5 Common Pitfalls in Contract Management
As companies continue to grow, they need to become more efficient in order to handle a larger number of contracts with increasing complexity. Not only does this place greater strain on clerical staff but also on personnel that needs continuous access to contract templates. Despite this steady demand, companies often delay updating their contract management processes in a timely manner. Here are the 5 common pitfalls in contract management that managers need to pay attention to in order to become more efficient.
1. Poor Clause Management
When it comes to drafting a contract, one critical step is to be able to select from a set of clauses that use the latest pre-approved legal language. Clauses that have loose terms or leave gray areas open to interpretation by both parties are a risk for any company. It is important to have a repository of clauses that is not only revised on a regular basis by the legal department but is also available to all staff at all times. By improving clause management, your business reduces the risk of unexpected consequences down the line like additional costs or mismatched expectations.
2. Inadequate Tracking of Contract Renewal Dates
Any business textbook stresses the importance of grabbing the lowest hanging fruit. No matter how many times authors repeat this concept, businesses fail to implement it in real life. The situation repeats itself every single year: the client sends a last-minute email with the urgent need for an updated statement of work by the end of the day so she can still allocate money for this year’s budget. In a rush to meet the deadline and avoid a cash flow crunch, your team makes some very high-level assumptions, has no time to check anything, and shoots back a make-shift contract. This is a missed opportunity that can be easily avoided with an automated reminder system.
3. Lack of Accountability
Just as it is important to keep track of clauses and renewal dates, it is important to keep track of when and who committed errors so that the necessary corrective actions can take place. In a paper-based contract management system, this is not possible because there is a complete lack of transparency. If there is not a system in place to make it crystal clear as to “who did what,” then there is going to be a sense of complacency and an ever-growing lack of attention to contract details. Even worse, how is your company going to meet the requirements of an audit?
4. Insufficient Communication with Traveling Staff
Constant communication among staff is essential, particularly if they are on the road representing your business to prospective clients and closing deals. Prepare to empower your traveling staff with real-time access to the latest contract templates and clauses through a cloud-based contract management solution. Taking the leap to the cloud allows your employees to minimize the use of outdated contract templates and avoid uncomfortable situations in which clients need to sign the “correct” contract version. Speaking of signing documents, contract management software provides e-signature tools so you don’t have to wait for approval – simply e-sign the document in a matter of seconds.
5. Poor Transition Management
A lack of accountability and appropriate communication with traveling staff often results in poor transition management. The transition of contract management processes and technologies from outgoing to incoming employees is a complex stage that sets the tone for how the whole cycle will be run in the future. Additionally, a manual contract management process can be severely hindered by the time gaps that usually occur during a transition. Keep your staff prepared by ensuring that various steps like renewal dates, delivery deadlines and metrics are communicated and agreed upon before a transition. This will establish a sense of trust that is more likely to carry through the whole process. After all, the period of transition should not be a challenge but an opportunity to establish high standards and specify best practices.
Enterprises in every industry should have a strategic plan in place for contract management. While many continue to use outdated, paper-based systems, after reading these 5 common pitfalls it should become clear that an enterprise contract management system is the way to go. An automated, cloud-based solution has all of the functionality needed to manage, track, and automate every single step within your contract lifecycle.