Contract management is a complex process involving many moving parts. A contract is created, then approved by the sending party, then negotiated or approved by the receiving party. Each step in the contract process, or stage, is known as a workflow stage. Workflow stages are conditions that contain tasks that must be performed for a contract to be signed by all parties. Workflow stages can be the responsibility of either the sending party or the receiving party or all parties.
Contract management accuracy is important. Managing contracts is complex because each contract has a slightly different progress status along its workflow. Each workflow stage can be different lengths and follow a different timeline. Contracts vary in other ways too. Each contract has a different dollar value and involves different parties. Each contract has different details to enforce at different effective dates. Contract management is the process of keeping abreast of the progress of each contract.
Manual contract management is complicated and lends itself to a high degree of human error. Human errors such as entering data incorrectly into a contract, missing a deadline for product delivery, or late payments are costly. SpringCM reports that 92% of the respondents from a survey of 1,409 companies in 2018 stated that contract management errors were attributed to human error. Usually, the breach of contract risk cost is higher than the cost of purchasing software to manage contracts. Thus, a contract management system software is a common choice. In 2018, pcmag.com reported that “60% of companies used email to manage contracts, and 32% of companies used a contract management software. 6% of companies said they had no contract management process in place.”
There are two types of contract management strategies, without software (manual) and with software (contract management system software). To create a single contract and see it through its workflow processes to the time of execution still risks human error. Human errors increase during manual contract management when an organization has many contracts and workflows with overlapping timelines. Therefore, it is still a smart idea to use software for contract management, even with a single contract to manage, to reduce human error.
Setting up an email contract management strategy involves:
Human error is likely in any one of the above manual operations. A better strategy for reduced human error is to use software to manage contract pipelines.
Software to manage contract pipelines is focused on minimizing human error. Many of the steps to accomplish a signed contract between multiple parties occurs through automation. Automation works by setting into motion specific actions based on certain triggers. Possible triggers include:
The reason for all these triggers is because every contract is going to have a few tasks pending simultaneously. Some of these tasks are the responsibility of the selling party, and some are the responsibility of the buying party. The more communication that is used throughout the contract life cycle, the human errors that will occur throughout the process.
Human error minimalization is a main accomplishment when choosing a software to manage contracts, instead of a manual process. As an organization grows and its contracts pipeline expands to involve multiple parties, using software to manage contracts will save time without losing awareness of the workflow status of each contract. Furthermore, as personnel within an organization changes, the contract management software system remains the same. This allows new users to pickup where old users left off. In contrast, a manual contract management or an email contract management scenario includes setbacks in contract progress, as new personnel are trained to know what past personnel knew or managed. Software use to manage contracts is the preferred method to reduce human error in contract management.
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