Contracts are an essential part of doing business. They define the terms and conditions of a business relationship, and they can have a significant impact on a company's bottom line. However, many businesses still use manual methods for storing and tracking contracts - resulting in poor contract management.
In this article, we discuss the risks of poor contract management. We outline what they look like, the disruption they can cause and how your business can mitigate them by using contract management software.
What causes poor contract management?
Manual contract management is at the core of heightened risk for your business. If your business has its contracts stored across Excel, email and even filing cabinets, it will fall victim to the symptoms of poor contract management which include:
- Lack of centralised storage: When contracts are stored in multiple locations, it can be difficult to keep track of them and ensure that they are all up-to-date. This can lead to lost contracts, inaccurate data, and missed deadlines.
- Lack of visibility: When contract data is not centralised or easy to access, it can be difficult to get a clear picture of your contract portfolio. This can make it difficult to make informed decisions about your contracts or to demonstrate processes and controls when it comes to being audited.
- High volumes of admin: Manual processes are time-consuming and error-prone. They can also be difficult to scale as the number of contracts increases. This can lead to delays, inefficiencies, and missed opportunities. It adds pressure to the Legal team who are often seen as the keepers of contracts - leaving them less time for strategic work.
- Fragmented processes: When there is no standardised process for managing contracts, it can lead to confusion and errors. This can also make it difficult to track compliance with regulations. When everyone handles contracts in their own way, it often turns out that nobody is managing them at all.
- Lack of communication: When there is poor communication between the stakeholders and third parties involved in contracts, it can lead to delays, misunderstandings, and even difficulty resolving disputes. This could lead to underperforming contract outcomes.
What are the consequences of poor contract management?
Poor contract management is more than just an annoyance for those who are trying to stay on top of key dates, outcomes and the ability to renegotiate for better terms in the future.
It can have serious consequences for your organisation such as operational disruption, damaged reputation and litigation. Below are some examples of what poor contract management leads to:
- Missed renewals. When contracts are not properly tracked, it can be easy to miss renewal dates. This can lead to a number of problems, such as the loss of a supplier or customer, increased costs due to continuing on unfavourable terms or paying for duplicate services.
- Inaccurate data. When contracts are stored in multiple locations, it can be difficult to keep track of the latest versions and ensure that all of the data is accurate. This can lead to problems such as overpaying or underpaying suppliers, making decisions based on outdated information and non-compliance with regulations which can lead to legal action.
- Poor decision-making. When businesses don't have a clear understanding of their contracts, it can be difficult to make informed decisions about things like pricing, supplier relationships, and contract risk management. This can lead to lost opportunities for vendor reward or consolidation and result in financial losses and damaged relationships.
- Not being able to renegotiate for better terms. When contracts are not properly managed, it can be difficult to renegotiate for better terms when the opportunity arises. This can lead to the business paying more than it needs to for goods or services.
- Increased risk of disputes. When contracts are not clear or are not properly enforced, it can lead to disputes between the parties involved. This can be costly and time-consuming to resolve.
How contract management software can help
Contract management software can help your business to mitigate these risks by providing a number of features, including:
- A secure, centralised repository for all contracts
- Search capabilities so you can quickly find dates, clauses and terms
- Automated alerts for key dates, such as renewals and expirations
- The ability to track contract performance and identify risks early on
- A messaging centre so all comms are accessed and stored centrally
- A fully defensible history of all actions completed for a contract.
Automating your contract management processes with ContractNow will help your business to improve overall visibility, take control and stay one step ahead of its agreements.
With more efficient, standardised and streamlined processes, your business will be in the strongest position moving forward.
If you’re ready to overcome the risks of poor contract management or want to automate the way you’re currently doing things, book a ContractNow demo today.