Contract Life Cycle Management Saves Time and Money

by: Marvin M. Garland, Chief Operating Officer, LEVERAGE

Even though the economy is improving in areas of the country and we’re seeing more credit unions adding members and assets, the pressure still exists to reduce costs and improve spending visibility. The traditional buying practices will not deliver bottom-line savings or the performance required for credit unions to survive in today’s marketplace.

It’s these types of pressures that should motivate credit unions to look into a contract management system. It’s beneficial in maximizing performances, both financially and operationally. By managing the contract creation, execution, and analysis as a systematic and connected process, the credit union will maximize financial and operational performance and minimize risks. Many credit unions have multiple people doing all of these jobs. The time and money savings come when the credit union houses this under one person and utilizes today’s technology.

Contract Management
This is the first step in overcoming the struggle of properly managing a contract’s lifecycle. Credit unions must always know what contracts they have – every contract – from the lawn maintenance company to the debit processing company. Many organizations have multiple people managing multiple contracts through various methods, and have a difficult time determining where contracts are stored and when they are up for renewal.

Finding an automated contract management system that streamlines the vendor management process can reduce the amount of time and energy when identifying the key information needed to view and track. It’s also important to set up notifications to ensure contract review happens in a timely manner to avoid a lapse in service, a commitment to a service that may not be needed, and automatic renewals which can be costly.

Risk Assessment & Due Diligence
With stricter NCUA guidelines, it’s essential for credit unions to assess the risk for each third-party agreement. This is generally the biggest area where credit union staff get bogged down in hours and hours of due diligence. By having an automated contract management system, the due diligence is performed for the credit union. Just think about that. All those hours of due diligence can now be redirected back to helping serve the credit union’s membership. All risk assessments should be developed in accordance with NCUA-identified risk areas, which an automated system will do.

Based on the results from each third-party vendor risk assessment, the appropriate level of due diligence needs to be identified by your management team; high, moderate, and low. Sample due diligence templates include:

• Due Diligence Checklist: Helps credit unions facilitate the due diligence process and organize critical information pertaining to each vendor relationship
• Due Diligence Questionnaire: Requests information directly from third-party vendors on their products or services
• Monitoring Checklist: Helps credit unions determine the level of due diligence follow-up and periodic reviews that will be required throughout the life cycle of an existing contract
• Legal Review Checklist: Utilized as a credit union’s area to review for key contract clauses

Upon completion of the due diligence, notifications should be implemented within the contract management system which will monitor the process throughout the life cycle of the contract in an efficient and timely manner.

Strategic Purchasing
An area where a contract management system can pay for itself is helping the credit union purchase many of its basic needs. The contract management system identifies when the contract is due, does the due diligence, and then the buying begins. Outdated or ineffective buying procedures can create insufficient spending volumes. Credit unions can leverage their collective buying power by purchasing their needs at the same time. Think about that. You need computers and two other credit unions need computers, as well. One vendor can service all three credit unions but each of you gets the discounted price because the volume is so high. That brings a lot of power to the credit union.

With the end of the year quickly approaching and budget top of mind, where can you save money? Also, where can you redirect staff time to better serve your membership? Take a look at automating your contract management and you will begin to see instant savings.

Marvin Garland is the Chief Operating Officer for LEVERAGE, the LSCU Service Corporation. LEVERAGE is a business services provider that has a revolutionary ePurchasing platform and a contract management system in Ventelligence, an automated compliance execution powered by ComplyTrac, as well as many other solutions. Visit myleverage.com to learn more about how credit unions have leverage in the marketplace. You can follow LEVERAGE on Twitter or LinkedIn.