Contract management is challenging. However, it is an incredibly important practice that can cost your company a lot of money if not properly handled.
Organizations often fall into the same traps in their contract management practices. These mistakes can cost organizations hundreds of thousands of dollars in waste, missed opportunities, or accidental breaches of contract.
Using an efficient and streamlined contract management system can help you avoid these traps and save you money.
1. Poor Organization
Poor organization practices make it difficult to find contracts when needed and can have a devastating impact on your workflow and efficiency.
In order to avoid this, you need to establish consistent and effective organization procedures. These procedures should include:
- Establishing standard naming conventions
- Tagging contract files with relevant information
- Maintaining contract metadata
- Ensuring that all contracts are in the same file format
You need an organizational system that not only makes it easy for you to find the right contract when you are looking for it, but one that will also remind you of specific contract related deadlines and dates.
A manual contract management process is simply inadequate to stay competitive in today’s high-speed, competitive environment.
2. Inconsistency and Misunderstanding
Inconsistency and misunderstanding are typically caused by poor drafting practices and a lack of a strong system for collaboration.
Often organizations will use an old contract and search and replace terms to use it for another party. This can lead to typos and mistakes. The best practice is to start with a clean template. This will save time in drafting and avoid simple, but costly, errors that arise when using an old contract.
Inconsistencies can also creep into the contract drafting process when different people in the same organization are confused by several different versions of the same document.
With a contract management system, you can easily create consistent contracts with templates that make it easier for employees without extensive legal knowledge to understand the purpose of the contracts. You can also efficiently manage different versions of the contract so that everyone is always working on the most up to date version of the document.
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3. Communication Gaps and Delays
Gaps in communication between those that are involved in the drafting and implementation of contracts is a common mistake made by organizations. These communication gaps harm productivity and cause long delays in contract execution.
Delays in execution leadto delivery delays and cause missed opportunities.
Digital contract management systems offer much more transparency, making it easier for team members to share information. Automated alerts improve accountability and avoid the problem with documents getting lost on desks for days or weeks.
4. Mismanagement of Renewal Contracts
Automatic renewal clauses between two parties that expect to have a long-term working relationship are very popular due to the convenience they provide.
While these clauses are very convenient and can save time and money when properly managed, mismanagement of these contracts can have several consequences.
It’s easy to forget about these contracts as they typically don’t need to be tended to. However, this can lead to the renewal of a deal with an individual or organization that you no longer want to associate with. It also can keep you from being able to negotiate better rates as your businesssituationevolves over time.
It’s critical that you use a contract management system that automatically reminds you of renewal dates months before the renewal date kicks in, so you review the contract and make an informed decision.
5. Using a Paper-Based System
Using paper contracts in your organization is an incredibly inefficient way to manage large amounts of contracts.
Paper-based systems cause delays and tend to waste time. Additionally, this can cause issues such as discrepancies between copies of the same document, tampering, or theft.
A physical system also makes it harder to share information with all of the key stakeholders within your organization.
Using a digital contract management system can make accessing documents easier and help minimize inaccuracies and discrepancies.
The easiest way to avoid all of these contract management traps is to make sure you are using the right cloud-based contract management system.