Contracts are critical to how business gets done in the construction industry.
They typically are the starting point for relationships with customers, suppliers, and subcontractors.
But administering contracts remains a big challenge for construction companies – even those with an advanced ERP like Oracle NetSuite – the world’s #1 cloud ERP. Businesses can lose up to 40 percent (40%) of the value of an agreement because of inefficient contract processes, studies show.
The Biggest Contract Administration Challenges
Even large construction companies struggle with contract administration. Regardless of size, there are three significant challenges with how most construction companies administer their contracts.
- Lack of consistent processes. Managing contracts can be complex. This is especially true for large construction projects with lots of stakeholders and deadlines. Most construction companies have no way to ensure that staff follows the company’s established guidelines for administering contracts. Without standardized processes, there’s no telling how well customer proposals and acceptance will be managed or whether the construction company will achieve full profit potential. And some companies rely on verbal contracts – often based on the relationship between two individuals – which can create vagaries about terms and conditions. As a result, administering contracts frequently costs too much, takes long, makes too many unnecessary issues, and throws open the door to profit-draining contractual problems.
- Too much paper. In today’s Digital Era, a surprising number of construction companies still administer their contracts on paper. Paper creates inefficiencies from the start. In a paper-based environment, it’s challenging for stakeholders to collaborate on the creation of sales proposals. With paper contracts, it’s easy to forget or misstate critical terms and other content. Mail delivery delays can seriously slow down the process of contracts being executed. Paper contracts also can be lost or misrouted. It can be hard to track down the source of errors or prevent them from reoccurring. And sending contracts via e-mail or snail mail is not secure. Once paper contracts are filed, it’s also time-consuming and tricky for someone to carefully review each one to ensure that contractual terms are being met.
- Poor visibility into costs. Manual processes make it difficult for construction companies to track contract expenses, much less get a fast and accurate snapshot of budget performance. Making matters worse, many construction companies store contracts in filing cabinets or locally on someone’s PC, where they are inaccessible to others. It can be such a burden to check on a supplier’s contractual pricing that no one bothers to do it. This lack of visibility makes it very hard to prevent overspending or to audit expenses against contractual terms.
Poor contract administration with each of these issues chips away at a company’s profitability.
The Benefits of Automated Contract Administration
Automated construction management solutions digitize and simplify contract administration.
The technology seamlessly integrates with a construction company’s Oracle NetSuite ERP to deliver greater efficiency, visibility, and control across the contract lifecycle. Here’s how it does it:
- Standard workflows. Automation standardizes all the steps of the contract lifecycle. It all starts with preparing contracts based on standard templates. The technology also provides controlled workflows for reviewing and approving drafts. Sales proposals are digitally presented to the customer for acceptance, with no chance of being lost or misrouted. And accepted proposals are securely archived for fast access by authorized individuals.
- Digital processes. Construction management solutions digitize contract administration, starting with customer proposals and acceptance. Proposals can be electronically sent to customers, potentially accelerating a response.And digitally capturing contract information and archiving contracts in a secure, centralized location eliminates any doubts about terms and conditions and enables staff to access contracts to see where things stand instantly.
- Real-time visibility. Construction management solutions provide real-time tools that eliminate margin erosion.Authorized employees can instantly access customer proposals as well as contracts. And contracts are automatically updated to reflect any change orders.All this helps construction companies stay on top of their customer proposals and contracts.
How to Streamline Contract Administration
Administering contracts is more complicated than it needs to be for most construction companies. Construction management solutions take the complexity out of contract administration, resulting in less profit erosion, fewer manual tasks, and stronger relationships with customers, suppliers, and partners.
If your construction company is looking for a way to administer its contracts better, FullClarity wants to speak with you. Contact us to arrange a no-obligation consultation with one of our experts.