Third-party vendor contracts are an essential element of the vendor management lifecycle. Managed correctly, they give a financial institution the ability to mitigate vendor risk, monitor vendor performance, and enable timely and informed contract negotiations.
Unfortunately, not every bank, credit union, mortgage company, and fintech has the tools it needs to stay on top of vendor contracts. Financial institutions have hundreds, and in some cases thousands, of vendors, each with a contract that outlines the terms, pricing, and expiration date. With so many contracts to juggle, keeping track of every contract and its key dates is a huge task—one commonly relegated to a spreadsheet. This can result in lost documents, missed deadlines causing expensive autorenewals, and other missteps.
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Contract management software and services can improve how financial companies manage third-party vendor contracts. Here’s what to look for.
1. A searchable, centralized repository. Your financial institution shouldn’t have to conduct a scavenger hunt of filing cabinets, manila folders, desk drawers, personal computers, shared drives, and other assorted locations every time it needs to refer to a contract. It should never discover duplicate contracts with different vendors that all provide the same service or contract for a product or service the FI pays for but doesn’t use and didn’t know it had.
A good contract management software solution provides a single, secure location to upload all contracts and other related vendor documents. Online, secure cloud-based solutions make it possible to look up contract information anywhere, while setting user roles so that employees can only access pertinent contracts. Contracts should be searchable by fields such as type or branch.
2. Automated reminders. Managing vendor relationships requires managing vendor contracts—including tracking expiration dates. A financial institution has the most bargaining power when it has plenty of time to weigh its options. Waiting until the last minute to renew can result in higher pricing, and autorenewals are even more expensive.
Seek out a contract management solution that will proactively send out automated reminders warning of pending expiration dates and autorenewals. Even better, make sure you can customize the lead time on reminders depending on the criticality and complexity of the vendor agreement.
Related: 10 Steps to a Pain-Free Vendor Management Process
3. Simple, insightful reporting. Your financial institution should never have to waste time worrying about when the next major contract term or deadline is coming.
Contract management software should provide at-a-glance reporting that makes it easy to quickly ascertain the status of every vendor contract. Wondering when your mobile banking vendor contract expires and how that aligns with your core vendor contract? It should take seconds to find out.
4. Integration into third-party applications. Vendor management goes far beyond the vendor management team. Accounting and other business areas may need to access contracts to verify information and avoid errors.
Look for a solution that can integrate into third-party applications, including your accounting or CRM solution.
Related: 5 Features Every Vendor Management Software Solution Should Have
5. Litigation holds. Just because you don’t actively refer to a contract anymore doesn’t mean you’ll never need it again. Archiving is important.
Good contract management software has litigation hold features. This ensures you’re always working off the most up-to-date and accurate contract, but you can easily pull up an old vendor contract if you ever need it.
6. Ability to track multi-party agreements. From purchased loans to other agreements, a good contract management software solution should track multi-party agreements.
Don’t let mismanagement of third-party vendor contracts cost your institution. Contract management software may be just the solution you’re seeking.
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