filing contracts away once they are signed can spell disaster for many businesses, as failing to monitor the contracting process can lead to unmitigated risks or other issues that aren’t noticed until it’s too late. For example, your company may require contractors to meet certain parameters in order to qualify for specific terms. Without a contract management system in place that can identify a contractor that doesn’t meet those terms, it’s possible that your company could face significant losses in the future. Therefore, you need to select KPIs for reporting that provide insight into the contracting process, identifying not only anomalies, but your overall performance.

The second area on which NASPO recommends focusing your contract reporting KPIs is your contract performance. This means looking at how well your contracts perform overall in terms of risk mitigation, pricing, delivery terms, and meeting obligations. You need to set levels for acceptable performance and monitor your contract performance against them. Using this information, you might discover trends that are problematic — such as one particular sales team’s low rate of meeting obligations — and need to be addressed. The purpose of measuring your contract performance is to evaluate how well your contracts meet your company’s goals and adjust your strategy as necessary.

KPIs to Consider

So, what KPIs should you monitor? This depends on your business and your goals. However, there are some contract management and performance measures that you should always include in your contract management reporting.

Among the specific contract management KPIs to measure are:

  • Time from initiation to signature. How long is it taking for contracts to be drafted and executed?
  • Number of contracts in each lifecycle stage, and time spent at each stage. Where are contract bottlenecks occurring?
  • Qualitative assessment of contracts. For example, are there specific terms or clauses that are being renegotiated on a regular basis? What contract amendments are taking place?
  • Deviation from standard contract clauses. What exceptions are being made? Do they add additional risk?
  • Compliance with contract management policies. Are contracts being executed without the proper authorizations or signatures?

Again, while you may be more interested in the actual performance of your contracts, understanding the contract management process is also important. One of the biggest determinants of success for a business is the amount of time it takes for contracts to be executed, so identifying where the process can be improved can have a measurable impact on the bottom line.

However, that doesn’t mean that you should ignore contract performance measurements. There are some vital KPIs to monitor in this area too, including:

  • Contract expiration and termination rates. How many contracts are expiring without being renewed?
  • Overall contract value, on monthly, quarterly, and annual basis.
  • Compliance with contract terms.
  • Contract obligation performance. Are milestones being met or missed?
  • Trends in contract type.
  • Geographic contract trends.
  • Contract disputes and resolutions. What is being disputed, and how quickly are these issues being resolved?
  • Contract risk. How much risk is contained within individual contracts and across your entire portfolio?

This is not an exhaustive list of contract management KPIs to measure; however, these are some of the most important factors that you need to quantify in order to ensure the most accurate view of your contracts. With the right contract lifecycle management system in place, like Exari Vision, you can create these reports in a matter of minutes, quickly identifying potential problems before it’s too late, while also improving your overall contracting performance.

To learn more about how this powerful contract management reporting tool can benefit your business, request a demonstration.

scott

Scott is Exari's GM, Field Operations Americas. Reach out on Twitter at @smarstx.