In procurement, contract management consistently rates as one of the top three issues for procurement managers. It offers great potential for procurement teams to make a difference for their organization. Having the ability to improve the contract management process will result in numerous business benefits – especially for organizations with direct supply lines dependent on longer-term service based contracts. It may even be the new frontier for procurement – the new place to generate real value for companies.
Challenges in Contract Management
Challenge 1: Legal Review
Legal review often takes a lot of time and this is the reason why companies try to circumvent legal review in the contract management process. It becomes a challenge for companies to review a 20-page contract when it’s only a few paragraphs that need legal advice. If not explained properly, it would take for legal review and business partners may ignore it altogether.
Challenge 2: Negotiation Terms
Negotiations can be a challenge in the contract management process. Any miscommunication in the negotiation process can lead to delayed revenues, longer lead times, and a reduction in profit margins for both parties. In addition, extending negotiations can also result in missed opportunities for companies. Therefore, it becomes critical for both parties to track each other’s involvement in the contract management process to avoid unnecessary delays.
Challenge 3: Poor Governance
Poor governance is one of the common challenges faced by companies during contract management. Lack of resources within organizations to maintain and monitor terms and requirements of a contract increases possibilities of risks. Also, it inhibits the implementation of new technologies, and delays renewals for contracts.
Challenge 4: Boilerplate Language
Boilerplate language refers to the standardized language used in the contracts. Although it speeds up the contract management process, it needs reviewal on a regular basis to meet compliance requirements. These provisions are extremely important and help determine how disputes would be resolved in case of any conflicts. This compels companies to leverage contract management services and amend the boilerplate language.
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