Contract management is critical to the success of any organisation. It assures compliance, reduces risks, and improves operational efficiency. Many businesses, however, struggle with contract administration, resulting in missed opportunities, higher expenses, and legal concerns.
According to IACCM, the average cost of authorship to signing for a low-risk contract is $6,900, a figure that has increased by 38% in the last six years. High-risk contracts, on the other hand, cost an eye-watering $49,000 per contract.
Mismanaged contracts not only incur large costs, but also result in a decrease in yearly income. According to a WCC study, contracting risks such as lengthy discussions and missing deadlines cost for an average 9.2% revenue loss. This percentage can be significantly greater in larger organisations, reaching up to 15%.
Furthermore, the Journal of Contract Management reports that a stunning 71% of businesses are unable to identify 10% or more of their contracts. The financial ramifications of missing contracts can be severe owing to fines, missed renewals, and other governance concerns affecting income.
In this article, we will examine seven frequent reasons why your contract management approach may not be effective as well as how to overcome poor contract management.
1. Lack of a Centralised Contract Repository:
The absence of a centralised system is one of the key causes of contract management failure. It is difficult to maintain and manage contracts efficiently when they are based on dispersed paperwork and manual methods. Implementing a solid contract management software solution creates a centralised repository, simplifies procedures, and improves visibility across the contract lifetime.
2. Inadequate Contract Standardisation:
Non-standardized provisions and inconsistent contract templates can lead to confusion and mistakes. A lack of standardisation can lead to inconsistent contract terms, missing commitments, and disagreements. Standardising contract templates and terms assures uniformity, cuts negotiating time, and enhances overall contract quality.
3. Limited Contract Insight:
A lack of insight into contract status, critical milestones, and renewal dates can have major impacts. Monitoring contractual responsibilities, tracking performance, and ensuring compliance becomes difficult. You may receive real-time insights into contract status, approaching deadlines, and renewals by using contract management software with powerful reporting and tracking features.
4. Dependence on Manual Contract Management:
Relying on manual contract formation, approval, and execution processes can be time-consuming, error-prone, and inefficient. Manual handling raises the danger of contract misplacement or loss, resulting in missed opportunities or legal difficulties. Contract process automation reduces mistakes, shortens approval times, and boosts overall efficiency.
5. Ineffective Contract Collaboration:
Effective contract management requires collaboration among parties. Misalignment, delays, and misunderstandings can result from a lack of adequate communication and cooperation channels. Implementing a collaborative contract management platform allows for seamless communication, streamlines the negotiating and approval procedures, and ensures that all parties are on the same page.
6. Insufficient Risk Assessment and Mitigation:
Failure to analyse and mitigate contract risks can have serious financial and legal ramifications. Failure to recognise and handle possible risks, such as noncompliance, intellectual property concerns, or insufficient performance indicators, can lead to expensive conflicts and strained relationships. For effective contract management, a solid risk management framework, including risk identification, evaluation, and mitigation measures, must be implemented.
7. Lack of Contract Performance Tracking and Evaluation:
Simply keeping contracts without actively monitoring and analysing critical indicators can stymie corporate progress. Tracking contract performance against set criteria is critical for identifying bottlenecks and opportunities for improvement. You may acquire important insights, optimise contract conditions, and drive strategic decision-making by employing contract management software with built-in analytics features.
An excellent contract management plan is critical to the success of any firm. Companies can overcome the hurdles that impede successful contract management by addressing the common causes outlined above. Implementing a centralised contract management system, standardising procedures, increasing visibility, automating workflows, encouraging collaboration, managing risks, and utilising analytics are all important elements in strengthening your contract management approach. Businesses may reduce risks, streamline processes, and extract enormous value from contractual partnerships by doing so.
Expediting SpeedLegal’s Support for Business Operations:
At SpeedLegal, we believe in revolutionising contract management. Say goodbye to tedious and complex agreements that drain your time and resources. With our cutting-edge AI based contract review and management services, we offer you a clear and concise picture of your contracts, saving you from countless hours of reading through dense legal jargon and protecting you from poor contracting.
Contract review at SpeedLegal comes with a plain review, highlighting all clauses with important keywords attached and we also provide for Contract Nutrition Label™ that simplifies the complex contracts and breakdowns it in plain and simple language, providing a comprehensive review ensuring no more headaches or confusion, just crystal-clear understanding.
But that's not all! Our Red Flag Table™ takes contract analysis to the next level. We compare your contract against prevailing market standards, highlighting even the slightest risks. And here's the game-changer: Our AI-powered suggested fixes guide you towards optimal solutions, ensuring you navigate the negotiation process with confidence.
Experience the convenience of smart folder based storage providing a centralised contract repository for your contracts. No more scattered documents or endless searches. With SpeedLegal, all your important files are securely organised and easily accessible, along with automatic reminders assisting you with contract performance tracking and evaluation giving you complete control over your contracts.