Understanding the Common Challenges in Contract Lifecycle Management

Contract Lifecycle Management (CLM) is vital for any business, guiding contracts from creation through execution, renewal, and expiration. Despite its importance, many organizations struggle with contract lifecycle management challenges, leading to inefficiencies and potential risks. Recognizing these challenges is key to improving your contract management practices.

Effectively managing the entire contract lifecycle is not just a matter of organization—it’s a critical factor in minimizing risks and maximizing efficiency. By addressing the common challenges in contract lifecycle management, businesses can ensure smoother operations, avoid costly mistakes, and maintain stronger relationships with clients and partners. Identifying these challenges early on provides an opportunity to implement better practices and technologies that can enhance your overall contract management strategy.

One of the primary challenges in contract lifecycle management is the complexity involved in drafting and standardizing contracts. Different departments within an organization often have unique requirements and language preferences, which can lead to inconsistencies in contract terms and formatting. This lack of standardization not only complicates the contract creation process, but can also cause confusion and delays during contract negotiation and approval.

The approval process is another area where many organizations face contract lifecycle management challenges. Contracts often require approval from multiple stakeholders, which can lead to bottlenecks if the process is not well-coordinated. Manual approval processes, in particular, are prone to delays as contracts may sit in inboxes awaiting review. These delays can slow down business operations and increase the risk of missed opportunities.

Once a contract is signed, the next challenge in contract lifecycle management is managing the various obligations outlined within it. This includes tracking deadlines, deliverables, payment schedules, and compliance requirements. Without a centralized system to monitor these obligations, organizations risk missing key deadlines or failing to fulfill their contractual commitments, which can lead to disputes or penalties.

In many organizations, contracts are stored in various locations: on individual computers, in shared drives, or even in physical filing cabinets. This decentralized storage approach presents significant contract lifecycle management challenges, making it difficult to locate specific contracts when needed, particularly during audits, disputes, or renewals. The lack of centralization can lead to inefficiencies and increase the risk of lost or misplaced documents.

The regulatory landscape is constantly evolving, and organizations must ensure that their contracts remain compliant with the latest legal requirements. This can be particularly challenging in industries with complex or frequently changing regulations. Adapting to these changes is one of the ongoing contract lifecycle management challenges that organizations must address to avoid exposure to legal and financial risks.

As a business consultant at IRIS Nederland, I’ve spoken to several clients who face these challenges daily. It’s common for organizations to feel overwhelmed by the complexities of CLM, but the good news is that these challenges can be managed effectively with the right strategies and tools.

Understanding the specific challenges your organization faces is the first step in addressing them.

While this post is meant to shed light on the typical challenges of contract lifecycle management, please feel free to reach out if you’d like to discuss how these issues might be affecting your organization specifically. In my role, I’m here to support you in finding practical ways to improve your CLM processes and help guide you through the complexities of contract management and the implementation of a new solution that best suits your needs.