Is Poor Contract Management Hurting Your Bottom Line?

The sheer increase in contract volume, as well as the diverse types of electronic and paper agreements, have made contract management even more important. However, studies suggest that many businesses may not be dedicating sufficient resources to managing their key agreements. In fact, a 2014 Huron Legal survey of 100 legal technology professionals revealed that 57 percent of respondents were concerned about their company’s existing contract management procedures. The survey also found that many businesses are not taking the proper steps to monitor and update their contract forms and templates. Of those polled, only 58 percent reported that they review their standard contract terms and conditions at least once a year. Another 17 percent said they reviewed agreement forms every two years, and 13 percent said such review was undertaken only whenever a new client is signed. Even more concerning, the Journal of Contract Management found that 71 percent of companies couldn’t find at least 10 percent of their contracts. Misplaced and outdated contracts can lead to serious legal concerns. Lost or out of date agreements can cost businesses money, from failing to collect payments when due to missing important renewal deadlines. Given that state and federal legal regulations can change and impact a company’s legal obligations, it is also important to review the terms of all standard contracts to ensure that they are still legally compliant. For instance, New York employers should review their employment contracts to address recent changes to the state’s human rights law. In New Jersey, recent environmental rulings may change indemnification obligations set forth in your contracts. For specific contract management tips, check out our prior post, “Do Your Business Contracts Need a Spring Cleaning?”