It’s no secret that many startups fail every year. But, a closer look at the data shows a shocking cause. Many startups fail, in part, because of poor contract management practices.
The lack of an efficient, automated system is cutting into razor-thin margins and leading to missed opportunities.
64% of Businesses Identify Contract Management as a Critical Issue.
Contract management is supposed to reduce financial risk, while simultaneously maximizing operational performance.
However, 64% of businesses surveyed in 2017, identified problems with contract approval processes as a significant drain on resources.
- Delays in customer, vendor, and stakeholder sign-offs impede workflow
- Almost 10% of companies say that human errors often impact their contract management process
- Poor contract lifecycle management often leads to poor relationship tracking, missed renewals, and business disruption
Why is Poor Contract Management Still an Issue in 2020?
Startups which failed in 2018, included 63% of new information-based businesses, 53% of new construction companies, 51% of new manufacturers, and 42% of new property and financial services.
As part of a trend reflected in previous years, higher startup failure rates tally with specific industry sectors. All of these sectors need a streamlined contract management process in place to thrive.
However, despite the critical role contract management should play in any organization, many firms are still using outdated manual processes and lack any formal contract management system or guidelines.
60% of Businesses Still use Email as Their Primary Contact Management Tool
Not establishing a robust contract management process, delays new contact approvals, renewals, and existing contract tracking.
However, 60% of businesses recently surveyed, still cite email correspondence with customers, vendors, and stakeholders, as their primary contract management tool.
Should email communication be considered obsolete in contemporary contract management?
Email still has a place in modern contract management. However, using email to communicate critical information and updates, can result in miscommunication, approval delays, and contract breaches. When this happens, financial ramifications can be severe. No email system was designed to capture all of the nuances of contract negotiation.
Even the best email systems lack the ability to adequately search for contract renewal deadlines and the ability to push contract-related alerts to stakeholders inside the organization.
Startups & Established Businesses Need to Streamline Contract Processes
Lack of planning and inexperience are still predominantly to blame for most startup failures.
However, poor contract management processes and systems can put an additional strain on companies who are already struggling to find their place in the market.
If you look at the industry leaders in almost every industry, they all have tight, streamlined contract management systems.
The difference between market leader and business failure is typically small.
Simply implementing a cloud-based contract management system can help startups survive long enough to grow their customer base and begin to thrive.
Email, Excel, and filing cabinets are all excellent tools, but in today’s hyper-competitive marketplace they are not enough to keep your business’s contracts organized.
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A cloud-based contract management system that leverages the latest advances in AI and machine learning can turn your contracts into a powerful asset and market differentiator.
Your contracts will get executed and implemented faster. Your team will never miss a renewal deadline again. Best of all, you can access data insights about your contracts from anywhere in the world.
Don’t risk all of your hard work and investment. Make sure your organization has a modern contract management system that is helping you to stay ahead of the competition.
Poor contract management FAQs
- What are the risks of poor contract management?
Poor contract management risks the loss of contracts and related documents. This risk happens mostly when contracts have to move from one department to another; and instead of sending on the original, it gets filed and a photocopy gets sent by mistake.
Since the original contract is important to the process, having to find a misplaced contract can chew up a lot of valuable time for every department it’s gone through.
Another risk is that with many contracts rolling over annually, poor contract management often results in the notice to terminate not being given in time.
- What are the causes of poor contract management?
The cause of poor contract management usually comes down to how it’s being handled. Some companies are still using filing cabinets, or physical servers to house the contracts and then trying to use spreadsheets and email to keep tabs on what is going on in the process.
This may have been okay when there was no better option, however, in this day and age contract management software is the easiest way to have a seamless, error-free contract management system.
- What are the costs of poor contract management?
Poor contract management takes longer to maintain which can increase costs. It also means managers who have to take care of poorly organized contracts aren’t spending time preparing for new deals.
Not being able to effectively manage contracts can also result in businesses going elsewhere. As delays and unexpected costs can add up being a financial burden for your organization.
Then there are possible penalty costs associated with poor contract management. If compliance regulations are not met then there can potentially be costly penalties for non-compliance. These are just some—but not all—of the more costly aspects of poor contract management.
And they can be easily mitigated with the right contract management software service.