5 Contract Management Myths to Overcome
Contract management is an important business process, yet it’s full of sacred-cow ideas and grandiose illusions. It’s time to bring down the reality distortion involving certain practices of contract management.
Some of the savviest contract practitioners are victim of these 6 myths. Learn to identify them, so you can do away with them as soon as possible. It will make your contract team much stronger.
Editor’s Note: Read our article on What is Contract Management Software to learn more.
1. Excel and Word are just as good as any contract management software.
It’s understandable why so many companies rely on Word and Excel as their default contract management software solutions because Microsoft programs are a sunk cost. Word and Excel are installed on nearly every single desktop and laptop, no matter the operating system. While Excel easily accomplishes tasks such as calculating, presenting, and displaying numerical data at no additional cost, the program is not capable of consistently recognizing events that trigger crucial contract management processes.
Have you ever played the “find the most up to date contract template game” in Word? It isn’t fun, and it tends to increase your contract risk exposure. Go beyond Word and Excel with contract management software and take your contract management to the next level.
2. Clients are not part of the contract process.
If you keep wondering why your clients don’t provide reviews on time or take so long to deliver signed documents, you need to take at how you are performing these tasks. Running contract management with a paper-based system may be the culprit, as your clients may not have a holistic picture of the whole process. Another benefit from using a professional contract management system is that you can create read-only accounts for your clients so they can see the entire flow of the contract lifecycle. Clients need to be a part of this process, and that is accomplished with them being involved from start to finish.
3. One contract template fits all.
You should never assume that a contract template that works well for one client will work just as well for another, and exclusions are perfect examples of the dangers of blindly using a single contract template. Jean Fine, Director of Contracts for Teledyne Oil & Gas recommends this best practice regarding exclusions:
“In documenting exclusions, it’s best not reuse templates. Often reusing templates can introduce errors in the language forming a commitment when the template is for R&D efforts. A similar example can occur when the parties have discussed a variety of approaches, and have agreed verbally to not include certain features. Document these verbal exclusions.”
4. Your contract managers know it all.
Most contract managers don’t have a comprehensive contract management methodology, particularly in risk management. While some are the exception to this rule, most contract managers don’t take the time to assess all the phases of your organization’s contract lifecycle. Even worse, they may bid on everything by bending your standard terms and promise to deliver on extraordinary terms without a hitch. A major pain point for contract managers is how to correctly handle “subcontracting squeezes“. It’s key to provide your contract managers with constant training opportunities and establish clear processes for them to follow.
5. Customer relationship management software provides compliance.
CRM solutions are amazing for collecting and leveraging client data. However, these solutions do not address compliance and auditing requirements like an enterprise contract management system does. The right planning, preparation, and validation tools are needed to meet the terms and conditions of the contract and ensure compliance. When evaluating contract management software, it is imperative to review how each one helps ensure compliance with the Sarbanes-Oxley Act. Decrease your risk exposure by being ready for potential audits faster, increase your regulatory compliance, and avoid rogue contract drafts.