How contractor management software boosts efficiency and reduces costs

How the right tools can help you reduce costs and access greater value

Procurement teams are facing greater pressure to deliver on two fronts: keep business operations running smoothly while continuously accessing cost savings in the materials and contractors they work with. 

Between inflation, rising labor costs, and increased regulatory attention, it’s hard for businesses to find ways to reduce spend. Procurement teams have a lot on their plates at any given time, leaving little room to take a step back and accurately assess spending patterns.

That’s where contractor management software comes in. 

Contractor management software gives procurement teams a way to unlock greater operational insight, helping them access increased cost savings while ensuring strategic decision making. 

In this blog, we’ll explore:

• What contractor management software does
• Five ways these solutions support cost savings in procurement
• The cost of not using contractor management software

Let's get started.

What is contractor management software? 

Businesses in the construction, heavy industry, manufacturing, and oil & gas sectors rely heavily on third-party contractors to execute on complex projects. 

Traditionally, the task of managing these contractors has been driven by a procurement team’s pen-and-paper processes.

Reviewing contract terms, verifying contractor qualifications, and a host of compliance concerns have, until recently, relied on manual intervention. It’s inefficient and prevents procurement teams from putting their considerable experience to work on more strategic concerns.  

Contractor management software solutions are designed to facilitate digital transformation, particularly with regards to procurement operations. By automating those tedious tasks, centralizing critical supply chain data, and offering real-time reporting on operations, these solutions give businesses a means of driving greater efficiency in their operations. 

The cost of not using contractor management software

Contractor management that relies on legacy tools and processes takes a toll. The true cost of this outdated approach may not be immediately obvious, but it adds up—and quickly, at that. 

Whether it’s costly onboarding delays, invoicing errors, compliance risks, or vendor mismanagement, even small expenses can quickly turn into millions in spend year over year. Inefficiencies in procurement processes make it much harder to get critical visibility into the on-the-ground operations that impact overall success. 

The obvious instinct is to simply digitize everything—we’ve already talked about the importance of digital transformation, after all. 

But hold on, not so fast. 

Simply digitizing existing processes takes a pen-and-paper headache and makes it a digital one. There are countless cautionary tales out there about how simply adding digital tools exacerbates the existing problem—in fact, a recent Gartner study found that tech-empowered workers, on average, were juggling 11 applications for their daily tasks.

That level of fragmentation creates more confusion than it solves.

Any contractor management software you choose should take a platform approach towards helping organizations eliminate these common problems, providing automation, visibility, and financial control that lead to significant long-term savings.

Five ways contractor management software supports cost savings efforts

Let’s take a closer look at five ways contractor management software helps procurement teams access greater cost savings. 

1. Reduced administrative burden

We’ve touched on just how time-consuming and tedious the pen-and-paper administrative work can be for procurement teams, especially when it comes to contractor management. These professionals are often stuck manually collecting certifications, reviewing contract terms for compliance, and processing a wealth of related paperwork.

Contractor management software lets these businesses automate these tasks—but the real benefit here isn’t in automation alone. 

That automation frees up your procurement teams to analyze supply chain data more closely. Because contractor management software centralizes this data in a single dashboard, it’s much easier to spot trends and identify issues before they impact operations directly.

For example, if your procurement team isn’t stuck managing a mountain of paperwork, they’re better equipped to review PO progress, helping them identify when a scope change may be required—giving them an opportunity to access greater cost savings, in turn. 

2. Improved project and contractor compliance

The industries you serve are often highly regulated, with exacting safety and governance requirements. If your projects are found to be noncompliant, it can cause delays or reputational damage at best. At worst, you could be facing serious legal penalties and regulatory enforcement. 

Contractor management software gives you a means of automating and tracking compliance data (such as contractor certifications, insurance, and safety qualifications), flagging expirations or missing documentation as they’re identified so you can take corrective action. 

Beyond these basics, though, storing all necessary compliance documentation in one spot allows you to rapidly generate reports to demonstrate your compliance efforts as needed. By preventing compliance-related disruptions, procurement teams can avoid unexpected costs and ensure smooth project execution.

3. Cost overrun prevention

Cost overruns are a major concern for contractor-based projects everywhere. They typically stem from inaccuracies in time tracking, scope creep, or avoidable invoicing errors. 

But contractor management software helps avoid these issues by offering real-time visibility into expense tracking and contractor hours. Procurement teams can easily monitor total contractor hours, the materials in use, and progress towards milestones in real time. 

What’s more, these software tools also let you compare and validate invoices against pre-approved rates. Any discrepancies are immediately flagged, allowing procurement teams to take corrective actions as soon as possible. 

This level of financial control helps procurement teams avoid surprise expenses and maintain profitability.

4. Stronger contractor relationships

At the end of the day, procurement teams are often focused on maintaining strong contractor relationships. Contractors you’re on good terms with are generally going to be more receptive to renegotiation of terms, flexibility with invoicing, and more. 

Contractor management software takes the subjectivity out of the relationship and lets you focus on the raw data. From there, your team can make an informed decision about the vendors you want to work with and whether you want to identify any strategic vendors. 

This data also gives you a means of consolidating your contractor base, putting more business with fewer partners—in turn opening the door to bulk discounts, lower costs, and streamlined operations. 

5. Enhanced job site efficiency

Contractor-related delays and inefficiencies can quickly drive up costs. Contractor management software helps procurement teams make sure contractors arrive at job sites ready to work, reducing downtime and boosting productivity.

That’s not all. This software supports:

• Faster onboarding and authorization: The automation offered by contractor management software means contractors can be pre-approved and assigned to projects much faster, reducing lag time between contract sign-off and work start dates.
• Better workforce planning: With up-to-the-minute insights into job site staffing requirements, your procurement team can easily schedule and allocate resources as needed to optimize contractor deployment—in turn reducing excess labor costs. 
• Reduced rework orders and disputes: Rework orders and disputes slow down total progress. Contractor management software centralizes all pertinent information, including specifications and communications, to help reduce the likelihood of a rework order even being required. This helps improve operational costs while improving overall project outcomes. 

Make no mistake, keeping projects on-schedule while reducing inefficiencies is a critical cost savings strategy that contributes to better project outcomes. 

Contractor management software in action

We’ve covered a lot of ground in this blog, but the old saying, “show, don’t tell,” feels particularly appropriate for this topic. 

After all, it’s one thing to talk about the benefits in the abstract and another thing entirely to see how it works for yourself. 

PayShepherd recently worked with an organization facing serious inefficiencies and steadily rising costs. When this organization’s procurement team dug into the problem, they were faced with wildly inefficient manual processes, fragmented workflows, and cost leakage estimated at 7%. 

By implementing the PayShepherd contractor management platform, they were able to standardize their process and enforce contractor terms. Leveraging the platform’s automation helped them:

• Reduce cost leakage by 5.9%, saving $59 million.
• Reduce blocked invoices by 72%, improving contractor relationships and payment efficiency.
• Increase contract compliance to 85% within six months.
• Reduce administrative tasks by 37%.

That’s just the tip of the iceberg. 

For the full story, download your copy of The Contractor Management Blueprint eBook today.