Contracts are often underappreciated in business practices. Without them, dealings turn into a never-ending mess of “he said, she said” and legal battles. Contracts ensure that everyone works towards a mutually beneficial goal. Finance departments and personnel in particular can benefit hugely from these kinds of results. But sometimes, managing these contracts can also turn into a complicated and time-consuming activity.
Up to 70-80% of company dealings involve a contract and this is especially prevalent in finance departments. This highlights that we have to find a better way to manage these contracts and manual solutions are no longer the most efficient or cost-effective option. Technology has made it easier to manage, store, execute, and archive contracts or other legal documents.
Accordingly, more and more companies have started adopting these technology options. Digital contract management in particular solves many of finance’s recurring problems. So, with that in mind, here are the eight top issues that finance departments face and how they can be overcome with contract lifecycle management tools.
A key aspect to better contract execution is understanding contract lifecycle management, which is the process of proactively moving a written agreement from conceptualization to execution. This process can be slow and arduous.
A lot of factors contribute to slow contract completion. For instance, when sending a contract to someone several miles away, sending the contract manually can eat up significant time. There’s also the added hassle of following up with key stakeholders to sign the document.
The fix: Using contract lifecycle management, companies can now send contracts digitally, which removes the travel factor. Employees can now send contracts digitally for both contract review and signing. Moreover, they can automatically send alerts in pre-set intervals so that stakeholders are reminded to complete the contract in the quickest possible time.
Poor contract management can also be related to slow revision and negotiation processes. Amending contracts can then become a messy ordeal. Parties and stakeholders may forget to apply changes or have a hard time understanding and locating instructions.
The fix: Many contract management tools also have revision and commenting features, making it easier for finance staff to revise contracts as needed. With faster revisions comes faster turnarounds, helping everyone achieve win-win agreements.
One of the other benefits of adopting technology in your contracts is cost-cutting. Companies and finance personnel can spend thousands of dollars every year paying for messenger, contract delivery, and courier. With digital contract management software, costs for document logistics is significantly reduced or even removed.
The fix: Many of today’s most basic contracts don’t need physical signatures. Most legal bodies honour electronic copies of contracts in the same way as physical ones. So, it makes sense to move towards digital solutions for contract distribution needs. This direction takes out the need to physically deliver contracts to signatories — a great benefit, especially when you have signatories in different cities or even countries.
Given that a large company can have up to 40,000 contracts at any given time, it’s only expected that some of the physical contracts and documents will get lost. Lost documents can cost a company revenue and relationships, two important assets for company growth and longevity.
Keeping physical contracts can also be a big space consumer. Filing cabinets can take up multiple rooms or even sometimes whole floors in the case of larger corporations. It can also eat up a lot of the finance and legal department staff’s time and energy.
The fix: Filing documents on a cloud-based legal contract management system is undeniably the better option. These systems will often come with a search feature, making it easy to find documents and contracts with a simple search query. As they’re also saved in an online system, there are also fewer chances they will get lost. However, it's important to keep back-ups of these contracts to ensure an added layer of archiving.
Company silos can be a source of work politics and disintegrated processes. These silos often slow down processing and contract movement.
Let’s take telecommunications and internet services as an example. When sales departments, onboarding staff, accounting offices, and customer service departments operate in their own respective bubbles in this use-case scenario, customers will feel the delays. There has to be seamless communication and collaboration between teams to file applications and provide connections to subscribers as soon as possible.
The fix: When departments use a contract lifecycle management system, collaboration on new accounts moves faster. That results in faster servicing of new clients and improves customer service. Some firms also use top live chat software solutions to provide easier communication channels for customers.
Many companies have had issues or incidents in their contracts. These mistakes can be an error in the context of the contract or simply typographical. Whatever it may be, these can be very costly to amend. Most times, parties have to null existing contracts and start over.
The fix: Advances in legal tech have made it easier to track and review contracts to ensure they are flawless. Artificial intelligence advancements have made contract scanning and checking for any possible errors more efficient. Sometimes, even having the ability to share contacts with various personnel to provide an added layer of checking can help significantly. Whether working with bots or people to ensure contracts are up to standard, getting extra help in proofreading contracts makes a big difference.
Once parties sign a contract, the real work begins — following through on the deal. Sometimes, what slows the deal down is the unavailability of the contract for people to refer back to. When the parties don’t readily have a copy of the contract to reference back to, there can be multiple delays in the deal. For example, in marketing agencies, consultants and account managers should have ready access to contracts to check if client requests are still within the scope or not.
The fix: Contract management solutions will not only ensure documents get signed. They will also send the signed copies to all concerned parties so that everyone can refer back to them during the follow-through.
When dealing with multiple clients under one deal, contract content should be consistent throughout. As a best practice, clients who pay for the same service should have the same terms, whether it’s a product like a gadget or a service such as a cleaning service. If customers find out that contracts vary for the same product or service, it could lead to customer complaints or even legal issues.
The fix: To ensure consistency, finance and accounting departments should keep templates of the contract and distribute it to all client-facing team members— including sales teams, customer service teams, and anyone who sends contracts to clients. Contract management software can help store these templates and then revise accordingly when new versions are out. This feature ensures that everyone uses the same template for all contracts.
The contract lifecycle management market stands to make up to $3.84 billion by 2026. So, for the next few years, it’s expected that more and more businesses will be using contract lifecycle management solutions and other business tools such as ESP software to keep on top of their processes. If your company hasn’t looked into it yet, it might be time to start considering it.