Contract Management Challenges and How Businesses Can Solve Them
Contract management is a critical process for businesses, as it involves creating, reviewing, negotiating, and executing contracts with various stakeholders, including customers, vendors, and employees. However, it can be a challenging task due to several reasons. Some common challenges of contract management and their resolution discussed:
Challenge: One of the significant challenges of contract management is the lack of standardization, where different teams or individuals create and manage contracts differently. It can lead to inconsistencies in the language, structure, and terms of contracts, making it difficult to ensure compliance and enforceability.
Solution: Businesses should create standard templates and guidelines for contract creation and management to solve this problem. It can include standard contract clauses, approval workflows, and contract lifecycle management processes. Businesses can ensure consistency and reduce the risk of errors or non-compliance by standardizing contract management.
Communication and Collaboration
Challenge: Effective communication and collaboration are critical for successful contract management, as contracts involve multiple stakeholders, such as legal teams, sales teams, and customers. However, a lack of communication and collaboration can lead to delays, misunderstandings, and disputes.
Solution: Businesses should establish clear lines of communication and collaboration between teams and stakeholders involved in contract management to address this challenge. It can include regular meetings, status updates, and clarifying roles and responsibilities. Businesses can streamline the contract management process and avoid delays and disputes by improving communication and collaboration. According to Forbes, 65% of the respondents in a survey on contract standards said they were planning to improve communication.
Challenge: Many businesses still rely on manual processes for contract management, which can be time-consuming and error-prone. Manual processes can lead to delays, data entry errors, and difficulty in tracking contract status and expiration dates.
Solution: Businesses should invest in contract management software to automate contract creation, approval workflows, and tracking to overcome this challenge. It provides a centralized location for all contracts, allows you to track important dates and milestones, and enables collaboration and communication among team members. An advanced contract management system can reduce manual effort, eliminate data entry errors, and provide real-time visibility into contract status and performance. Automated contract management also increases productivity and efficiency, freeing resources for other critical business tasks. Electronic signatures save time and eliminate the need for manual signing and mailing of contracts. They also provide a more secure and efficient way of signing contracts.
Compliance and Risk Management
Challenge: Contract management involves compliance with legal and regulatory requirements, and businesses must mitigate contract-associated risks. However, compliance and risk management can be challenging, especially for businesses operating in multiple jurisdictions.
Solution: Businesses should implement a robust contract management system that includes compliance and risk management features to address this challenge. It can include contract audit trails, compliance tracking, and risk assessment tools. Businesses can avoid legal and financial penalties and protect their reputation by proactively managing compliance and risk.
Contract management is critical for any business, and they can face several challenges. However, by standardizing contract creation and management, improving communication and collaboration, automating manual processes, and implementing robust compliance and risk management measures, businesses can overcome these challenges and optimize their contract management process.