5 Contract Management Challenges (and How to Fix Them)

At top.legal, we talk to in-house lawyers and managing directors every day. One thing we notice again and again: legal departments run into the same contract management challenges over and over — especially when working with sales and other teams.

A common misconception in many legal departments is that the established contract process poses no significant problems. Raise the idea of contract software to automate agreements, and the answer is usually the same: the organization doesn't have the contract volume to justify a technical solution for the existing process.

Look at the issue more closely, though, and it quickly becomes clear that the problems with contract creation don't hit the legal department first — they surface across the individual business departments.

The main contract management challenges that undermine the effectiveness of your contract lifecycle include a lack of central contract storage, friction between teams, an overloaded legal department, long contract cycles, and a poor overview of important contract deadlines.

Below, we look at each of these five issues that can stop your organization's contract process from working properly.

1. No central storage location/no contract reporting

Everyone in the company should be able to report to their manager. Sales talk regularly about the state of the pipeline, and product developers can answer questions about the state of development. Lawyers, too, should be able to report on their contract workflow efficiently — without spending two days collecting all the data first.

As a former banker, you know that a company's contracts have to be reviewed as part of divestments or financing rounds. Above a certain company size, these transactions are routine, as business units are bought and sold at regular intervals.

Each time, this creates a lot of work, because contracts are often not stored centrally in one place. Between transactions the business keeps growing — and so does the contract volume. Pulling together every contract in the organization usually falls to one or two people in the legal department, and it often turns out to be true mammoth, Sisyphean work.

When compiling contract information proves harder than expected, you tend to hear the same answers: "We couldn't find all the contracts in the CRM." "We're not sure the versions stored on this drive are up to date." "We can't find the final signed contracts anymore, but we assume this version is final."

Sometimes contracts are spread across several company systems, or tucked away in a remote filing cabinet that an especially diligent employee used to keep the signed contract safe from prying eyes. All in all, it can then take days or weeks to collect the information.

We recently had a telling conversation with a major international hardware manufacturer who had to obtain a missing contract from the customer via back channels because the original could no longer be found. So if you have to search for your contracts in more than one place and are no longer sure whether the saved version is the final one, it stands to reason that you don't have an effective contract process.

Find out how to create your first central contract database.

2. Friction between teams

In large companies, legal departments are generally not run as profit centers, which makes it hard for them to secure budget for more legal staff. As a result, we often encounter legal teams that are already at full capacity yet still have to handle the minor legal issues of sales.

Sales staff, in turn, are under internal pressure to hit their targets. That's where friction between sales and legal becomes inevitable: throughout the sales process, legal questions keep landing on an already overloaded legal department, which slows and delays deals. Over time, this breeds chronic tension between the two teams — hardly conducive to progress.

“If there are processes that could be automated to change this, it's hard to find a good reason why it shouldn't happen.”

For fast-growing companies and enterprise customers, good software — such as the platform top.legal offers — can play a central role in resolving this conflict. For example, legal staff with the right expertise can create contract templates and hand them to sales to generate authorized contracts.

Template creators can account for different scenarios and customer requirements through optional clauses and optional wording. Explanations in video and text format answer the majority of questions right inside the software.

Sales then has a clear structure and a defined margin of discretion to meet customer needs. A clear permissions structure on the templates prevents unauthorized employees from changing the process. In return, the legal department always knows what stage each contract is at and which terms have been granted to which customer.

Sales and legal share a clear understanding of the roles and the process flow — and friction is avoided.

3. Overloaded legal department

In many companies, the work isn't done even on a Friday evening — and that's especially true for the legal department. All too often, an in-house lawyer's task list is inflated by minor work such as drafting and reviewing simple contract documents. They answer the same basic questions several times a day. As a result, the genuinely important tasks don't get the attention they deserve.

The various departments of an organization often depend on input from legal, even when a contract's value to the business is relatively small. We see that this constantly growing task list causes important projects to fall by the wayside and slows the whole organization down. Many legal departments are aware of the issue, yet we still see little movement toward process automation.

If smaller contracts are piling up in your legal department, questions are answered only hesitantly, and important projects keep slipping, that's a strong sign your contract process isn't working.

4. Long and opaque contract cycles

Talk to the legal departments of many mid-sized companies and you'll unfortunately find that the average time to close a contract is more than 70 days.

The actual net negotiation time — the time genuinely spent negotiating with the other side — is far below that figure. Nailing down the key business parameters often takes just a few hours.

Search for the real reason behind long contract cycles and you'll usually find a series of administrative tasks and inefficient processes: endless email chains (including just to schedule a negotiation date), sending and re-revising confusing notes in tracked-changes mode in an old-fashioned Word document, a lack of version control, versions that overlap over email, comments built on outdated versions, and PDFs with handwritten notes that are often hard to decipher.

The long time to close is usually a good indication that the process you've implemented for agreeing and concluding contracts isn't working, or is working poorly.

On the corporate side, top.legal is often brought in to solve exactly these problems — problems that can usually be traced back to a manual contract process. Along the way, we run into the usual suspects: Microsoft Word, email, DocuSign, and plenty of friction that slows sales cycles down.

5. Lack of overview and missed contract deadlines

If you've ever been caught out by a missed withdrawal or notice period, you know the problem. You pay for software or products you only meant to trial, that for various reasons never get integrated into your systems and workflows — and that you end up paying for anyway because of a simple oversight.

It's much the same with deadlines on contracts you've already signed with paying customers. As a rule, customers expect timely delivery of the paid service on a fixed date. For a handful of customers, delivery dates can still be tracked comfortably in Outlook or another calendar tool. But once you have a certain number of contracts — and a certain number of employees responsible for delivering on them — things can quickly get critical.

“Decision-makers don't have to press a reset button and start from scratch to noticeably improve contracts.”

We listened closely to decision-makers at large companies as they described the contract chaos inside their organizations. With that knowledge, we gradually built an overview dashboard into the top.legal software. It shows department heads and owners where each contract currently stands, which counterparties contracts are being signed with, and which version was used. Reminders can also be set easily for every contract and template.

If you recognize one or more of these challenges, the first step is worth taking: build a central contract database to bring order, visibility, and deadline control to your contract management.