Whether you’re a startup, a small enterprise, or a growing company, your contracts are the backbone of your business. And managing your contracts efficiently will help you optimize your workflows, ensure compliance and strengthen your business relationships.
In this guide, we’ll explore the importance of contract management for small companies, common challenges and best practices to overcome them.
Step 1: Understanding the importance of contract management
Being a small company, you probably don’t have heaps of contracts scattered around in different files and servers – at least not yet. Chances are you are handling your contracts manually, storing them in folders or even physical drawers. While you might still feel in control over your contracts and all their important dates, it’s important to lay a solid foundation for growth and reduce risks by establishing a proper contract management strategy early.
Proper contract management enables you to:
- Ensure compliance with legal and regulatory requirements.
- Minimize the risk of disputes and litigation.
- Optimize financial performance by tracking commitments, payments, and revenue.
- Enhance operational efficiency by streamlining processes and reducing administrative burden.
- Improve communication and collaboration with stakeholders.
Step 2: Identifying common challenges
Regardless of what your company does, your contracts will be at the core of your business – just like it is for every business. And every small business is faced with similar challenges in contract management. Here are the most common ones:
1. Limited resources
Small businesses typically have fewer staff and financial resources dedicated to contract management, making it challenging to handle contracts effectively.
2. Lack of expertise
Small companies, with only a few employees, may lack specialized legal expertise required for drafting and negotiating contracts, which can cause unfavorable terms or problems with compliance.
3. Manual processes
As we mentioned before, many small businesses rely on manual, paper-based processes for contract management, which are time-consuming, prone to errors and difficult to scale.
4. Visibility
Without centralized systems or tools, small companies may struggle to maintain visibility into their contract portfolio, leading to missed deadlines, renewal opportunities or compliance issues.
5. Ineffective communication
Communication gaps between employees or with external parties can result in misunderstandings, delays, or disputes related to contract terms or obligations.
Step 3: Best practices for effective contract management
Are you currently struggling with one or more of the challenges above? Don’t worry, there are several easy and cost-effective ways to meet these challenges and level up your game.
1. Use a centralized contract repository
Establish a centralized repository where you can store and organize all contracts securely. This enables easy access, retrieval, and tracking of contract-related information by authorized personnel. It gives you a complete overview of all contracts and their important dates, reducing the risk of missing important renewal dates.
Read more: How to effectively manage your contract renewals
2. Implement a contract management software
Invest in contract management software that meets the needs and budget of your business. These tools help you automate contract processes, streamline workflows and provide insights into contract performance and compliance.
Even though we say “invest in”, it doesn’t have to cost a fortune. Trackado offers a low-price solution, which is perfect for small companies who don’t have hundreds of contracts to keep track on. See our pricing here.
3. Standardize contract templates
A good advice is to develop standardized contract templates for common agreements. This will help you ensure consistency, reduce drafting time and minimize legal risks. You can customize templates as needed to reflect specific terms or requirements.
4. Establish clear processes and responsibilities
Define clear processes and responsibilities for contract management amongst your team. This includes creation, approval, execution, monitoring and renewal of contracts. Assign roles and responsibilities to specific people to ensure accountability and that everyone is on board.
5. Monitor key dates and obligations
Make sure you monitor key contract dates, such as renewal, termination or milestone events. This will help you avoid missing deadlines and opportunities to renegotiate unfavorable contract terms. Make it a habit to set reminders or alerts to notify you in time. You can do this manually, but having a contract management system with a centralized contract repository will support you in those areas.
In Trackado, reminders are automatically generated and sent out to relevant stakeholders in advance, meaning you’ll always be on top of your important dates.
6. Regular review and optimization
Finally, schedule time, once or twice a year, to review your contract performance, processes and outcomes to identify areas for improvement and optimization. Talk to your stakeholders to collect feedback and adjust strategies or workflows accordingly. This will build trust and help you further optimize your contract management.
A flexible contract management solution for small companies
When you embark on your journey to improve contract management for your small company, remember that the right tools can make all the difference.
Trackado is entirely designed to meet the needs and wants of small and medium businesses and offers a flexible, affordable and user-friendly solution. With affordable pricing plans and a range of features designed to streamline contract management, Trackado empowers small companies to take control of their contracts and drive growth.
Start your free trial today and experience the difference Trackado can make for your business!
