Contracts are the fabric of business relationships and help bind organizations together. As such, efficient legal payment processing is paramount. CobbleStone Software is often approached by leading organizations of various industries to discuss how they can better track contracts, contract spend (contract expenditures), and contract budget management. The process of managing contract-related fiduciary responsibility is inherently complex. However, it is highly simplified with a comprehensive contract management software system that does much more than provide basic contract management features. One of the foremost solutions for comprehensive contract lifecycle management (CLM) - including streamlined legal payment processing - is CobbleStone Contract Insight®. To that end, let's further explore this topic of legal payment processing.
B2B Contracts: Who is Involved?
Typically, contracts in any business-to-business (B2B) transaction not only spell out the terms and conditions of the relationship between the parties but may also detail transaction amounts for buy-side and sell-side contract management. The purchasing and sales teams often begin business relationships with suppliers and customers, and the legal department is often at the center of the subsequent legally binding agreements.
What is Legal Payment Processing?
Legal payment processing involves ensuring vendors, suppliers, customers, or any other necessary contract parties get paid faster and more efficiently. This process often involves seamless collaboration between legal, procurement, sales, and project management teams.
Legal Payment Processing: "More Than Just Lawyers"
Yes, managing a buy-side contract (or procurement agreement) involves lawyers, contract reviewers, contract negotiation specialists, contract signatories, and contract managers; however, it also involves purchase and procurement teams, accounting and payable approval professionals, and even project managers. In most cases, a contract for a buy-side business relationship should include not only the total amount of spend (over time), but also line-item details indicating:
- each item purchased.
- unit price.
- quantity.
- a description.
- tracking information.
- tax (as fees if applicable).
- who to pay.
- when to pay.
After the vendor/supplier/counterparty) delivers the goods or services, the supplier typically invoices for the items delivered. Next, a payment from the buyer’s organization is typically required [in some contracts, an early payment or deposit payment may also be required]. With legal payment processing, the fiduciary duty of accountants is to ensure proper approval that the delivered goods/services are of good quality. This approval may involve receiving personnel and managers (or directors) before an accounts payable professional releases the payment.
Along with this legal payment processing workflow, the process necessitates confirming the unit price and number of units and that the item(s) match what was ordered or expected in the original contract (or subsequent order). An assigned resource should confirm:
- the pricing for the item unit price.
- the item total.
- most importantly, that the cumulative spend total does not exceed the contract amount (including change orders and amendments) and the department's spending limits (typically tracked as contract and purchase budget amounts).
Disastrous Hardships of Manual Legal Payment Processing
If solely reliant on manual processing, email communications, chats, or low-qualify accounting and ERP systems, this legal payment processing leaves a great deal of risk - including overpayment, failure to pay, delays in the supply chain, disruption of services, and/or breach of contract. It's easy to inadvertently mismanage the aforementioned steps, along with requirements to renew, extend, or cancel contracts in a timely manner - all potentially resulting in big losses.
In fact, I recall a client stating that within the first month of implementing CobbleStone Contract Insight CLM Software, they found they were paying $60,000 per month on maintenance for a property that had been closed for years! I invite you to do the math; over a year or more, that payment adds up incredibly fast.
A Solution for Legal Payment Processing: CobbleStone®
Procurement professionals, legal professionals, project managers, and contract administrators who are currently experiencing the despair of inefficient and error-prone legal payment processing should not fret.
If your organization is facing (or is at risk of facing) the legal payment processing hardships described above, CobbleStone Contract Insight Enterprise contract management software—which also seamlessly supports eProcurement and fiduciary and spend management—can help you today!
Not to dive too deep, but the first step to better legal payment processing is implementing the CobbleStone Contract Insight platform for centralized and automated contract drafting, negotiation, review, approval, e-signing, and management. The next phase is to enjoy enhanced invoice approval processing by implementing the CobbleStone Purchase/Spend Management Module and the Vendor Collaboration Gateway Module - both seamless extensions of the core, enterprise system.
After that, the external party may upload invoices to automatically trigger workflows to your key staff (configured to your business rules). Once approved, alerts can be sent to the accounting team to process and release payment. For invoices not under contracts, implementing a CobbleStone request configured to track basic fields - like invoice number, invoice amount, invoice attachment, and approval information - will also help foster a better fiduciary review, including transparency. No longer is the nightmare of lost invoices and overpayment necessary.
Once the contract process and purchase configuration are complete, it is now easy to track the initial contract value, the budget value, the purchase orders against the contract, the amount spent, the budget amount remaining (with alerts if the budget is low), items received and location, tasks, and milestones for compliance.
ADDED BONUS: For public agencies, take advantage of CobbleStone’s award-winning CLM with a public contract portal to meet Freedom of Information Act (FOIA) requirements.
Book a free demo today to get started with all of these award-winning features and so many others for better legal payment processing and more.
