Even a small business can find themselves dealing with a significant volume of contracts. After every deal and project is closed, your project management system has a new entry to handle. With many businesses having multiple contracts with individual parties, having an effective and efficient contract management system is crucial. However, there are mistakes that might seem little at the time that can grow larger, costing you more money as your contract list grows and your system fails to deal with them as it scales. Here are some of the mistakes that can end up costing you big.
Relying too much on paper
With the sheer number of contracts that a business can enter into, especially an enterprise-level business, using paper alone to manage all your contracts is simply asking for trouble. There’s a huge risk of discrepancies between copies, tampering, theft, damage, and forgery. Contract management software makes it much easier to update contracts unilaterally across the board and can speed up the negotiation process by animating much of the busy work.
Inconsistent contract creation
The more consistent in formatting, structure, and style your contracts are, the easier it is for your team to be able to comprehend and make the necessary changes. Similarly, if you’re doing repeat contracts with the same party, it can grow frustrating for them to see major differences in the way contracts are written. This slows down the management process greatly, meaning both parties lose money waiting for the negotiation process. Contract management systems include document templates that make it much easier to ensure consistent authoring across your contracts.
Failing to automate compliance
Depending on your state and industry, you have to ensure that you are compliant in all contracts and contract management. Contract management software can make this much easier by allowing you to automatically archive system logs for audits, backing up contract data and virtual data room files, such as who was granted access to the files, who viewed them, and who edited them. Similarly, you can automate compliance by creating specific rules, such as not allowing a contract to move into the next stage of the management cycle without having first been viewed, approved, and signed by all the necessary parties.
Not reviewing your documents access options
Different contracts are going to require different pairs of eyes on them. Not automating access for certain parties can slow the negotiation and approval process. Similarly, allowing too much access to sensitive information can see you liable for what is potentially a lawsuit-worthy mistake. Contract management systems make it much easier to grant access to specific groups and parties, such as all current stakeholders. Access can be controlled, allowing you to decide on who has read-only access and who has editing access, so you don’t have the classic situation of all stakeholders making edits at once, delaying things even further.
Backing up contracts on multiple devices
Transmitting contracts to other devices like thumb drives can be almost as problematic as storing them in paper form alone. As the contract is updated, every outdated copy you have out there is a potential risk and can muddy the waters. Furthermore, there are huge access risks about who has the drive and how permissions are managed on each copy. Many contract management systems are Cloud-operated, meaning any update to one copy on the system applies across the board.
Relying too much on auto-renewed contracts
Contracts that automatically renew can simplifying the management process significantly. However, relying on them too much can result in failures to make changes that would keep up with updated company policies or regulation rules. Contract management software can make it easier to auto-renew contracts, but it can also alert stakeholders as to when that renew date is approaching so that you can check the contract and make any necessary adjustments.
Failing to involve all stakeholders
When tracking individual stakeholder contributions to a contract manually, such as on a paper system or with an Excel sheet, it’s very easy to miss one or two. This mistake can cost you dearly if a contract goes through without the necessary stakeholder involvement. Contract management software makes it a lot easier to automatically check stakeholder involvement, as well as alerting you when you’re missing any approval or signatures. Make sure all stakeholders have enough time to access the contract and read through it so you’re not liable for restricting access.
For truly effective contract management, creating a digital system that is scalable and interconnected can ensure that many of the mistakes caused by pure human error simply don’t happen any longer. However, you still need to exercise some care even if you do make the switch to digital.