Business agreements would not be the same if contracts were not used, even though contracts improve how business is done. Contract management systems are used in various industries to help businesses through the contract lifecycle, explicitly focusing on each company’s pain points and special contract management challenges. The contract management system solidifies contracts, so firms are not susceptible to faulty deals and volatile handshake agreements.
Technology and software have simplified the contract lifecycle. A contract management system (CMS) is a solution that firms utilize to manage, curate, and carry out contracts digitally. This digital transformation not only makes contract management more efficient but also eradicates some common challenges faced in traditional contract management systems.
Common Problems Faced in Contract Management
Businesses face various contract management problems. Whereby most of the time, each situation is caused by different issues.
- One of the problems faced in contract management is the poor scope of the contract. Some contracts have unclear conditions and terms documented, or at times the responsibilities of the contractor or the client are not clearly spelled out.
- Another common problem is poorly managed contracts. This problem occurs when the contractor and the client have an agreement that is not written. Then, it might lead to misinterpretations from both parties. Thus, confusion and disagreement.
- The contract might start to move off-target. A firm that manages different contracts cannot keep track of every contract. Therefore, one or two contracts might veer from the main objective.
- The contract lifecycle is filled with various challenges and issues that impact the contract. Avoidable aspects cause contract management issues, and understanding why these contract management challenges occur is the only way to deal with them. The following are some of the challenges and Issues:
Lack of contract transparency means that the contract is curated in a manner that is not open. One party tries to take advantage of the other in such a situation.
- Slow contract turnaround time and delays are when contracts take a lot of time to be completed. This is mainly caused by revisions requested by both parties, incompetent third parties, or non-compliant clients and contractors.
- Noncompliance is when either contractor or client fails to act according to the contract’s terms.
- Contract systemization is the process of planning a contract into a system. In this case, lack of contract systemization means that the contract process is not in a system. Some systems can help to improve contract lifecycle management.
- Poor contract risk mitigation strategies are a challenge that involves the lack of risk management during contract negotiation. Various risks are present during a contract negotiation, so a proper risk mitigation strategy is required.
- Using multiple online or physical contract management platforms becomes problematic because the different platforms have different functionalities and outputs. Confusion can arise when two platforms are used to manage the same contract.
- Contract security is whereby confidential contracts fall into the wrong hands. Some contract managers might utilize publicly accessed tools to handle contracts and expose confidential information. A contract management system can help to solve this trough providing encryption and protection to contracts.
- Manual processes waste time and space because physical copies of contracts need to be stored and retrieved once an employee deals with a contract. The process is better when digitized; any contract can be accessed anywhere in the world, and the appropriate action is taken with only a click on the PC screen.
How to Solve These Contract Management Challenges?
These contract management pain points can be solved by a contract management system, which can provide encryption for contracts to be secure. For organizations utilizing various online or physical platforms, a contract management system provides a platform with all the features needed for contract management. In addition, they provide a system that ensures contract systemization.
At the same time, improve the contract turnaround time by asking the contractor and client to add comments before signing; therefore, everyone gets a chance to resolve their concerns before the final step. A contract management system solves almost all contract management challenges, problems, and issues.
A contract lifecycle management (CLM) tool is the way to go; most organizations have embraced this technology, improving their outputs. The Parley Pro CLM tool is an excellent recommendation that has become a favorite for many firms. It has become popular because it has the necessary functionalities to deal with contract management problems and issues. It improves the contract review process, provides real-time contract negotiation, automates the contract approval process, and keenly analyzes contracts through technology.
With such a tool, some benefits will automatically be part of your business. Time and money will be saved, an automated contract process means that less effort is required, and employees will not need to spend hours on one contract.
Adopting such a tool brings a host of benefits to your business. It helps save time and money, as an automated contract process requires less manual effort, meaning employees don’t have to spend hours on a single contract. Additionally, this tool improves the quality of output, resulting in higher-quality contracts.
Your clients will appreciate the services provided because this CLM tool streamlines the contract management challenges. Happy clients automatically mean more referrals. Finally, your team will churn out higher-quality contracts.
In the era of digital transformation, businesses that adapt and integrate technology into their contract management processes will not only stay competitive but also enjoy streamlined operations, reduced errors, and improved client satisfaction.
Contracts have a nostalgia that makes businesses feel that they should be executed traditionally, through pen and paper. But things are changing; embracing CLM tools will help manage a contract lifecycle better.
Olga Mack is VP at LexisNexis and CEO of CounselLink CLM.