3 Small Business Contract Management Mistakes to Avoid
Contract Management Software
Effective management is critical to running a successful business, and this necessitates strong oversight for every facet of a company’s operations. Unfortunately, a company’s leadership team often becomes embroiled in a few discrete matters to the detriment of many others. Some aspects of a business may be overlooked from time to time without consequence, but contract management is not one of them. Contracts impose binding, legal obligations and can have some pretty significant financial ramifications, especially for smaller businesses with fewer resources at their disposal. As a result, crafting a coherent contract management strategy and implementing a practical contract lifecycle management solution are vital to averting a potential disaster. Here is how the right contract management solution can help small businesses avoid these far too common contract management mistakes:
Cost overruns are a problem for many businesses, but the scope of their impact is likely far greater for smaller operations. When running a business on a fairly tight budget, it is crucial for every cent to be spent wisely. Many contracts deal with the provision of goods and services, whether for direct use by the ordering company or for incorporation into the ordering company’s own production line. In some cases, there are a number of contracts needed for the purchase of parts, equipment, supplies, or other tangible goods. Without an organized management system, keeping track of all these contracts and the goods they cover can become quite overwhelming. There is a greater likelihood of over or under ordering items, with either scenario inevitably costing more money in the long run. To avoid this sort of redundancy and financial waste, it is important to utilize a centralized contract database to keep things organized.
In addition to keeping a handle on a company’s contracts that address supplies and inventory, there are many other types of contracts that will need managing, such as those that obligate a company to provide a good or service to another party. Some contracts may extend over a year, two years, or even longer. In any case, it is imperative for each party to perform fully and punctually to maintain a long and lucrative working relationship. This is far less likely to occur if one or both sides consistently fails to deliver on its promises, especially if the reason for such failures is due to poor management. With the right contract management solution that provides a central calendar and various alerting features, there is no reason that a deadline should ever be missed.
Communication is absolutely central to effective contract management, and this requires timely sharing and dissemination of information. One of the key ways to avoid miscommunication failures is by standardizing processes and centralizing contract repository. These days, cloud-based CLM software allows companies to upload, save, review, share, and modify contracts in a way that allows all necessary parties to view these documents and any pertinent changes in real-time. Although person-to-person conversations and correspondence are important aspects of the communication process, having a system that provides everyone with access to the same data further facilitates information sharing. This, of course, decreases the chance that something will fall through the cracks due to a lack of awareness on someone’s part.
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