6 Most Common Flaws in Contract Management

Proper contract management is essential to any business. Regardless of your industry, a large bulk of transactions are tied to a contract, which provide key details, such as the standards for deliverables, how your organization gets paid, and what are the steps in case of breach of contract.

This is why contract management determines the sustainability of your business. More than just a necessary evil, contract management has a direct effect on your company’s operations. In this article, we will review the 6 most common flaws in contract management.

Editor’s Note: For more information, download our whitepaper on the top 10 contract management best practices.

1. Inability to Run Reports on Contracts

“Out of sight, out of mind”, goes a popular saying. In business, this is particularly true because you can’t control what you can’t see. When an organization manages contracts using paper-based systems, it can take several hours or even days for a manager to find the exact terms used in a specific contract.

Such a bottleneck is not only a waste of valuable time but also creates additional unwanted costs and risks. For example, if you’re not able to filter contracts by expiration date then you’re not able to effectively prioritize those that are renewing soon. A contract that is auto-renewed is a missed opportunity because it may force you or your clients into a contract that is no longer favorable.

If you can’t extract data and run reports on your contracts, you’re making decisions based on partial information.

2. Delay in Executing Standard Contracts

When you’re writing contracts in Word, emailing clauses back and forth, doing approvals over the phone and not capturing all of those steps in a centralized contract management system, you’re wasting time. A lack of automation in your contract management processes leads to increased errors, inefficiencies, and risks.

By forcing staff to manually transfer data from one software such as Word to another like Excel, standard contracts that should take only a day or two become projects that take a week or more. Other negative consequences of manual processes are human error, lack of visibility of the latest version, minimal risk management, and unknown contract performance.

3. High Cost of Executing Contracts

There’s no question that mailing contract versions for client approval or signature is ineffective. What’s also ineffective is emailing, printing, signing, scanning, and then emailing back signed contracts. The time spent on all these steps is unnecessary burden on any organization.

According to the Aberdeen Group, 57% of companies generate more than 100 contracts a month and 7.5% of those companies have more than 10,000 active sales contracts during the same period. If you start crunching the numbers on postage cost and printer ink, you won’t be able to sleep again.

The ability to execute contracts through e-signatures has been around since 2000 thanks to the E-Sign Act. It’s time to modernize the way we’re executing contracts.

4. Too Many Contract Repositories

While it’s understandable that different departments work in different ways, it’s not acceptable that every single department in your organization has its own separate repository of the latest contract templates. Such a redundant system leads to lower compliance of the latest versions of contracts which exposes you to risk.

By centralizing your contract repository, you can ensure that everybody is building contracts from a library of approved clauses and templates. Organizations with a central library of contract templates and clauses have more efficient processes, minimize deviation from approved language, and are better prepared to handle a high volume of contract requests.

5. Lack of Insight into Critical Data

Being able to search all your contracts by a keyword is a game changer. However, that’s impossible to do with paper-based systems or systems that digitize contracts without any character recognition. Using optical character recognition (OCR), the data in existing contracts can not only be digitized, but the data contained in them can be made searchable by the contract management software.

Visibility of contracts is important but, even more important, is the ability to track changes and amendments that fall outside of pre-approved ranges. Having the insight into these changes is critical for proper risk management. An contract management system goes a step further with two key features. First, it enforces accountability by providing a timestamp and indicating who authored the changes. Second, it can be configured to deliver automated email alerts every time that contract language deviates from a pre-approved range.

6. Undefined Contract Lifecycle

Finally, the biggest and most common flaw is the lack of a structured contract lifecycle. Contract management is a complex, time-consuming field, which is complicated even more by disjointed activities.

There are various stakeholders, many obligations, and plenty of moving, ever-changing variables so that’s why the process needs to be consistent. When evaluating options for a contract management system, make sure to select one that allows you to create unlimited number of custom and visual workflow processes and customize workflow steps to track compliance with your unique business rules and requirements.


The 6 most common flaws in contract management are inability to run reports on contracts, delay in executing standard contracts, high cost to execute contracts, multiple contract repositories, lack of insight into critical data, and undefined contract lifecycle.

Image Credit: Daniel Foster

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