Avoid These 7 Deadly Contract Management Pitfalls Before It is Too Late

Did you know that businesses lose up to 9.2% of their revenue due to poor contract management? That’s a big hit! If contracts aren’t handled properly, they can lead to missed deadlines, legal issues, and financial losses. A Contract Management Course can help you avoid these mistakes and improve efficiency. 

But What is Contract Management? It’s all about creating, tracking, and optimising contracts to protect your business. Yet, many companies fall into common traps. In this blog, we discuss seven deadly contract management pitfalls and how you can avoid them before they affect your business. Let’s begin!

7 Contract Management Pitfalls That Can Cost You Big

All companies depend on good contract management. If done wrong, it may cause legal problems, money lost, and time wasted. Many businesses often make simple mistakes that they could have avoided. Let’s discuss seven common contract management pitfalls and their solutions:

1. Poor Contract Drafting

A badly worded contract could cause misunderstandings. Different persons may understand the terms differently, which may cause arguments and legal problems. Additionally, missing information or unclear words can lead to loopholes that may harm your company.

Here are ways to avoid this pitfall:

• Check that contracts are precise, clear, and compliant with the law
• To keep things consistent, use contract templates
• Before signing, get contracts reviewed by legal professionals

2. Lack of Compliance

Every contract has requirements and guidelines that must be followed. You risk fines, penalties, or legal action if you fail to maintain compliance. Many companies fail to verify that they are appropriately following the terms of their contracts.

Here are ways to avoid this pitfall:

• Establish compliance checks for every contract
• To keep up with obligations, use contract management software
• Review contract conditions and industry rules on a regular basis

3. Inefficient Storage and Tracking  

Contracts are difficult to locate when needed since many businesses keep them in several places. Important papers are more likely to be lost in paper-based or outdated storage methods. Decision-making may be slowed down as a result, leading to significant delays.

Here are ways to avoid this pitfall:

• To store contracts, use a centralised digital system
• Set up automated reminders for significant occasions
• Maintain records that are easily accessible and well-organised

4. Missing Contract Renewal Deadlines  

It might be expensive to forget to renew or terminate a contract quickly. You can lose an excellent business opportunity or get stuck in a bad contract. Unwanted contract extensions result from many organisations’ failure to remember when contracts expire.

Here are ways to avoid this pitfall:

• Create notifications for automatic renewals
• Keep a calendar of the contract lifespan
• Assign duties to a committed contract manager

5. Poor Risk Management  

Risks associated with contracts might include unfair terms, unclear duties, and hidden expenses. Businesses may experience monetary losses or legal problems if risks are not recognised early. Many businesses enter into agreements without carefully considering potential risks.

Here are ways to avoid this pitfall:

• Before signing contracts, evaluate the risks 
• Add provisions for penalties for noncompliance 
• Make sure that every clause in the contract protects your company’s interests

6. Failure to Monitor Contract Performance  

The process does not finish when a contract is signed. Businesses might not receive what was agreed upon in the contract if performance is not checked. Unfulfilled responsibilities and missed deadlines can result from poor contract management.

Here are ways to avoid this pitfall:

• Establish Key Performance Indicators (KPIs) to track success
• Review contract deliverables and obligations on a regular basis 
• Hold stakeholder performance meetings

7. Lack of Contract Automation  

The process of manual contract management involves significant time consumption and substantial challenges. The manual approach to contract management leads to increased risks of mistakes, together with document misplacement and missed deadlines. Companies that continue to use paper contracts frequently face efficiency issues.

Here are ways to avoid this pitfall:

• Purchase software for contract management
• Automate workflows and contract approvals
• Teach employees how to efficiently use digital contract technologies

Conclusion

We hope this blog has helped you understand more about the common challenges of contract management. Time, money, and legal issues can be avoided by avoiding these errors. Simple actions like automating tasks, monitoring due dates, and closely examining contracts can have a significant impact. If you want to get better at managing contracts, The Knowledge Academy offers courses to help you keep up with your contracts.