Contract management is an unavoidable part of every business out there. You need legally binding agreements to dictate every commercial relationship, from suppliers to vendors to partners. Managing the contracts throughout their lifecycle is also necessary and presents its difficulties. Businesses across the board require thought-out strategies to identify and overcome common contract management challenges. You can get started with this blog.
Challenge 1: Contract Accessibility
There are hundreds of active contracts at any given time for an expanding business. Where do you store them all? Storage and accessibility are especially painful for paper contracts and physical file systems. Because it’s not just about safely storing the legal documents, they must be readily available whenever, wherever.
When companies lose track of contracts, there are reputational, legal, financial, and operational risks. Organizations may spend much time and energy looking for contractual agreements during reviews or disputes. In addition, the contractual agreement affects the work of the legal, sales, and procurement teams. As a result, it can hinder departments from utilizing contract intelligence to identify risks and opportunities.
Commercial contracts bleed into every aspect of a business operation. Making the most of your relationships with clients, suppliers, and vendors requires effective contract creation, negotiation, review, and signing. However, contract management goes beyond execution; businesses must continuously monitor and review the contract.
Solution 1: Digital contract repository
If you want your contracts to be accessible across the organization anytime, anywhere, digital repositories are the way to go. They’re centralized storage spaces to store, retrieve, and collaborate on contracts. They have sophisticated search filters that make it simple for users to find legal texts, clauses, and information. Businesses can organize contractual agreements as per projects, departments, or purposes.
Digital repositories are also an easy way to keep track of the finalized agreement and ensure everyone is on the same page. It considerably reduces the risk of duplicates or overlapping contracts. It makes it easier for the legal department to contract names, milestones, deadlines, and involved parties. Apart from legal professionals, digital repositories provide sales, finance, and procurement teams quick and easy access to relevant agreements.
Challenge 2: Missed Deadlines
The significance of a contract goes beyond establishing a business relationship. Therefore, companies must continue to monitor contractual agreements even after the execution phase. However, companies with extensive contract portfolios frequently must catch up on significant contract deadlines. It means lost opportunities and unnecessary risks due to missed contract renewals, expiry, or payments. Any delay can erode trust and damage relationships with clients and partners, harming your organization’s reputation.
Missing a contractual deadline can result in a breach of contract, which may lead to legal disputes and financial penalties. Moreover, foreknowledge of contract milestones is necessary for businesses to reinterpret and renegotiate contractual terms. Or else organizations will end up with unwanted contract renewals or termination. Aside from significant dates, corporations struggle with tracking terms and conditions to ensure compliance.
Solution 2: Automated reminders and tracking
When you have countless agreements and deadlines to keep track of, relying on automation rather than human operations is critical. Fortunately, most contract management solutions these days come with provisions for automated reminders for relevant contract milestones and deadlines. Organizations can set up notifications that trigger during renewal and expiry dates. They can set the notice period to any number of days to give themselves enough time to prepare for the renewal or expiry.
Furthermore, contract management systems also offer tools to stay on top of critical terms and conditions. Dock 365, for example, allows customers to extract relevant clauses from legal contracts and set up automated reminders for them. Businesses can stay on top of obligations by assigning them to specific stakeholders with due dates. Thus, there’s no scope for losing track of deadlines, terms, conditions, and payments. Obligation tracking and automated reminders are useful for scaling businesses with expanding portfolios.
Challenge 3: Disconnected processes
Contract management processes, especially traditional ones, exist cut off from the rest of the organization. The sales, finance, and procurement teams have a stake in the contracting process and can contribute to it. Disconnected systems mean information silos and no data-sharing between departments. For instance, the salespeople will need insight into the contract lifecycle. They would need ready access to sales agreements and data to optimize the sales process or serve customers fully. But more than often, it’s hard for the legal department to provide contract management visibility to other teams without compromising sensitive data.
Sharing responsibilities and intelligence takes a back seat when processes and systems are disconnected. Contract compliance is an organization-wide concern. Without contract management transparency, there’ll be no means for other teams to establish compliance with contractual terms, payments, and obligations. Also, procurement and sales departments can’t track contract performance, spending, and expenditure to make informed decisions.
Solution 3: Integrations with Business Applications
Organizations are no longer the sole responsibility of the legal department. That is why businesses cannot afford to have information silos in the contracting processes. They can overcome these challenges by integrating their contract management software with the necessary tools. Most teams, such as sales, procurement, and finance, use ERP and CRM systems. They can stay on top of the contract lifecycle with accessibility contracts and related processes within these platforms.
Organization-wide collaboration and transparency in the contracting process can improve contract compliance, performance, and efficiency. Moreover, organizations can utilize the shared data and systems to import party details. It eliminates manual data entry and human error from the contract lifecycle. Integrations also lead to self-serving contracts from every department. For instance, when CMS is accessible within the CRM platform, salespeople can easily create sales agreements within minutes. Also, integration with electronic signature solutions allows businesses to quickly execute agreements on a single platform.
Challenge 4: Manual processes
Historically, businesses relied on manual, paper-based processes to draft, negotiate, execute, and manage contracts. They had to create contractual agreements from scratch and store them across filing cabinets and folders. Contract execution was only possible with wet signatures on paper agreements. Although we have come a long way since using these outdated techniques, manual processes are still impending the contracting process.
Organizations depending on traditional means, such as phone calls, emails, or face-to-face meetings, to create, negotiate, or update contracts have long, drawn-out processes. It is challenging to stay on top of everything when multiple stakeholders negotiate and modify the contractual agreement. There’s always scope for inaccuracies, human errors, and a lack of version control.
Solution 4: Automated workflows
The best alternative to drafting contracts from scratch each time is templates. Advanced contract management software offers diverse libraries of templates and clauses, from NDAs to statements of work to employment letters. They can utilize the pre-written templates and clauses to create relevant legal agreements within minutes.
Organizations can also route contracting processes through automated workflows available in contract management software. It accelerates the contract lifecycle, including reviews, approvals, and signing. The automated workflows ensure the contract gets to the right stakeholder at the right time. Thus, businesses can avoid unnecessary delays and bottlenecks in manual processes. It leads to quick conversions and vendor onboarding.
Challenge 5: Data security
Business agreements hold a wealth of sensitive information. Unauthorized access is challenging to curb when your contracting process spans numerous systems, files, and folders. Organizations rely on basic security measures for physical documents and may use basic electronic security for digital files. Therefore, inadequate data security poses a serious risk to most businesses.
Dependence on physical storage devices or paper-based contracts exposes you to physical theft or unauthorized access. Unsanctioned individuals can gain access to confidential contractual agreements and sensitive information. Malicious activities or unintentional data breaches harm organizations in the long run. Security vulnerabilities can lead an organization to legal, operational, reputational, and financial repercussions.
Solution 5: Encryptions and user-based permissions
The first and foremost task in contract management security is to establish a safe storage space for all your contracts. Organizations have to go beyond filing cabinets and folders on individual systems to avoid data leakages and unauthorized access. Instead, they can opt for digital contract repositories with strong encryption and cloud-based infrastructure. Thus, organizations can ensure the confidentiality of sensitive contract information.
User-based permissions and access control for every task and data related to contract management can also help to ensure critical files don’t get into the wrong hands. Organizations can set up editor and viewer permissions for contract management dashboards, workflows, and documents based on department, role, project, or contract type. They can also utilize audits and version history to keep track of changes throughout the contract lifecycle. It helps establish data integrity and accountability in the entire contract management process.
Contract management is a crucial but complex task for most businesses. From the initial drafting of contracts to their ongoing management and eventual renewal or termination, organizations have to be proactive to make the most of their business contracts. Fortunately, the latest advent in technology has made it easier for everyone to collaborate and contribute to the contract lifecycle. All you have to do is figure out the unique needs and challenges of your business and find a solution that works for you. From digital repositories to redlining software, there are tailored solutions to take care of every phase of the contract management lifecycle. These end-to-end contract management solutions not only streamline the process but also improve your relationships with clients, vendors, and other stakeholders.