When it comes to manual contract management, there are always high chances of errors. No matter how skilled or well-trained your staff is, they are humans and prone to making mistakes. While most human errors in contract management systems can lead to a longer contract lifecycle, missed deadlines and milestones, and significant revenue loss. In this article, we have listed four common contract management mistakes and provided tips on how to avoid them.
Mistake # 1: Traditional paper contracts
Perhaps someone in the production department needs to double-check the contract that outlines the manufacturing specs, but it is filed away in the legal department’s filing cabinet. This is tedious, at best!
Or maybe, to prepare for a sales call, a salesperson may want to look over not only the present contract but also any earlier agreements with the client. Contacting headquarters and having someone rummage through drawers for the paper copy adds unnecessary delay and lost time to the contract lifecycle.
How to avoid it: Build a contract repository.
Ditch all paper records and go digital. Upload all contracts and legal documents onto a central database. The optical recognition feature in most digital contract repositories allows you to do a quick Google-style search within the database to find exactly what you’re looking for. You can also assign role-based access controls to ensure that only the people participating in a contracting process can create, edit, and delete contracts and the associated metadata.
Mistake # 2: Contractual inconsistencies
Drafting a legally-binding contract is not an easy task. It requires conciseness, up-to-date knowledge of corporate law, and relevant facts and figures. A single misword and one or both parties could end up signing a contract with conflicting terms. Left uncorrected, these contractual inconsistencies can cause disparate contracts with different meanings.
Worse still, they can result in an erroneous interpretation of obligations mentioned in the agreement. When this happens, there’s a good chance one or both parties unknowingly fail to hold up their end of the bargain. Often, this misunderstanding leads to costly and extensive litigation, and also, the potential loss of customers.
How to avoid it: Use a contract template library.
Contract templates have standard, pre-approved clauses for you to generate business agreements in a few minutes. By using them, in-house legal can rest assured that no important provisions are left out of a contract, nor does it have any unapproved terms. Also, these templates can be tailored to a particular use case or contract type. Imagine: if 90% of a contract is templated, the legal personnel will only need to work on the remaining 10% of the non-templated sections. The process will still be much faster and easier than creating a contract manually.
Mistake # 3: No visibility on contract versions history
At times, contract negotiations involve a lot of back-and-forth between external parties and internal departments. In such cases, it’s natural for contracts to go through multiple revisions between external parties and internal departments, making it difficult to determine which version is final. More often than not, this translates into sending out an unapproved version of the contract for signature or not being 100% sure that it captures all the changes made during negotiations.
How to avoid it: Get contract management software (CMS).
Contract management software does a lot more than allow everyone involved in the contracting process to work on a contract together in real-time. Its versioning feature tracks the history of a document since its creation. It also gives you visibility on all the changes made, who made them, and when. Lastly, the system sends notifications to all parties whenever someone edits an agreement. That way, everybody stays up to date with the progress of a contract.
Mistake # 4: Physical signature retrieval
It sounds sad, but using traditional signing processes to finalize contracts is still one of the most common contract management mistakes companies make today. As partnerships multiply at home and abroad, businesses find it difficult to close deals with counterparties that require physical signatures. For example, if a client is not local, a contract must be emailed over, saved as a PDF, printed, signed in pen, scanned, and finally emailed back to indicate its approval. Deals move unbelievably slowly because of this pointless extra step.
How to avoid it: Implement electronic signatures.
By replacing traditional wet-ink signatures with digital ones, you can eliminate manual administrative tasks like printing, scanning, arranging a witness for the sign-off, etc., and get contracts signed within seconds. Digital signatures help both parties save valuable time and effort and lead to seamless workflow, which is great if you aim to become a paperless office one day.
Final Thoughts
You’d be surprised, but even large companies with experienced legal teams often make rookie mistakes while managing contracts. If not addressed, these mistakes can add up and become critical non-performance areas for your business in the long run. Hopefully, this article will help you remove a few (if not all) friction points in your existing contract management process.
Author Bio:
Qurat-ul-Ain Ghazali, aka Annie, is the growth manager at Contractbook and looks after all the organic channels. She has been with tech startups and scaleups for a couple of years with a B2B focus. You can find her socializing, traveling, indulging in extreme sports, and enjoying the local desserts when she is not working.
