Do you typically spend a significant amount of time searching for contracts? Are you consistently aware of upcoming contract renewals? Is it common for you to invest weeks in drafting and negotiating new deals? If your responses include "a few hours," "sometimes," and "yes," it's possible that you are not effectively managing your contracts.
Inadequate contract management is characterized by slow processes for drafting and negotiating, inefficient systems for storing and retrieving contracts, limited oversight mechanisms, and ineffective communication. These kind of risks of poor contract management, often lead to severe legal consequences and financial losses for organizations.
If you are looking for ways to enhance your organization's contract management efficiency, look no further. Continue reading to discover the risk of poor contract management and why it is crucial to implement best practices.
What are the risks of poor contract management?
Based on data from World Commerce and Contracting, the average expense for drafting and finalizing a low-risk contract is approximately $6,900. Furthermore, according to a report in the Journal of Contract Management, despite these contract management costs, more than 71% of companies still misplace 10% of their contract documents.
Such inadequate poor contract management practices have been demonstrated to result in a yearly loss of approximately 9% of a business's net income. In addition to the financial impact, the risk of poor contract management exposes organizations to various other complications, including regulatory penalties, security breaches, and reputational damage.
Top 3 contract management best practices for avoiding inadequate contract process
Ensure centralized and searchable contract storage
To expedite contract creation, it is beneficial for the legal department to establish standardized and pre-approved contract language and terms. Storing contracts in a centralized and easily searchable repository is no longer a choice but a necessity.
Take, for example, the Convergepoint software, which aids in the management of several contracts by providing organized views in the form of lists or grids. This feature enables you to conveniently locate specific documents that align with your needs by applying relevant filters.
Your team can easily access the desired document by conducting a search based on the contract name, classification, or contract type.Advanced legal record management is crucial, providing information such as the party accepting the agreement, the specific version of the agreement accepted, and the date and time of acceptance.
Hence centralized software ensures both the security and accessibility of contracts and the significance of secure contract storage becomes even more apparent in the event of litigation.
Tracking obligations
Often, individuals sign contracts and then overlook them until problems arise. However, the significance of contracts intensifies once they are signed. Your organization carries obligations that require diligent tracking to ensure they are fulfilled, particularly when dealing with a large number of active contracts.
To meet your contractual obligations effectively, it is crucial that your contracts are readily accessible. Within the ConvergePoint software, obligation management assists teams in recognizing, monitoring, and receiving reminders about their contractual commitments.
This is accomplished by consolidating all essential contract data into a unified workspace located within the 'Manage' section. By doing so, it simplifies the process of locating, viewing, and overseeing obligations and responsibilities on a larger scale. Hence, utilizing the software can assist you in staying on top of your obligations by sending timely email reminders prior to their due dates.
Automate communications
Contract communication through emails has inherent shortcomings due to their lack of centralization. It is easy to overlook the address of relevant parties when sharing information, and important details may get buried within lengthy email threads.
To address these issues, it is advisable to adopt contract lifecycle management software (CLM). Such software tracks and records every activity, while also sending real-time notifications to relevant stakeholders.
The ConvergePoint software facilitates online negotiations with shared documents, ensuring seamless collaboration among all parties involved. During the establishment of a contract workflow, the contract specialist responsible can engage in collaboration with the contract requestor, and their communication will be displayed within the "Communication tasks" column on their respective dashboard.
Furthermore, every individual can receive timely reminders of important events and due dates, streamlining the contract management process. Thus, by automating your communications, you can ensure that no stakeholder is left behind at any stage of the contract process.
Conclusion
Implementing a meticulously designed contract management process guarantees that your organization maximizes the benefits of each contract, mitigates risks, and achieves revenue milestones more efficiently. However, achieving such outcomes is hardly feasible through manual processes, which have become synonymous with inadequate poor contract management practices.
To adapt to the rapidly evolving business landscape and ensure that your contracts effectively fulfill their intended objectives, embracing Contract Lifecycle Management (CLM) solutions is strongly advised. Request a demo from ConvergePoint and witness firsthand how a CLM can elevate your business to new heights.