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The 5 Common Pitfalls of Contract Lifecycle Management and How to Solve Them

Contract Management

The 5 Common Pitfalls of Contract Lifecycle Management and How to Solve Them

The contract lifecycle management (CLM) process demands efficiency at every level of your legal, sales, and procurement teams. Without feature-rich, easy-to-use tools that promote collaboration, you’re likely leaving money on the table during intense negotiations or risking unfavorable terms.

If your company experiences any of these challenges, it’s time to rethink your current platforms and processes to avoid prolonged, tedious workflows and bottlenecks.

Thankfully, where there’s a challenge, there’s also a solution just waiting to be explored.

1. Lack of Communication

One of the most apparent process gaps at any organization is a lack of communication among team members. Employees must take advantage of both external and internal communication whenever possible to ensure contracts never slip through the cracks; there must be accountability at every step during the contract lifecycle. Without an internal system that streamlines and centralizes the review, editing, and approval process, communication will remain a barrier to maximizing productivity.

SOLUTION

Don’t let current communication hurdles impact your team’s ability to execute contracts effectively. Implement a solution that includes approval workflows and other features to store notes and comments about contracts to enhance your process. These platforms also make it easy to incorporate redlines when editing and reviewing contracts to ensure everyone is on the same page about the latest changes, and who made those changes.

2. Poor Tracking of Renewal Dates

Proper revenue management is the cornerstone of any organization, and, of course, avoiding revenue leakage is a significant contributor. Yet ineffective CLM software and processes do little to mitigate this issue. A study by the IACCM found that the average annual revenue leakage is 9%.

So, what’s causing businesses to lose out on their hard-earned cash? Sell-side concerns such as missed renewal dates or improper billing are obvious culprits. In many cases, companies lose track of contract renewals until the last minute or forget them altogether. Companies with third-party vendor contracts may fall prey to their own missed renewals, wherein they inadvertently get locked into unfavorable terms or cost increases. Broadly speaking, this lack of oversight can lead to:

Procurement & Legal Challenges

  • Missed auto-renewals
  • Missed opportunities to renegotiate better rates/terms
  • Unfavorable terms (i.e. addition of non-standard terms that aren’t flagged)
  • Lack of visibility into pricing and billing

Sales & Legal Challenges

  • Missed renewal billing
  • Missed opportunities to renegotiate better rates/terms
  • Missed opportunities to cross-sell

SOLUTION

With all of these issues stemming from inadequate contract management software and processes, it’s no wonder companies are frustrated that these pitfalls are hurting their bottom lines. Luckily, a CLM system with reminder notifications about renewals and other important dates will make a world of difference for your organization. This way, your team can stay on top of upcoming renewals and prepare for any renegotiations. A CLM platform that automatically tracks renewals and other important dates and terms will be your legal and procurement teams’ new best friend.

3. Contract Disorganization

Depending on your company size or industry, you may easily have thousands of contracts to manage. Some contracts may be stored locally on employee computers, while others are stuffed in your office filing cabinets. You may even have contracts stored in internal portals or intranets. Such volume and storage options make searching for specific contracts or templates like trying to find a needle in a haystack. This disorganization means your staff members cannot easily find contracts when they need them most, exposing your company to increasing risks as a result. All contracts should be in a central location to avoid these inefficient processes, which drain your company’s time and money.

SOLUTION

Fortunately, the right contract management software will enable your team to find relevant contracts and information any time they need. A CLM platform with a searchable contract repository allows you to upload all your contracts into a single, searchable database. With this tool, you have complete control over the contents of your contracts. Your team can not only locate the right documents exactly when they need to, but they can also mitigate risks by:

  • Searching key terms and clauses to accelerate decision-making
  • Reporting relevant data, such as force majeure or termination clauses across all contracts
  • Identifying contracts that require amendments due to ever-changing industry regulations

4. Inconsistent Clause Management

With hundreds or thousands of contracts in circulation throughout your organization, the same clauses are likely used across different versions of your documents. This reality is enough to make anyone’s head spin, but it’s essential to keep track of where each clause is used to ensure the most recent language in your contracts are in place at all times.

Outdated language exposes your company to risk and noncompliance. If employees are expected to manually search for the outdated clauses that are impacting your contracts, your organization is not only wasting resources, but it’s also exposed to human error. It’s a lose-lose proposition.

SOLUTION

Rather than forcing your teams to comply with manual processes, wasting time and money for your organization, top-notch CLM software is equipped with a centralized clause library that makes switching out clauses within your contracts as simple as clicking a button. These libraries enable you to add and maintain language and easily swap out clauses during the editing process. Certain solutions will even prompt you if there are multiple options of clauses to use at your discretion.

Other advanced clause management features include:

  • Contract comparisons to identify how clauses are used across different contracts
  • Clause modifications to easily follow how clauses have changed

5. Limited Use (or Overuse) of Technology

Any type of software should make your sales and legal teams’ lives easier, not harder. However, too many systems in place can overly complicate your employees’ daily job functions and leave their heads spinning. If your organization has multiple systems to manage contracts and negotiate terms, this is likely an overkill of technology resources.

On the other end of the spectrum, ineffective CLM software or contract management processes that require tedious, manual recordkeeping will be a nightmare for your organization’s productivity and employees’ sanity.

SOLUTION

It’s key to strike a balance with your contract management tools and processes by finding the right platform. An end-to-end CLM solution will help:

  • Streamline your workflows
  • Encourage faster user adoption, since users don’t have to become acclimated to numerous systems
  • Optimize costs, meaning no more paying for multiple platforms to do the work of one system

Bridge Your Contract Gaps for Good

There are plenty of roadblocks that can cause your contract management process to skid out of control. Whether your organization still relies too heavily on manual methods, or your CLM software isn’t keeping pace with technological advances, it’s time to stop wasting valuable resources and start seeing results. You can minimize these pitfalls once and for all with an end-to-end solution that stops revenue leakage, fosters collaboration, and provides organization-wide visibility into contracts.

Want to see how IntelAgree can help streamline your entire contract management process? Schedule a demo now to check it out!

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