7 Common Contract Management Challenges and How to Overcome Them

Effective contract management is essential for businesses aiming to drive recurring profits and mitigate risk. However, there are numerous contract management challenges that can disrupt even the best-laid plans. In this guide, we outline the most common challenges of contract management and practical strategies to address them.

1. Ensuring contracts deliver business value

A fundamental challenge in contract management is ensuring each contract provides tangible value. While this sounds straightforward, many companies struggle with agreements that fail to meet expectations or become costly to revoke.

Modern contract management tools can help monitor the performance of contracts, allowing businesses to evaluate:

• Which types of contracts deliver the most value
• Which clauses tend to cause issues during negotiations
• What industries or client types are most profitable

Using data-driven insights, organizations can make informed decisions, and enter into agreements that are more likely to create real business value.

2. Allocating the right resources

A significant challenge in contract management is ensuring that the right people and tools are available to manage contracts effectively. Companies need skilled contract managers, legal counsel, and heads of departments to navigate complex agreements. Moreover, digital contract management tools can streamline processes and minimize manual work.

Consider allocating resources according to contract complexity. For example:

• Standard sales contracts: Can be handled by a sales representative with legal-approved templates.
• Complex contracts: Require input from multiple departments and management oversight.

This approach helps prevent resource bottlenecks and promotes efficient workflows.

3. Keeping remplates and clauses updated

Another contract management challenge is having to continuously update contract templates to include the correct standardized language and “boilerplate” clauses. According to recent studies, over 50% of contracts are created from outdated templates, leading to costly revisions (IACCM, 2018 Benchmark Study).

With a centralized digital contract management tool, teams can access only up-to-date and authorized templates. This also allows for real-time updates on standard clauses, helping avoid potential legal complications and ensuring compliance across all contracts.

4. Setting clear processes for review and approval

Inefficient review and approval processes are another challenge in contract management that can delay the contract lifecycle. Draft contracts often get overlooked due to a lack of standardized routines or notification processes.

Automation can streamline this process. By setting up automated workflows, companies can ensure that:

• Contracts reach the right reviewers promptly.
• Permissions are set to prevent unauthorized changes.
• Notifications alert team members about pending approvals.

Automated approvals significantly reduce contract lifecycle times and ensure that contracts are reviewed consistently.

5. Streamlining contract execution

Once contracts are approved, they must be executed promptly. Execution delays, often caused by back-and-forth redlines and physical signing requirements, are a common contract management challenge.

Switching to electronic signatures offers multiple benefits, including:

• Faster execution times
• Reduced administrative costs
• Enhanced security

Digital signing eliminates the need for printing or scanning, providing a modern, efficient way to finalize contracts.

6. Monitoring compliance

Monitoring compliance effectively is another major contract management challenge. Failure to uphold contractual obligations can lead to lost revenue and strained business relationships.

Best practices for monitoring compliance include:

• Designating responsible parties for each deliverable
• Setting automated reminders for due dates and renewals
• Establishing clear processes for addressing non-compliance

Using a centralized, digital contract management system ensures real-time updates and full contract visibility, allowing teams to track compliance easily.

7. Managing contract costs

Cost tracking is an often overlooked challenge of contract management, but is critical for understanding the financial impact of managing contracts. Without cost tracking, businesses risk overspending or underestimating contract-related expenses.

To monitor contract costs effectively:

• Track labor, legal, and compliance time for each contract type
• Set up budget alerts for contract-related expenditures
• Use data insights to optimize future contract spending

Tracking costs helps reveal inefficiencies and ensures the contracting process remains cost-effective.

Overcoming contract management challenges with technology

Most challenges of contract management can be mitigated with the right digital solutions. By adopting modern contract management software, businesses can centralize contracts, automate workflows, and streamline compliance checks. However, it’s essential to balance technology with skilled personnel and well-defined processes for the best results.

FAQs

What are the main challenges in contract management?

Common challenges include ensuring contract value, resource allocation, maintaining updated templates, review processes, efficient execution, compliance monitoring, and cost tracking.

How can I manage contract compliance more effectively?

Using a digital contract management platform allows you to set automated reminders, assign roles, and ensure up-to-date templates, helping maintain compliance effortlessly.

Why is contract cost tracking important?

Tracking contract costs helps identify inefficiencies and optimizes spending, ensuring each contract aligns with budget goals and maximizes value.