A Guide To Contract Management In 2025

Making the most of commercial relationships with customers, suppliers, or employees requires well-thought-out contract management processes. Every step on the way, from setting competent terms to tracking obligations to handling renewals, is crucial. 

Businesses with small portfolios can manage legal agreements across spreadsheets, email chains, and Google Calendar. However, as the complexity and volume of legal agreements increase, overseeing them throughout their lifecycle becomes challenging. This is where the right strategy and tool can help deliver results. To help you along the way, here’s an all-inclusive guide to contract management, shedding light on challenges, best practices, and essential technology. 

What is contract management?

Contract management entails methodically handling all aspects of a contractual agreement, from its inception to termination. It enables businesses to enhance performance and mitigate risks when interacting with suppliers, partners, customers, or employees. 

Contract managers and legal personnel employ various tools and strategies to create, negotiate, execute, and monitor legal agreements. How you manage the process—whether it involves Word, spreadsheets, or calendars—determines how the contractual arrangement turns out. With effective contract management, parties can comply with laws and regulations, establish performance, and take timely action for contract milestones. 

Why does Contract Management matter?

Contracts are essential for all businesses, whether large or small, to conduct their day-to-day operations. If your organization relies heavily on procurement, you need vendor agreements to ensure that goods and services arrive on time. Contract management is a critical business function that ensures agreements between parties are effectively created, executed, and monitored throughout their lifecycle. It goes beyond just drafting and signing documents; it supports risk management, performance tracking, cost control, and strategic alignment, making it essential for operational success and compliance in any organization.

1. Risk Mitigation

Effective contract management helps identify, assess, and reduce risks by clarifying terms, responsibilities, deadlines, and penalties. With well-managed contracts, businesses can avoid legal disputes, financial losses, and reputational damage by ensuring all parties adhere to agreed conditions.

2. Cost Control

Contracts often define pricing, deliverables, and payment schedules. Managing these details closely helps organizations avoid overpayments, detect hidden costs, and ensure they receive full value from vendors or partners. Strong contract oversight leads to better budget management and improved return on investment.

3. Compliance and Legal Protection

Regulatory and legal compliance are embedded in many contracts. By properly managing contracts, businesses ensure they meet industry standards, labor laws, and environmental regulations, reducing the likelihood of fines or legal actions. It also ensures that the organization's rights are protected in the event of a dispute.

4. Operational Efficiency

Streamlined contract processes reduce delays, improve coordination between departments, and automate administrative tasks. Systematically carrying out contract-related tasks can boost productivity by giving stakeholders timely access to critical information and documents, supporting faster and more informed decision-making.

5. Performance Management

Well-managed contracts provide a framework for evaluating partner and supplier performance, holding them accountable to agreed standards. They also strengthen trust and transparency, enabling long-term relationships that support the organization’s strategic goals.

What are the Challenges in Contract Management?

Contract management is a critical function that ensures business agreements are executed efficiently and align with organizational objectives. However, managing contracts can be complex and challenging, especially as businesses scale and deal with a wide range of stakeholders, legal frameworks, and performance expectations. 

Challenges often arise from inconsistent processes, limited visibility, outdated tools, and poor collaboration across departments. These issues can lead to financial losses, non-compliance with regulations, and strained business relationships. The risks are particularly significant when contracts are not properly monitored or when key obligations and deadlines are missed. Furthermore, as businesses become more global and regulated, the complexity of managing diverse contract portfolios increases, making it harder to maintain control and accountability.

Lack of Standardization

 When different departments create and manage contracts independently, inconsistencies in structure, language, and legal terms can emerge. These variations complicate contract review and approval processes, often causing delays and increasing the likelihood of errors or omissions. Lack of standardization also hinders compliance with internal policies and external regulations, making it difficult to audit contracts or ensure legal soundness. Without a common framework, organizations struggle to maintain quality and enforceability in their agreements. Additionally, inconsistency in formatting and content creates confusion among stakeholders, leading to misunderstandings and contractual disputes. 

Poor Visibility and Accessibility

Limited visibility into contract data and poor accessibility to documents pose significant challenges to effective contract management. When contracts are stored in disparate systems, shared drives, email attachments, or even in physical filing cabinets, locating critical information becomes time-consuming and unreliable. This fragmented storage prevents key stakeholders from accessing the most current version of a contract, which can result in outdated terms being followed, missed deadlines, or unfulfilled obligations. Lack of visibility also makes it difficult to monitor contract lifecycles, track key performance indicators, or assess risks. 

Manual Processes

Manual contract management processes remain a significant obstacle to efficiency and accuracy. Many organizations still rely on spreadsheets, email threads, and physical documentation to create, review, and track contracts. These manual approaches are prone to human error, lack real-time updates, and often involve repetitive tasks that consume valuable time and resources. For example, manually tracking renewal dates or performance milestones increases the risk of missing deadlines or failing to meet obligations. Additionally, approvals routed manually through various departments can lead to bottlenecks, version control issues, and confusion over document ownership. Without automation, it’s also difficult to maintain a consistent audit trail, complicating compliance and dispute resolution. As contract volumes grow, manual processes become unsustainable and limit scalability.

Difficulty in Performance Tracking

Contracts are not just legal documents—they serve as blueprints for delivering goods, services, and value. Without clear systems in place to monitor performance metrics, such as timelines, deliverables, service levels, and cost benchmarks, organizations may fail to detect underperformance or non-compliance. This can lead to unmet expectations, financial loss, or damage to strategic relationships. Many companies rely on periodic manual reviews, which are insufficient for real-time performance tracking. 

Limited Collaboration

Contract management is inherently a cross-functional process that involves legal, procurement, finance, operations, and other departments. Limited collaboration among these teams often leads to delays, miscommunication, and misaligned goals. For example, legal teams may prioritize risk mitigation, while procurement focuses on cost savings, and operations emphasizes delivery timelines. Without coordinated communication, these priorities can clash, resulting in contracts that are inefficient, overly complex, or lacking in necessary details. Additionally, when collaboration is ad hoc or siloed, critical input may be missed during contract drafting and negotiation phases. This can lead to rework, prolonged negotiations, or agreements that fail to serve the organization’s best interests. Lack of integration between departments also affects contract execution and monitoring, as responsibilities are unclear and follow-up is inconsistent. 

What does productive contract management entail? 

Contract management offers a wealth of opportunities for organizations to maximize the value of their contractual relationships. Rather than using an outdated approach to managing your company’s contracts with shared drives, email back-and-forth, physical storage systems (filing cabinets), and Excel spreadsheets, you can leverage a digital contract management approach that keeps all of your company’s data secured in a single location that is accessible anywhere on any device.

With data fragmentation, you’ll find it increasingly difficult to work and communicate ideas internally and to maintain a productive workflow. Tracking obligations, overseeing key due dates, and locating contracts also become major issues in manual, traditional contract management systems. With missed deadlines, obligations, and noncompliance, your company will encounter unnecessary negative implications like lost revenue, fines, breach of contract, and unfavorable contract renewals. Contract builder software will be a burden rather than an assistance without proper planning and implementation. There are specific actions that every enterprise should take to optimize its contract lifecycle management, regardless of the type and scale of its operations.  

Standardize Contracts 

Most organizations do not have the time or personnel to create contracts from scratch. One way to do this without turning the proverbial wheel is to standardize the contract creation process. The legal team can employ templates and clause libraries to generate compliant legal documents. Businesses can establish consistent language and clauses for contractual agreements. Consequently, the legal division does not have to deal with hundreds of versions of the same contract. 

Performance Management 

Setting up performance indicators enables organizations to evaluate the effectiveness of their contracts. Contract management allows the legal team to determine specific, measurable goals and assess success. Businesses can choose metrics relating to their needs and challenges with customizable dashboards. Moreover, monitoring KPIs will help the legal team find ineffective processes in the contract lifecycle and improve them. 

Compliance Management 

Having a systematic contract management process empowers organizations to conduct regular compliance audits.  Consistent monitoring of legal and financial pitfalls will help your company avoid unnecessary risks. Thus, organizations can take the necessary actions to remain compliant. Apart from contractual terms and stipulations, the legal team should also track external regulations. It helps to protect your business from legal transgressions and financial penalties. Eventually, constant compliance checks can perpetuate solid business relationships. 

Authorized Access

Contract management offers a single safe location to store all contract-related documents. Consequently, the contract managers will not have to spend endless hours searching for necessary information or contracts. The contract lifecycle management system comes with OCR and AI capabilities, making any digitized data easily accessible and searchable. Moreover, CMS also enables the digital workforce to set user permissions for dashboards, widgets, and workflows. Thus, you can prevent leakage and security flaws by limiting access to critical information to the appropriate employees. 

Leverage Integration 

Implementing advanced integrations with your contract builder software can go a long way to improving your contracting process. Organizations can utilize e-signature solutions to execute contracts within the CLM solution.  Businesses can also integrate Salesforce CRM or Dynamics CRM solutions with contract workflow software to empower the sales team to self-serve sales agreements. Utilizing every technology available is the only way companies can keep up with expanding contract portfolios.  

Conclusion

Every organization comes with its own set of possibilities and challenges. Achieving business goals, in the end, depends upon the tools you have in your arsenal and your ability to use them. Contract management can assist the legal team in optimizing the contract lifecycle and clearing any glitches. In the long run, efficient contract lifecycle management can translate to better returns and partnerships. 

Dock 365 offers a powerful and cost-efficient approach to contract management using your Microsoft 365 and SharePoint tenant as the base for contract management. Dock’s easy-to-use, intuitive, and customizable contract lifecycle management software provides unique features and integrations that boost collaboration, efficiency, and productivity. Upgrade your contract management system today with Dock.