Common bottlenecks in the contract process and how to overcome them

The contract process is a critical component of any business, serving as the backbone for agreements and collaborations. Yet, it’s often riddled with bottlenecks that can slow down operations and sour relationships — organizations like the WCC have found a 9.2% loss in annual revenue for businesses with poor contract management.

Understanding these bottlenecks and knowing how to effectively address them can significantly enhance efficiency and improve business outcomes. Here, we explore the common obstacles in the contract process and offer practical solutions to streamline it.

Identifying bottlenecks in the contract process and exploring their solutions

1. Manual document creation and template management

At the heart of contract bottlenecks lies a fundamental issue: document creation. Many businesses still find themselves caught in the time-consuming loop of drafting contracts manually. This often involves copying from previous agreements or starting fresh every time, which can be a real drag on efficiency.

The solution:

1. Create a centralized library of templates with pre-approved language to streamline drafting.
2. Adopt automated document assembly software to cut down on repetitive tasks.
3. Develop standardized clauses for common contract sections to make the process more consistent.
4. Regularly review and update templates to ensure they meet current legal standards and business needs.

2. Inefficient review and approval workflows

Review and approval stages can quickly become a nightmare, especially when too many cooks are in the kitchen — or if the head chef is a mystery. 40% of organizations admit a lack of clarity on who’s responsible for which contract responsibility, according to World Commerce & Contracting research.

3. Contract negotiation delays

The negotiation phase can drag out the contract process, particularly when there’s a lot of back-and-forth between parties. Multiple revision rounds can become a real time sink.

The solution:

1. Develop fallback positions for common negotiation points to expedite discussions.
2. Use redlining software for efficient change tracking.
3. Create a playbook with pre-approved alternative clauses to simplify negotiations.
4. Set clear parameters before negotiations begin to limit unnecessary revisions.
5. Embrace electronic negotiation tools for real-time collaboration and quicker resolutions.

4. Poor version control

Managing different versions of a contract can be a daunting task, leading to confusion and delays if not handled properly, especially when several parties are involved.

The solution:

1. Leverage cloud-based document management systems to keep everyone updated.
2. Employ version control software to manage changes systematically.
3. Use naming conventions for different versions to avoid mix-ups.
4. Maintain a clear audit trail of changes for transparency and accountability.
5. Restrict editing access to ensure only authorized personnel can make changes.

5. Signature collection bottlenecks

Collecting signatures can be a major bottleneck, particularly with multiple signatories or when dealing with international partners.

The solution:

1. Implement electronic signature solutions to simplify the process.
2. Use mobile-friendly signing platforms for convenience.
3. Set automatic reminders for pending signatures to keep the process on track.
4. Establish a clear sequence for signature routing to avoid confusion.
5. Monitor signature status with a dashboard to ensure timely completion.

6. Inadequate contract storage and retrieval

90% of contracting professionals feel like finding a specific document is a challenge. Once a contract is signed, poor document management can make it hard to retrieve important information when needed, which can impact compliance and performance.

The solution:

1. Set up a centralized contract repository for easy access and management.
2. Use OCR technology to make documents searchable.
3. Develop a standardized filing system to organize documents efficiently.
4. Implement metadata tagging protocols for quick retrieval.
5. Ensure regular backups and security measures to protect sensitive information.

7. Compliance and risk management issues

Managing compliance and risk throughout the contract process can be a challenge if not properly structured, leading to delays and potential liabilities.

The solution:

1. Use automated compliance checking tools to catch issues early.
2. Create risk assessment checklists to identify potential problems.
3. Conduct regular compliance training for team members to keep everyone informed.
4. Establish clear escalation procedures for handling compliance and risk issues.
5. Perform regular audits of contract processes to ensure they meet standards.

8. Lack of performance monitoring

Without effective monitoring, identifying and addressing bottlenecks in the contract process can be difficult, leading to inefficiencies.

1. Implement KPI tracking for various stages of the contract process.
2. Provide regular reports on cycle times to identify trends and issues.
3. Analyze bottleneck patterns to find areas for improvement.
4. Conduct periodic process reviews to refine workflows.
5. Collect stakeholder feedback to enhance process efficiency.

Impact of unresolved bottlenecks on business and relationships

The bottlenecks in the contract process can have far-reaching implications — delays can result in financial losses as opportunities slip away or penalties accrue due to non-compliance with agreed timelines. Moreover, they can erode trust and goodwill between parties. Clients and partners expect efficiency and reliability; when these expectations aren’t met, relationships can become strained, potentially leading to loss of business.

Moving forward: Creating an efficient contract process

To effectively overcome these bottlenecks, an organization should focus on:

1. Process automation

Utilize technology to automate routine tasks and workflows for greater efficiency.

2. Standardization

Develop and maintain standard processes, templates, and guidelines to ensure consistency. As of 2021, only 31% of contract in organizations surveyed followed a contracting playbook or guidance document.

3. Training

Provide comprehensive training to all stakeholders to enhance their understanding of systems and processes.

4. Regular reviews

Continuously monitor and optimize the contract process to adapt to changing needs.

5. Change management

Implement changes with careful consideration and ensure buy-in from all stakeholders.

In conclusion

By addressing these common bottlenecks in the contract process and applying the suggested solutions, businesses can transform their contract process into a streamlined, efficient operation. After all, improvement is an ongoing journey — regularly review and refine your processes to keep up with business demands and maintain optimal performance.

The key lies in systematically identifying and addressing bottlenecks while remaining flexible to meet unique organizational needs. With proper planning and implementation, the contract process can shift from a source of frustration to a driving force for growth and success.

Talk to us today to discover how you can troubleshoot and refine your contract process.