There are challenges that pertain to just about every area of business. Managing contracts, whether, they originate internally or externally, is no different. Companies that develop and maintain contracts with multiple parties, particularly those that originate off shore, face many challenges that could impact the effectiveness of their contract management processes.
There are several challenges pertaining to contract management that can be difficult to overcome without proper Contract Lifecycle Management (CLM) tools. Here are a few of the more prominent potential difficulties:
Tracking global contracts: Suppose your organization either has geographically dispersed offices or you conduct business internationally. A number of factors, ranging from differences in language and how words are interpreted, to unique business practices can complicate global contracts, making it difficult to ensure sufficient understanding is established between parties. While today’s contract negotiations rarely happen in person, global contracts almost never happen in person, making clear understanding essential. It can also be difficult to share data between parties on opposite ends of the earth. While email communications have become the standard means of communication for most companies, it does not prevent the wrong version of documents from being reviewed, nor does it adequately control or track contract review status or workflow, both essential to good contract management.
Measuring contract performance: Businesses need to know if their contractual obligations are being followed and deadlines are being met. Contract leakage is a real concern that can occur if individuals, obligated to act upon the detailed obligations in a contract, are unaware of the specifics of their agreement. While a manager may fully understand a contract’s details at the time of execution, remembering obligations months later is another matter entirely. Without a structured way to identify contract events and tie them to a calendar or to reminders that prompt action, missed deadlines, potential penalties and missed incremental revenue opportunities can become the norm.
Managing scattered data: If data is contained in different locations, it can be difficult to locate and to associate one document to another. This can create problems if you need to review multiple documents pertaining to a certain contract (amendments, SOWs, exhibits, etc.), or review different versions of the same document, and they are not together. As this blog has stated in the past, even if documents are digitized, if they are in different environments they can be difficult to locate or to access.
Overcome These Chalenges With a CLM Solution
A CLM solution can mitigate the risk of these and other potential problems during the life of a contract. CLM solutions can help facilitate global communication during the creation and management of a contract, giving stakeholders the ability to easily collaborate on documents from their respective corners of the globe, minimizing the chance of inconsistent language or other issues that could impact the integrity of the contract. Enabled CLMs can also provide virtual “deal rooms” that allow third parties to securely access only those documents that are part of a negotiation. This capability is particularly useful in long involved negotiations and during M & A activities.
Using a CLM, contract stake holders can accurately identify and track contract obligations, deliverables and key events with contract tracking calendars and automated email reminders. This minimizes contract leakage, particularly when dealing with thousands or tens of thousands of contracts, each with many obligations that must be honored.
Because cloud-based CLM documents are managed in a central repository, contract managers do not have to concern themselves with locating specific or related documents because they are maintained in the same place in the cloud. Secure access is provided from any Internet location and good CLMs identify how each document relates to other documents with which it is associated. Everything is searchable and well organized. By giving stakeholders access rights to the documentation that only pertains to them, they can easily monitor and track progress and performance. Obtaining real-time information allows for actions that avoid potential problems that could impact the fulfillment of contractual obligations.
While it's true that proper contract management can be a challenging endeavor, it can be made dramatically easier with the appropriate CLM solution.
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