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Monday, January 13, 2014

Three problems companies face with poor contract management

Contract management is a key aspect of business performance
Contract management requires careful balancing of business objectives and resources

Companies sometimes neglect certain areas of their business, which can end up costing money, time and producing legal battles. Some of those areas are more apparent than others. One of the areas that can create such problems is poor contract management. Companies don’t always look to their contracts to improve business operations.

The National Contract Management Association defines contract management as managing customer and supplier relationships, controlling risks and costs and assisting with organizational success. When you examine this definition, you can see that proper contract management is an essential piece of a business’ success model. If you are still skeptical about whether using a contract management system can help you, here are three of the main problems that could hurt your company if you let your contracts manage themselves.

Lost income


As the saying goes, a company that saves money makes money. This phrase can be applied to contract management. If your business doesn’t have a system in place that monitors contract events, dates and terms, you could have money-saving renegotiations pass you by and not even know it. Especially as your business grows, you can’t keep up with all of the holes that could be lurking in each contract, which in turn could be costing you.

Legal woes


One of the major problems with neglecting your contract management is the potential for legal issues. You could be in violation of contract terms and not even know it due to the disorganization of your contracts. In turn, you could face legal damages and court costs because you neglected your contracts. Improper contract management can also lead to neglect. You might have no idea what you are obligated to or what money or services you owe. If you have some sort of management in place, your business can avoid those potential legal problems.

Battling the clock


In today’s busy and fast-paced world, many companies are looking to not just save money, but also to save time. One of the main problems with not using a contract management system is the great deal of time spent dealing with contracts manually. As the clock ticks away, the costs can pile up for a business. Sifting through hard copies of contracts wastes precious time. Many contract management software programs allow you to search for certain contracts and clauses with just a few clicks. This helps businesses free up more time to get back to the tasks at hand.  

Research from the International Association for Contract and Commercial Management (IACCM) notes that businesses neglecting their contract management could be missing out on about 9 percent of revenue. Businesses struggling to keep afloat could be missing out on potential revenue with improper contract management. The research doesn’t lie. If you merely get your contracts in order in a set system or hire a contract manager to do the task, you can avoid all of the problems that go with poor contract management, such as lost time, money and legal problems. A little forsight, when it comes to contract management, can save you and your company a lot headaches.


About the author: As a career contract manager, Kenny knows the right way to go about taking care of agreements – and the wrong way, as demonstrated in this article. With the right software solution and the right personnel to implement that technology, he knows that all companies can manage their contracts successfully. 

Image license: Jean-louis Zimmerman, CC BY 2.0

2 comments:

  1. This is why many heads of organizations employ contract management services for this. Although they have to spend money to use such a 3rd party management service, in the end this is worth their investment.

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