February 2, 2024
Negotiating contracts in the business world can be quite challenging, but it’s always necessary. The sort of long-term relationships that make a company flourish are only possible if contracts are created. Those contracts don’t mean anything if they aren’t correctly managed.
There are many obstacles when it comes to making the right sort of contracts for your company, but none of them are too big to conquer. To really excel at creating and keeping contracts, you simply need to keep a few ideas in mind.
Here are the biggest issues waiting for a company attempting to manage their contracts. More importantly, here are some of the ways to avoid them.
One of the biggest roadblocks for companies is managing an enormous number of contracts all at one time. As you can imagine, it’s very easy for something to slip through the cracks and for important third parties to feel ignored because their contracts aren’t being respected. Keeping up with contracts is a way of showing respect and when that doesn’t happen, people will look elsewhere to do their business. When it comes to an up-and-coming business, even a small amount of contracts add up quickly.
When there are too many contracts, there can be confusion among employees, especially if there isn’t a uniform method for creating and dealing with them. Think about it: every part of a company might have its own method for creating and managing contracts, which will result in a very disorganised situation where contracts can slip by and be ignored.
Unless everyone agrees to the same rules or uses something like a contract lifecycle management system, the agreements a company has with other parties could become overwhelming and, sadly, lost.
As the number of contracts grows and grows, the likelihood of missing key deadlines and special dates only intensifies.
For example, imagine failing to renew on time with an important supplier for your company and how that would disrupt business operations or leave the whole company without a vital service. It could be devastating.
So, what can be done about this?
How can this common problem be avoided? It’s simple, actually. Businesses can use contract lifecycle management software to reduce and streamline contracts and enhance workflow across a company.
By using cutting-edge digital tools specifically made for these sorts of tasks, businesses are now able to easily find any contract they have and create notifications that remind them about renewals or other important milestones. By doing this, they guarantee that every contract is recorded, deadlines are consistently met, and responsibilities are honoured.
Contracts sometimes need evaluation and authorisation by several people within a company at the same time, including legal and finance experts. As you can imagine, this can be a big task. For any company that wants to meet its goals, doing this correctly is vital.
The contributions from each department are obviously very important. However, if the process of getting them isn’t managed well, it can slow down the entire timeline for creating the contract.
In businesses and entire industries that are constantly evolving, any delay when it comes to creating contracts will lead to losing money, missing out on chances, and weakening partnerships with other companies.
Contract approvals might get delayed in this kind of bottleneck for a number of reasons. One of the biggest is the absence of an understood set of procedures and responsibilities in the approval process.
The most effective way to eliminate this kind of approval bottleneck is to create a smooth, automated process that leads to approvals without delay. Businesses can create approval workflows, which will ensure that once an approver reviews the contract, it is automatically sent to the next person on the list until everyone is taken care of.
Managing any contract renewal is a very important part of contract management, especially for a developing business. If it’s mismanaged, this can have very serious consequences for a business and stop it dead in its tracks.
Auto-renewal clauses will lock companies into agreements they might otherwise prefer to renegotiate or end. On the flip side, companies run the risk of letting good contracts expire by accident, which may result in losing valuable partners.
Because of the high volume of contracts they are working with, some companies miss important dates related to renewals and expirations. They also sometimes scramble to review contracts at the very last minute, which leaves not a lot of time for proper review and due diligence.
How can this be taken care of? One way to handle all of these renewal and expiration dates effectively is to create a calendar with automatic alerts set well in advance of each crucial date.
This gives businesses plenty of time to take a thorough look at the contract, conduct the right kind of market research they need, and then negotiate any new terms that could be necessary.
A lot of business software today can help with this by using built-in tools that focus on tracking and managing renewals, so contracts don’t end up slipping through the cracks. In addition, management reporting tools can help track real-time deadlines, ensuring that contracts are always up-to-date and preventing any potential lapses in coverage.
Contracts often come with a very long list of legal rules and regulations that companies have to stick to. Following these regulations is especially important for businesses in sectors such as healthcare, finance, and government contracting.
In these industries, even a slight violation may result in some heavy fines or even legal issues that could shut a business down.
To tackle these kinds of problems, companies need to create compliance milestones and checkpoints within their contract lifecycle, making sure that each and every contract is closely reviewed by the right department before it is signed.
By formulating an approval process like this and using software that includes tracking tools, companies can reduce the risks of not complying. It should be noted that automation and AI can help a lot in this area, too. It can notify the right people about changes in laws and rules and help them modify contracts quickly.
As you can see, keeping up with contracts can be complex. It can add a lot to an individual’s plate, even an accomplished business professional.
Fortunately, there are many options to overcome these problems in today’s business world, thanks to advances in technology and contract management.
