The 5 pain points of inefficient contract management
If contracts are done faster, you’re able to collect on them sooner. If they’re accurate, you have fewer disputes and fewer time-wasting contract revisions. Generals counsel and C-level executives will sleep better at night because they have confidence that the contract management process is working. The benefits of automating contract management are real. But so are the pains.
Here is a look at the five most common pain points of inefficient contract lifecycle management and some of the ways to overcome them.
1. Speed versus control
The biggest source of friction in the contract lifecycle comes from the balancing act between speed and control. Because contracts are so critical, legal prefers to examine contracts with a fine-tooth comb. Sales often has a different interest, pressuring legal to get out of the way so deals can close faster. The main business challenge becomes moving contracts through quickly but with enough oversight to effectively manage risk.
2. Lack of visibility
Part of what exacerbates the speed vs. control dilemma for legal is a general lack of visibility into contract terms, obligations, and value. If you can’t see it, you can’t control it. This becomes a major pain point because agreements outline the terms of the value exchanged, and if you can’t ensure the right value for deals, money is slipping through your company’s fingers. Lack of visibility is an especially serious problem for expiring contracts and renewals.
3. Inconsistent legal language
It’s important to be consistent in the use of terms and language in your contracts. Gaps in standardized language can introduce risk or confusion. If you can’t determine that contracts contain accurate language or identify the difference between contracts, lawyers might have to get involved in every single deal. This also increases the risk of being non-compliant or leaving revenue on the table.
4. Information silos and manual processes
Managing all of the necessary steps in the contract process is hard enough internally across several departments. The complexity of managing contracts increases exponentially when you have to manage contracts across several office locations, time zones, or languages. The ability to have everything centrally located with changes tracked in real time becomes critical. Human error, bottle-necked contract cycles, and limited process control can increase risk dramatically when contracts are managed manually. Automating contract management helps companies improve control and visibility and significantly shortens contract creation time.
5. Inability to manage changes
The customer relationship gets more valuable once the deal is signed so it’s important to have a mechanism for managing changes over time. You need to be up to speed on renewal dates, pricing changes, emerging legal requirements, and other events that require you to speak to the customer specifically about the contractual relationship.
If you drop the ball on contract-related communications, you risk blowing up the relationship with the customer—especially if the contract language (or lack of contract language) exposes the customer to new risk. Your ability to manage the contract, particularly changes over time and the renewal process, will have a direct impact on customer retention rate.