Common Contract Management Mistakes You Need to Avoid | Whether you run a retail or wholesale business, operate in the healthcare or event planning space, have a trades-based business, or otherwise deal with suppliers and inventory, you need comprehensive contracts to protect your venture. Contracts keep everyone on the same page and reduce the likelihood of issues arising.
However, the results of your contracts can only be as good as the paperwork put in place and the way these crucial documents get managed internally. If you want to make your organization’s contracts work as hard for you as possible, avoid some common contract management mistakes.
Lack of Clear Goals
Many people do themselves and their company a disservice by not getting clear about why they’re creating contracts. It’s essential to understand the critical goals for the project or relationship or another factor you’re developing the contract for.
All the stakeholders involved in the documentation should know the outcomes you hope to achieve from putting this paperwork in place and the different elements that need covering in the document(s). Once you have goals in place, you’ll know how to negotiate contract terms better to make those outcomes more likely.
Not Gathering Enough Data
To protect a business, a contract must include all the necessary information relevant to the matter at hand. Unfortunately, some people aren’t thorough enough when developing such paperwork and don’t gather as many details as they should. To avoid this issue, make the contract as comprehensive as needed with all the contact details of each party mentioned in the document, plus their specific rights and responsibilities. The latter is something you may need to negotiate first, though.
Other essential data to include in your contracts include dates and descriptions of the work involved, plus key performance indicators. Set these KPIs out in writing so everyone knows what they’re bound to deliver and when.
Failing to Set Up Clear, Organized Procedures
Another common contract mistake is failing to set up clear, organized procedures for handling this vital paperwork within your organization. It helps to have one person or team who looks after contracts, from creation and management to analysis upon completion. Plus, it pays to have a boiler template everyone can use as the starting point for new agreements over time.
Consider utilizing a quality contract lifecycle management tool that reduces errors and takes much of the time-consuming work out of handling this business area. This software will automate some of the processes for you and your team and help create more consistency with documents. With your procedures, specify who’s allowed to access the paperwork, since it often contains sensitive and financial details. Plus, layout what each contract must cover, who addresses edits and signs off on documents, and the process for renewing contracts and investigating failure to comply from other parties, if needed.
Missing an Exit Clause
Each time your company creates or agrees to a contract, you should feel comfortable knowing you have an exit plan in place if it’s required at some point. After all, issues can arise when you least expect it, even with people and firms you’ve dealt with numerous times before. Situations can change, too, in ways no one expected. Yet, a common contract mistake is not adding this exit clause.
Always provide grounds for termination or some other consequence if one or more of the other parties in the relationship fail to deliver what they said they would or don’t produce results or work of high enough quality or quantity. Contract annulment clauses should be stated in unequivocal terms with simple language and note precisely what qualifies as a failure to adhere to terms and conditions.
Lack of Follow Up
Many people focus on creating and signing contracts but don’t pay enough attention to following up on them. This is a mistake. Part of your management process should involve checking in with the other parties to the deal during the contract term to see if they’re on track to deliver as needed. This follow-up will make you aware of potential delays and problems ASAP, which is a good thing.
Also, follow-up is essential when you have end dates looming for documents. You may need to extend or renew timeframes for some contracts, so scheduling the next steps will help ensure you don’t forget to sort these factors out within the necessary period.
Some other mistakes to avoid regarding contracts are rushing the process and making errors in turn and failing to back up contracts adequately, such as to the cloud. Contract management is something you must take seriously and handle effectively. Avoiding all these mistakes will help you get better results for your business and reduce stress, in turn.