Enterprises can manage many contracts for various reasons, from sales, purchase services, warranties, leases, non-disclosure agreements, and legal contracts. The number of contracts managed by an organization can be thousands or hundreds each year. The reports indicate that 60 to 80 per cent of transactions in the business are created or tied to contracts. However, despite their volume, they are not being controlled and monitored efficiently.
Contract lifecycle management faces a myriad of problems, particularly when it’s spread across different departments, versions, and parties. Complex contracts that aren’t structured and handled by hand could cause long cycle times, lower yield jobs, risks to compliance and ultimately, revenue loss.
So, how do you determine whether your contract management is up to the same level, and how can you avoid these costs?Here are the most prominent indicators that your company needs to transition to a new way of managing contracts:
Inconsistent Terminology for Contracts
Contracts and legal documents require the highest level of precision. Certain words have particular meanings in the field of contract law. If the language your business employs differs, even slightly, in the context of a contract describing the same concepts, you could be setting yourself up for a lengthy legal fight. For instance, a healthcare contract differs a lot with construction contract. However, implementing an effective healthcare contract management software can make every step of your healthcare contract management easier.
A misplaced comma could alter the meaning of a clause. Although many contractual clauses require customization to suit different vendors and customers, the language should be as consistent as possible.
You must have the same terms for the vendor contracts and a standard set of conditions in your customer agreements. The standard language provides a unifying framework for the negotiation process of your team.
It Is Difficult to Amend and Act
How flexible and simple is it to make modifications to the contract during its duration? Can the current processes anticipate and handle changes and renewals at the most appropriate moment? A lack of visibility or poor management of contracts can lead to leaks in revenue or the loss of opportunities.
Inconsistent Legal Language Leads to Multiple Review
As the contracts constitute legal papers that specify the rights of each party and parties, it is essential to use the same language that is reviewed by your legal team. A lack of consistency in a language requires lawyers to examine every contract and all the terms and conditions, often repeatedly in negotiations. This slows down the process and hampers your company’s success, and deals get more frequent.
It’s possible that you are having a problem with the language used in contracts right at the moment. As your business grows, however, more employees need contracts, typically quickly. You could soon be surrounded by people who have added their terms to contracts to achieve their goals quickly but then realize that legal must review the contract terms in the same way.
Contract Changes fall by the Wayside
Contracts are subject to change during negotiations and can change even after you’ve reached an agreement. Smaller businesses might discover that they can keep track of the contract modifications in the negotiations without much hassle. After a contract has been accepted, small-sized businesses may decide to discuss an amending or changing order. You can even track that change on a spreadsheet, so it is linked to the master agreement that was initially signed.
Businesses that are growing require better ways to implement and monitor adjustments. The volume of contracts increases, as does the number of persons empowered to make agreements, be it in sales, licensing procurement, or acquisition. It’s not long before the pressure of business prevents the contract and subsequent changes on them from getting to their destination on an internal shared drive or being properly examined or documented. This presents a growing risk for the company.
Contract Compliance Penalties
Every penalty for contract compliance imposed by the company is an infraction of the contract procedure. It could be that someone was optimistic with their commitments, someone did not fulfil their obligations to comply, or the contract manager did not follow up.
As contracts become more complicated and complex, compliance with contracts becomes more difficult. You must automatize as many aspects of the compliance management process as possible.
Control andVelocity Are Mutually Exclusive
The legal department of your company examines the particulars of each contract. They are aware of the importance of precision and that one oversight could affect the result of an agreement.
The sales team will likely focus on closing deals as swiftly as possible. Sales representatives are motivated to complete transactions to earn commissions, advance to the next deal, and grow the company.
Because sales and legal teams have different viewpoints, they can source conflict between the two departments. If you experience little tension in handling one contract, anticipate the issue worsening when you are required to handle hundreds of arrangements. Most of the time, the legal department digs into the process and refuses to leave until they’ve completed an extensive review. In this case, it can be extremely difficult from the selling department’s viewpoint.
Every business, large and small, requires efficient contract cycles that concentrate on completing negotiations while increasing revenue. If you notice any of these indicators that indicate your contract management processes do not scale and you are not sure how to look for an effective software solution for managing contracts, making every step easier and more efficient.