Challenges in contract management & how to solve them

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There have always been challenges in contract management, however they have never been more apparent than in the past year. With the impact of the coronavirus still being felt globally, businesses are facing new and different challenges to the ones normally associated with managing contracts.

In the industries hardest hit by the pandemic, there has been a noticeable shift towards a greater insight into the granular data of how each contract is performing and the effect each contract has on business revenue. This increase in scrutiny and demand for more in-depth reporting and data analysis has required a change in how contract management processes are managed and even the processes themselves.

Businesses and organizations are having to prioritize contract management in a way we have never seen before, supported by increasingly clever technology and contract management software solutions, there has been a marked difference in how contracts are controlled and managed. Detail orientated processes are fast becoming the norm and although efficiency is a key element of any business, it is now being more stringently applied to areas that have previously lacked effective or successful contract management.

So what are the current challenges being faced by contract managers or legal and compliance teams and how are they managing to solve them?

Remote working

One of the newest challenges faced by any contract management team is the switch to remote working by employees. Not only does this have possible consequences in terms of security and risk, but ensuring compliance and accountability have also been key elements to answer. With many businesses not adequately prepared for the remote working environment and the issues that come along with it, for contract managers this has proved a contract management challenge unlike any other.

If your business or organization already has a robust contract management system in place, either with manually controlled policies and procedures, or by using contract management software, then the switch to remote working for employees has been easier to address. However, if your business was still heavily reliant on paper, then employees working remotely lost all contract visibility and as a result, reduced transparency and communication with vendors and third-parties. Strong vendor relationships are crucial to extended enterprise so ensuring those relationships weren’t further damaged proved another challenge of remote working.

For those businesses already using a browser-based system such as the one offered by Symfact, they had the solution to a remote working environment already built in. Contract management software allows employees access to all the contracts online, with no loss of advanced search functionality, no matter their location. This level of remote access has allowed precise information to be shared, helping with version control and by cataloguing your metadata and using configurable search tools and data tags to identify contracts for key words and clauses, information can also be accessed quickly and easily.

So, if you’re looking to make the remote working model work for your business organization, controlled access is imperative to ensure the contract process continues to run smoothly with minimum disruption to efficiency and productivity. This problem can really only be overcome with the use of technology, but there is a growing range of dedicated contract management solutions that can be utilized to help solve the challenges caused by remote contract management.

Lack of standardization

One of the familiar challenges in contract management is lack of standardization from the people and processes concerned. As there are often multiple departments involved from the procurement point of a third-party, through contract creation to contract reporting, there are often different internal management systems at play, causing inefficiency, poor administration, and a complete lack of cost visibility.

For your business to move forward and deal with the challenges faced in contract management, you will most often benefit from streamlining your processes and systems into one to help avoid problems such as:

  • Your legal team must review every term and clause in every contract because there is no system to enforce standard terms where appropriate and no standardized contract management processes.
  • There is little or no visibility into cross functional overlap around products, customers, and business partners, for example buying and selling to the same company as both a customer and supplier.
  • There is little or no understanding of enterprise risk, lost revenue, or cost savings opportunities from not having enforced contract standards.

Another big issue from lack of standardization is having all your contracts, data, and documentation in and across various shared files. This can prove massively inefficient when trying to maintain sustainable business growth and stay compliant with data regulations, so having a standard, central repository which allows for safe and secure storage of your contracts in one individual location and helps create a unified data pool, can solve a lot of contract management issues. And of course remote working would be almost impossible without this.

One of the benefits of contract management software when trying to standardize processes, is the automation. By moving to a digital platform and automating your management procedures, you standardize your processes throughout your entire contract management system, which can improve administrative efficiency and optimize your organizational structure by integrating any siloed departments by merging all departmental systems that are currently involved with any part of the contract process such as Legal, HR and Sales as well as the management and administration across the business as a whole. And by collating all the individual processes, departments, and information, you have tighter data access control balanced with easy management of documents, contracts, legal agreements, as well as a reduction in errors and loss.

Whether you decide to standardize your processes manually or by using automated software, standardization and control can have numerous benefits throughout the organizational model, from contract creation and approvals, to future-proofing your business and having the necessary framework in place to allow for scalability.

Managing risk & compliance

Risk is one of the largest challenges for businesses and their contract management teams due to the inherent risks involved with any contract. Add to that the complex compliance issues that come with competing both locally and globally, and internal and external regulations, and suddenly you see why managing risk and ensuring compliance is the largest challenge in contract management.

Contracts may contain risk elements such as significant contract value, contingencies, and long-term commitments. It is an absolute requirement of any contract management system to be able to track and report on these risks. Key contractual commitments must be pro-actively monitored with alerts and notifications being sent to the respective individuals within an enterprise. This sort of robust, risk management framework can allow you to deal with any issues that arise in a timely manner to avoid negative consequences for your business.

Efficiency can reduce the risks associated with contract management, so many businesses are using technology to their advantage when managing their risk. Improving efficiency throughout a contract lifecycle using software means there are the available resources to increase the monitoring of expanding third-party relationships and the value they bring to your business. Using the monitoring and auditing tools that form part of many contract management software solutions, means your business can continually and quickly, identify and mitigate risks. Including operational, financial, and reputational risk. This analysis combined with the granular data and auditing tools, means you can be proactive in your approach to risk, allowing you to successfully reduce risk whilst assessing your level of risk appetite and the effect it has on your business strategy regarding your current and future contracts.

Ensuring compliance is often a complicated task for business compliance teams and officers. Not only do they have to manage policies and procedures, but all trading activity, record keeping and managing all the administrative tasks in regards to all corporate data and information as well as ensuring compliance with regulations. If this is done by your legal team rather than a specific compliance department then the amount of work shouldered by that department can be huge. As such, compliance issues can often fall under the radar, which result in financial penalties and loss of confidence in your business.

So what are the best practices to help control the challenges created by managing compliance? In terms of the contract itself, compliance to fulfilling contractual obligations for all parties involved needs to be tracked and audited. This makes sure the contract performance matches the requirements for your business and by auditing and tracking every step of a contract milestone or change, you can hold everyone involved accountable for their actions, helping give your company some protection against non-compliance whilst improving efficiency.

You also need to regularly review your compliance in terms of regulations. Depending on your business location and trading location, this may mean keeping compliant with several different industry regulators, including GDPR. This is vitally important for the success of your business and to reduce the risk of litigation and fines which can have devastating financial consequences. Regular auditing and reviews protect the company and minimizes risk.

Missed deadlines & contract reporting

Missed deadlines and an auto-renewal of contracts is another challenge faced by businesses.

When a contract is coming to end, businesses with good contract management decide whether to renew or terminate the contract. If a business wishes to renew a contract, they will often want to re-negotiate certain terms dependent on the contract performance and so this point in a contract lifecycle is vital and must not be missed.

For businesses with poor contract management and poor management of operations, end of contracts are often missed or left to either auto-renew or expire without renewal. The risk here is mostly financial, due to penalties that can be incurred around contract renewals, or the loss of revenue due to poor performance and poor value contracts. The amount of contract deadlines missed is a good indicator of the overall health of the contract management operation you have in place.

Having an automated system in place to track and notify employees of milestones and deadlines is an efficient solution. You are less likely to miss rate changes, approvals, renewals, and any contract re-negotiation dates. Contract management software can be configured to track and analyse all the available data important to your business. Regularly reviewing all the available reporting data can also help your business plan for future agreements by helping to predict any possible future risk and guarantees a quick response to current trends and any issues that arise during the contract lifecycle such as bottlenecks, poor performance and operations and non-deliverables.

Metrics and specific contract KPIs can also be used by businesses as an overview to ascertain how well a contract may be performing and the value they provide to the business. Continuous monitoring and tracking of any KPIs is an essential process for businesses looking to improve their contract management.

By defining and agreeing set KPIs in the contract creation and negotiation stage of a contract lifecycle, you can stay in control. What KPIs your business chooses to set are entirely dependent on what you prioritize, or even the industry you are in, but contractual obligations, target performance and risk based KPIs can form a good base and the contract renewal rate KPI findings will reveal how many contracts are missed, allowing you to monitor and fix any issues in the process.

The solution

With contract management, the challenges faced by a business are made far harder to solve with manual management. The management structure ends up often simply a collection of unwieldy processes and standalone legacy systems that cannot provide stability or push forward growth of a business. Managing your contract lifecycles in this way provides no stability or scalability, especially if your business is a mid to large level enterprise.

As such, is it any wonder that businesses are adapting to old and new challenges by embracing automated software? With digitalization now at the forefront of many business initiatives, it is important that your contract management matches the ambitions and strategy of your business. As your business moves forward digitally, automated contract software can streamline key elements and processes and provide the framework to simplify contract management and protect businesses with fact-based decision making.

Contract management with Symfact

Here at Symfact, we believe by implementing our software, especially configured for the industry you are in, you can ensure your organization is adopting the best platform available that can help optimize your contract management and help deal with the challenges of an extended enterprise and it’s potential. But why us?

  • Our solution is highly configurable to your data requirements and taxonomy, and thanks to our cross-platform open API architecture, we offer software that can integrate with a range of different systems and software. Any existing tools or processes, or even legacy systems that are already being successfully utilized within your organisation can be retained and implemented into our contract management platform.
  • Our contract management solution is aligned to modern business processes and works seamlessly with existing IT infrastructure. This enables you to effectively control and adapt contract management software to any current framework you have in place, especially if your business is already managing complex contracts.
  • Make the contract management process easier with document creation, agreement, and approval, electronic signature, and commitments management. Using any web browser, you can keep on top of all your contract management projects and processes in just one single system.
  • By streamlining the contract stage using standardized contract templates, a standardized contract language and clause library which can be signed off by your legal team, and eSignatures to reduce fraud, you can reduce the time spent by your procurement or sales teams on each contract, improving efficiency and quickening your sales cycles.
  • Streamline your administrative tasks and approval processes whilst simultaneously lowering your overheads. Optimise your business processes to improve productivity, efficiency, ROI and maximise your business revenue.
  • With our trigger notification feature, you will never miss a deadline again. You can use this tool to configure and track important data and milestones in the software, and by setting alarms for specific tasks and events you ensure nothing ever falls under your radar, including contract re-negotiation dates.
  • Our browser-based platform means you can access contracts no matter where you are in the world, or on what device, as long as you have an internet connection. This is an ideal solution for the remote working environment. We also provide support for multiple languages, locales, and currencies. Ideal for businesses with global enterprise. We make your contract management achievable anywhere at any time.
  • Our software offers businesses improved capabilities for the management and monitoring of risk, our software has features to help with your risk assessments and profiles, as well as minimizing the operational risk of poor contract management.

For your contract management to be a success, implementing an automated solution like the one from Symfact, should be high on the list of priorities for every business with an extended enterprise.

Improving your contract management and not just overcoming the challenges created, but actively streamlining your business processes to improve your overall governance and organization with automated software, can make a positive difference to your business. So, if you feel this is the right step to help you successfully manage your contracts, projects, and resources, then please do not hesitate to contact us here at Symfact.

We want you to work smarter, not harder. Book your free demo today.