3 Challenges in Contract Obligation Management
Are your contract closing statistics overwhelming, but you aren’t sure how to keep track of obligations arising out of them? You’re dealing with contract obligation management issues.
Managing multiple contracts manually is surely hectic. It comes with a lot of challenges. That’s where your organization needs an automatic system that can offer alerts and reminders for pending tasks. Such a mechanism ensures all your contract-related information is stored in a secured repository with user-defined access.
In this article, we’ll highlight the challenges faced by companies in obligation management and the benefits of using contract obligation management software.
What is Contract Obligation Management?
It is the process of extracting the responsibilities from an agreement, tracking contract obligations, and ensuring that signatories fulfill them within the due time. Managing this process manually is impossible when you have multiple active contracts in your organization. Even if you pursue it for a few months, you’ll come across numerous challenges impacting your organizational reputation and creating legal problems.
Why Organizations Fail to Meet the Contract Obligations?
Once the parties agree to the terms in the negotiation stage and sign the contract, they actually want to fulfill these obligations. However, the agreed terms aren’t always properly met. One of the biggest reasons for this failure is the existence of multiple contracts with the manual management process.
When a party is expected to perform a wide range of duties arising from numerous contracts, it is common to miss a few during the extraction or execution stage. Similarly, going beyond the deadlines and failing to communicate the progress could be a few other issues that might translate to non-compliance with the terms.
3 Common Challenges in Contract Obligation Management
Usually, organizations face the following common challenges in manual contract obligation management and tracking:
1. Manual Extraction and Identification of Obligations
With multiple contracts under consideration, it is challenging to read every clause, find the executable part, and convert it to one of the organizational doable. There is a significant chance that the resources assigned to complete these tasks might miss a few. It would surely result in non-compliance with the contractual terms. But that’s something organizations can avoid by following the manual process.
2. Undefined Ownership of Contract Obligations
Another challenge that organizations face in execution is undefined ownership. If the required individual or team in the organization isn’t assigned to the relevant task, the task will slip through the system. You’ll only come across the missed term when pointed out by the contracting party or through manual review.
3. Lack of Cross-Functional Data Visibility
Some organizations might not have all the data related to the particular contract visible across the organization. There is a chance that the obligation required to be executed or monitored by different teams might not have access. Such a problem can create additional hassle in which you must manually provide the necessary documents and resources for every contract. It results in a waste of time and productivity.
Impact of Poor Contract Obligation Management on Organizations
The lack of proper contract obligation management impacts organizations in multiple ways. Here are a few:
Missed Deadlines – You’ll more likely be missing the contract deadlines when you’ve no clear idea what duties were to be performed and who was supposed to perform them.
Compliance Failure – With poor obligation management within the organization, you’ll be violating the contracting terms, which can cause further complications.
Access Control Problems – Not all the required parties might have access to all the documents, so proper execution and timely completion isn’t possible.
Strained Relationships within the Organization – Access delays, undefined tasks, and problems in defining responsibilities can create complications between different departments and employees.
Confusion between your Organization and Customers – Asking for an extension for executing tasks every time or a lack of timely communication will create problems between you and your customers.
Inefficient Workflow – Lack of clear deliverables and non-defined responsibilities will make the overall processes of your organization ineffective.
Competitive Disadvantage – Companies with multiple active contracts prefer automation. So, if your competitors already have contract management software, you’ll be at a competitive disadvantage.
How can Contract Obligation Management Software Help?
To overcome the obligation contract management challenges, you need obligation contract management software. Specialized software programs are available to extract the contract obligations, providing an easy interface to manage access and assign tasks. Also, with the special software program, you can get reminders for upcoming tasks and due dates.
All these features help make your organization better in the following ways.
An automated contract management tool can allow you to add tasks from all the contracts within one platform, so it will be easier to track the progress, assign or change the person responsible for it or set a due date. You can get improved organizational workflows with a clear understanding of who is expected to perform what.
Better Time Management
By having all the tasks available in a single repository, you can manage and execute the functions efficiently. Also, all the data files are searchable with the specialized contract management software. Using it will save you time in planning and contract obligation tracking.
The use of contract obligation software can help you get the required tasks done in a shorter span with more efficiency. Also, it can help you in saving additional costs by limiting the resources associated with a task. In addition, when the employees know of their responsibilities ahead of time, they can settle their schedules accordingly. Overall, all these tasks result in improved productivity.
Timely Task Completion
In a contract, the executables are time-bound. Using contract management software can send reminders and alerts to the relevant individuals, so the tasks are timely completed. It can help you earn a better reputation with your clients and enhance the chances of future collaboration.
Apart from managing things on time, the contract management software also provides you with a list of all deliverables and commitments made with a particular client. Besides, all the documents associated with a client are organized, making it easier to find the relevant data. All of it can help your organization in creating and communicating efficient reports.
Manual contract obligation management processes can be tricky and come with several challenges. These include finding the executable clauses, assigning tasks to the relevant parties, and proper access management.
An automated obligation management software can help you overcome these difficulties. It will save you time, enhance productivity, and, most importantly, ensure compliance with the contract terms.