In 2016, the Royal Swedish Academy of Sciences recognized the importance of contracts to the world and awarded the Nobel Prize in Economics to Oliver Hart and Bengt Holmström for their work in contract theory. It may have taken until 2016 for the RSAS to recognize it, but businesses have known the importance of contracts for thousands of years. Contracts between yourself, a customer, a vendor, an employee, or any other business partner are the backbone of every business transaction. With contract litigation accounting for over 40% of the lawsuits companies faced in 2019, having a good handle on your contract lifecycle management process is critical to protecting your business.
The Challenges of Contract Lifecycle Management
Whether it be in legal fees, payroll, or even the cost of paper and pens, the contract creation process can cost companies millions of dollars a year. To help avoid wasting that money, let’s look at the common obstacles companies face when managing their contracts.
While signing a contract may feel like the final step of the process, it’s only a tiny part of a contract’s life, and there will be times when you need to refer back to it. Whether filed away in a locked cabinet, saved in a forgotten email folder, or on your computer, using an inefficient and disorganized storage method makes managing contracts difficult and time-consuming. This has only become more of an issue as the number of people telecommuting continues to grow.
Inefficient Collaboration and Communication
Every contract signed is a collaborative effort between groups to reach a mutually beneficial agreement. Depending on the processes you already have in place, this could mean hours of phone calls and meetings spent negotiating and making revisions. If your communication throughout the process is disorganized, you risk missing critical comments, changes, or having multiple versions of the contract floating around.
Bottlenecks in Contract Processing
It takes businesses an average of twenty to thirty days to draft and finalize a contract. Because contracts involve many different departments and multiple parties, there are several opportunities for it to get hung up and for that time to increase dramatically. Without a way to monitor each stage of the process, identifying the weak points in your contract approval process becomes complicated. This results in contracts taking longer and costing more.
Tracking Contract Renewals and Expirations
Awaiting my every contract at its end is one of two fates: renewal or expiration. Despite this certainty, many businesses forget and miss the deadline. Whether a contract renews or expires is a considerable part of contract lifecycle management. Missing important contract deadlines can have disastrous results such as damaging vendor relations, causing unplanned expenses, or being trapped in a contract that isn’t beneficial.
How to Rise to the Challenge
There are a lot of obstacles that present themselves while managing contracts, and it can feel like an overwhelming task. Thankfully, you can implement contract lifecycle management software to overcome these challenges and simplify the process.
Keep a Digital Contract Database
Using the right tools is essential, and giving your employees the tools they need to succeed can help you reach your business goals. The best tool for contract lifecycle management is a digital repository of your company’s contracts. By digitizing your contracts, you create a searchable database that can be accessed regardless of physical location. Taking it a step further and making the documents accessible on the cloud will give the parties involved the freedom to work on it wherever and whenever they choose.
Increase Contract Lifecycle Visibility
A contract goes through many stages before final approval, and getting delayed along its journey is incredibly frustrating for all parties involved. To prevent this, use a contract management system that allows for visibility at all stages of the process. Doing this will give you the information you need to identify bottlenecks and will enable you to shorten the time between request and approval.
Use One Document for Collaboration
Negotiating and revising a contract is vital to ensuring everyone is satisfied with the final document. However, this can sometimes lead to confusion if multiple versions of the same document exist. Keep all collaboration confined to a single copy and update it when changes or edits are needed to remove this risk. Keeping one central living document also guarantees the version being read is the most recent version created.
Automate Contract Milestone Notifications
Having a contract renew or expire automatically can be extremely helpful, but having it happen without knowing can be a disaster. Managing contract deadlines effectively ensures that all stakeholders are on the same page and prevents conflict in the future. You can automate notifications for important contract milestones using contract lifecycle management software. Be sure that your alerts give stakeholders the time they need to prepare or reach out with questions.
Get Help With Your Contract Management Lifecycle
Contract lifecycle management is critical to building and maintaining business relationships. Finding the right contract management software can increase efficiency while reducing the risks you face through the contract lifecycle.
ComplianceBridge Contracts is a robust and powerful contract management software that provides a central location for creating, revising, approving, and storing your company’s contracts. By containing all collaboration to a single document, ComplianceBridge gives you security in knowing that all parties are looking at and working on the same version. With version tracking, every version of the contract will be stacked together, ensuring the most recent version is always displayed while keeping a history of each change. With acknowledgment/rejection verification and automatic reminders, our software ensures every stakeholder is kept up to date along the way, significantly reducing the time from initiation to approval.
Automatic renewal alerts will let you know when a contract is about to renew or expire, allowing you never to miss a deadline again. ComplianceBridge also provides a cloud-based database that guarantees all parties involved will access their contracts while giving your employees an easy-to-use database. Having effective contract lifecycle management practices will help everyone involved while helping to minimize your company’s financial risk and help you achieve your business objectives.
To learn more about overcoming obstacles with ComplianceBridge Contracts, request a demo with ComplianceBridge today.