Overcoming obstacles in enterprise contract management 

In the whirlwind of today’s business world, mastering contract management is like having a superpower. After all, the average enterprise manages a staggering 20,000 – 40,000 contracts dictating everything from supplier deals to employee agreements. Managing, monitoring, and negotiating this multitude of agreements can be a Herculean task, filled with obstacles that threaten to derail efficiency and amplify risks. 

In this blog, we’ll dive into the heart of these contract management challenges and detail practical solutions to conquer them, ensuring your enterprise stays on the path to success. 

Common challenges in enterprise contract management 

Contract complexity

Enterprises deal with a variety of contracts and a diverse array of clauses, making the task of managing them inherently complex. This complexity is further compounded by the need to comply with numerous legal and regulatory requirements. For instance, a contract might need to adhere to local, national, and international laws, which can be a significant burden for legal teams.  

Volume and scale

As mentioned, enterprises often manage a high volume of contracts simultaneously. Keeping track of contract lifecycles, renewals, and obligations can be overwhelming. This can lead to missed deadlines, undesired auto-renewals, unfulfilled obligations, and financial losses. (Read how an accidental auto-renewal cost BISSELL $60,000.) 

Lack of standardization

Inconsistent contract formats and terms across different departments can create confusion and inefficiencies. Without standardized templates, maintaining uniformity becomes challenging, leading to errors and misinterpretations.  

Inefficient processes

Manually handling contracts using spreadsheets and email threads can cause significant delays across the enterprise. The approval and sign-off processes are often slow, leading to bottlenecks. These bottlenecks often cause rifts between various colleagues and departments, particularly Procurement and Legal.  

Risk management

Identifying and mitigating risks associated with contracts is challenging, but crucial.  Ensuring compliance and avoiding penalties requires constant vigilance, and regulations are constantly changing. Take, for instance, the emerging world of environmental, social, and governance (ESG). Regulators, investors, and clients alike are demanding that corporations provide ESG disclosures and improve their ESG performance. Missteps in this realm can result in loss of business, loss of investment dollars, greenwashing allegations, and brand damage.  

Data management

Storing and retrieving contract data efficiently is another major challenge. Ensuring data security and privacy is paramount, especially with the increasing threat of cyberattacks. Attacks can happen anytime, to any organization – and their consequences are costly.  

Last year, hotel and casino company MGM Resorts suffered a cyberattack that exposed customer data, costing the company an estimated $100 million. MGM is still recovering from the attack and the scale of the data exposure is unknown.   

Solutions for effective contract management 

Adopting Contract Lifecycle Management (CLM) software

One of the most effective solutions is implementing a robust Contract Lifecycle Management (CLM) solution. CLM software manages all aspects of a contract or legal agreement from creation to negotiation all the way through execution.  

CLM systems are used for various types of legal agreements with external parties, including arrangements for outsourcing, procurement, sales, confidentiality, protection of intellectual property, property leases, management of facilities, and more.  

So, what does CLM software do? At its most basic level, a CLM system provides system for managing the workflow of negotiating and completing an agreement, and a single, searchable digital repository where organizations can keep and easily access the data within their legal documents. A more robust CLM solution can revolutionize the way your organization handles contracts, from creation and negotiation to approval and e-signature, to storage, reporting, and actionable analysis. 

In the market for a CLM? Features to look for include platform flexibility, user-driven configuration, automated alerts for renewals, compliance tracking, useful AI, and secure storage. The right CLM will accelerate internal processes, allowing you to close deals quicker, without assuming additional risk.  

Standardizing contract templates

Creating and using standardized templates can ensure consistency and compliance across the organization. Standardized templates reduce the risk of errors, reduce the time it takes to get to agreement, and make it easier to manage contracts.  

Implementing workflow automation

Workflow automation can significantly streamline approval processes, reducing manual errors and delays. With automated workflows, teams can create, review, and approve contracts more efficiently. Automation also helps eliminate manual, time-consuming tasks and paperwork, freeing you up to focus on strategic, high-value work.  

Data-first contract repository

A data-first contract repository provides access to the data stored within each contract, acting as a single source of truth for all contract-related information. This makes it easier to access and retrieve contract details, improving efficiency and reducing the risk of lost documents. 

Regular audits and reviews

Periodic contract audits are essential to identify and address issues proactively. Regular reviews help ensure that contracts remain compliant and relevant. (Read how Paris-based hospitality company Accor enhanced its compliance measures using Agiloft CLM.) 

Training and development

Educating staff on CLM best practices and keeping them up-to-date with legal and regulatory changes is crucial. Continuous training ensures that employees adopt the new CLM technology and are well-equipped to manage contracts effectively. 

Conclusion

Effective contract management is vital for enterprise success, but it comes with its own set of distinct obstacles. By understanding these challenges and implementing the right solutions, enterprises can streamline their contract management processes, reduce risks, and ensure compliance. Adopting best practices and leveraging technology are key steps towards achieving efficient contract management. Enterprises should take proactive measures to enhance their contract management strategies and drive business success. 

Ditch the manual contracting processes. Learn the top nine risks enterprises take with a bad CLM system (or lack thereof).