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6 Challenges Contract Managers Face When Handling Contractual Agreements

Companies / SME Apr 28, 2021 - 01:02 PM GMT

By: Submissions

Companies No matter how small a business is, it may require entering into contractual agreements from time to time. Contracts are an inevitable business process if a company is looking to expand outreach and to adopt more growth opportunities.

Contractual agreements are sensitive. As such, entrepreneurs appoint contract managers, tasking them with the responsibility of handling these agreements. Contract managers are more than the heads of company contracts. They must often collaborate with both individuals and companies to draft and negotiate agreements, control and review contract results, document key milestones, and perform a variety of other tasks.

Contract management is one of the most crucial business operations due to the impact it has on various companies. Small businesses can leverage the benefits of meaningful contracts with reputable companies. It is a critical job, but one that comes with a slew of challenges due to the complexities of managing many contracts.

In this article, we will discuss the challenges contract managers face in their line of work and share suggestions on how to alleviate these pain points.

1.     Keeping track of contracts

As a small business seeks more growth opportunities, the number of contracts can escalate from a few to hundreds of them. New employees need employment contracts, the company needs to create vendor agreements with suppliers, and some parties may be required to sign non-disclosure agreements.

Keeping track of these contracts becomes challenging. Contract managers, therefore, need small business contract management software that allows them to store all contracts in an organized manner. It eliminates the need to go through desk drawers and filing cabinets in search of one contract. Instead, they can gain access to any agreement in a matter of seconds, with a few clicks of a button.

2.     Keeping track of contract costs

Finances are the backbone of all company processes. In legally binding contracts, a lack of transparency in how the involved parties handle finances is frowned upon, attracting severe consequences.

Keeping track of costs is one of the greatest challenges contract managers face. Considering that some contract managers are still using manual record-keeping and outdated accounting systems, it becomes difficult for them to gain insight into income and expenditure. Such practices cause a strain in business relationships especially when contracted companies cannot effectively break down how finances were used.

One of the best ways to keep track of contract costs is through automated contract management software. These systems offer excellent visibility on cost monitoring, among other things.

3.     Dealing with project bottlenecks

Contract managers are responsible for a variety of tasks including writing and evaluating agreements, negotiating transactions, maintaining healthy professional relationships between involved parties, and solving problems that relate to the contract execution process.

These are tasks that revolve around one contract. What about a company that has a myriad of ongoing contracts?

On any given day, a contract manager might find themselves working with several contracts at a go. Unfortunately, these might form bottlenecks minimizing efficiency levels. In the worst-case scenario, they might paralyze critical business functions.

As is the case with keeping track of agreements, contract management software can help in dealing with such bottlenecks. The software streamlines processes, promoting efficiency in the handling of contractual agreements.  Apart from such programs, a contract manager can delegate tasks to the junior staff. It is a great strategy when looking to ease the volume of agreements you are handling.

4.     Lack of clarity

The lack of consistency and scope on the aims or commitments that both sides are entering into is one of the most challenging aspects of contract management. Contracts become overwhelming without setting specific expectations, and both parties risk signing without fully understanding the terms of the agreement of the contract.

To handle lack of clarity, a contract manager should feature summaries of the conditions of the contracts alongside the agreements throughout the contract lifecycle. Doing so makes it easier for the relevant parties to understand and gain much-needed clarity on the more complicated contracts.

Also, the contract manager can use tools that allow parties to comment and highlight specific clauses that need attention. By making clarifications on one platform, they speed up the review process, which has a positive impact on the overall lifecycle.

5.     Poor communication between parties

Each contract has a variety of sections. Each party has its expectations that need to be met. For this reason, the involved parties need to read the contractual agreement and review it. In a business scenario, this can be done by different departments or team members to ensure it is in line with their goals.

The issue is that the review process needs to happen before the contract is finalized, and copies of the draft disbursed to the intended partners. In many cases, this may be problematic since a draft document may bear no resemblance to the final product, causing a stir among the involved parties.

In this case, the solution is simple.

The contract manager should use contract management systems that allow users to comment and indicate amendments they want to be included in the final draft.

6.     Confirming the viability of suppliers

Credibility is one of the first things intended business partners will look into before entering into any contractual business dealings. This duty is often left to the contract manager. By pulling a few strings and researching, contract managers can verify the reputation of the other party.

The challenge, however, comes in when a contract manager has to confirm the viability of the parties regularly. There is a lot in business that can change in a minute. As such, contract managers must conduct intensive viability checks on those suppliers as needed; also look at the potential risks the contract faces in case the situation changes for those suppliers and they are not able to meet their end of the bargain.

Regular viability checks aim to help small businesses estimate the impact of a failure from the suppliers. This helps businesses plan for such unprecedented situations while minimizing the risk involved.

By Cris Allouis

© 2021 Copyright Cris Allouis - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

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