All business deals and projects are closed with complex contracts. The company enters into a contract with their partners, suppliers, vendors, customers, or employees. There may also be a time where multiple contracts exist with each party. With so many contracts in the table, it is necessary that a firm has deployed efficient contract management practices. Missing a small detail in the contract or overlooking a single clause in it can have devastating effects. Although the consequence of inefficient contract management can be damaging, organizations still make mistakes when it comes to contract management.
Mistakes You Make with Contract Management
#1 – Overreliance on Paper-Based System
Its already 2017, and there must be something wrong if any organization is relying primarily on papers for record keeping and carrying out transactions. In an era dominated by digital signatures, the blockchain, e-procurement, and electronic data interchange, relying on a paper-based system for contract seems outdated. Depending on the paper-based system could bring out problems such as discrepancies in two copies, risk of tampering, damage, theft, and forgery. By using contract management software, the process of drafting contract can be hastened with the availability of pre-approved templates. Additionally, contract automation can accelerate negotiation cycle, reduce erroneous payments, and cut operating and processing costs.
#2- Neglecting Document Access
Documents containing sensitive information is of critical importance to an organization. Granting full access to documents for all stakeholders may not be the wisest of ideas. It is important to limit the access to critical documents to only those who needs it. Additionally, contract management systems can grant different level of authority as required which can be restricted, read-only, or editing permissions. Also, giving write permissions to all stakeholders may bring out the classic case of “too many chefs spoil the broth” with numerous revisions. Some companies are looking at blockchain technology to implement contract management as it can ensure both privacy and transparency as required.
#3 – Failure to Engage all Related Stakeholders
Failure to engage all related stakeholders in the contract management process can be detrimental to the company. It usually happens in public sector contracts as numerous parties are affected by the contract. It might happen that once some parties are left out, it may later develop a conflict of interest, and hinder the smooth flow of operations. Modern-day contract management solutions allow the drafter to include all related parties in the drafting process. Simplified contact lists enable the drafter to double check if any concerned parties have been left out.
#4 – Storing Contract Documents on Multiple Shared Drives
Although companies are using digital packages to draft their contract, they can always make a blunder of sending out copies which will be saved on multiple drives. It not much of a problem if it is the finalized contract, but if revisions are to be made, then the person revising will have a different version compared to others whose drive has not been updated. This way, whenever a correction is made, each party can have modified version of the contract. The best way to avoid this pitfall is to opt for cloud-based online contract management software and allow central collaboration to edit the document.
#5 – Neglecting Auto-Renewed Contracts
It is not good to be too comfortable and neglect auto-renewed contracts. Although digital contracts can be auto-renewed with the use of contract automation, there might be some adjustments that can be missed. It can be possible that the company may allow outdated conditions to continue or continue longer than either party would like to without their knowledge.
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