Contract Management Challenges: How to Improve Contract Management?
Research shows that poor contract management can erode company profitability by up to 9% annually* — a figure that should make any business leader pause. The reality is that contract management challenges affect every department, from legal and procurement to sales and finance. Understanding these challenges and knowing how to address them helps transform contracts from administrative burdens into strategic assets that drive business value.
Contract Management Challenges of 2025
If you’ve been in contract management for any length of time, you’ve probably noticed that the complexity has increased dramatically in recent years. Organizations now deal with more contracts, more stakeholders, and more regulatory requirements than ever before. The average medium to large enterprise manages contracts across 24 different systems, with some companies juggling contracts in over 100 systems**. This fragmentation creates a perfect storm of inefficiency and risk.
The challenges of contract management extend far beyond simple document storage. Contract managers must coordinate with an average of 29% of their organization’s workforce, who touch contracts in some capacity. They must ensure compliance with evolving regulations, manage complex supplier relationships, and extract actionable insights from contract data—all while maintaining speed and accuracy in contract execution.
The Hidden Costs of Poor Contract Management
When contracts aren’t managed effectively, the financial impact hits hard. Organizations typically experience an 8.6% value erosion during the contract lifecycle due to contract management issues such as missed obligations, poor compliance tracking, and inadequate performance monitoring. This erosion happens quietly—a missed discount here, an unwanted renewal there—until the cumulative effect becomes impossible to ignore. Beyond direct financial losses, poor contract management creates indirect costs through increased legal exposure, damaged supplier relationships, and lost business opportunities when contracts can’t be located or executed quickly enough.
Why Traditional Approaches Fall Short
Email chains, spreadsheets, and shared folders might have worked when organizations managed dozens of contracts, but these tools simply cannot handle the volume and complexity of a present day business. Traditional approaches create information silos where critical contract data remains trapped and inaccessible to those who need it. Version control becomes a nightmare when multiple stakeholders edit documents simultaneously without proper tracking. These manual methods also make it nearly impossible to extract meaningful metrics or identify patterns across your contract portfolio, leaving organizations blind to both risks and opportunities hiding within their agreements.
What Are the Challenges of Not Using an Efficient Contract Management System?
Think about the last time someone urgently needed to review a specific contract clause or verify a renewal date. How long did it take to find that information? If you’re like most organizations without an efficient contract management system, that simple request probably triggered a frantic search through emails, folders, and possibly even filing cabinets. This scenario repeats itself countless times across organizations, wasting valuable time and creating frustration. But the problems run much deeper than just wasted time.
Limited Contract Visibility and Accessibility
The most fundamental challenge organizations face is simply knowing what contracts exist and where to find them. A Journal of Contract Management report revealed that 71% of companies cannot locate at least 10% of their contracts***. Imagine the risk exposure when one in ten contracts is essentially invisible to your organization. This lack of visibility means you cannot monitor performance, ensure compliance, or even know what obligations you’ve committed to. When contracts live in individual email accounts or departmental silos, critical information remains hidden from decisionmakers who need it most.
Manual Processes Leading to Bottlenecks
Manual contract processes create bottlenecks at every stage of the contract lifecycle. Contract creation relies on copying and pasting from old documents, introducing errors and outdated terms. Approval workflows depend on email chains that get lost or ignored, causing delays that frustrate both internal stakeholders and external partners. Without automation, simple tasks like sending renewal reminders or tracking deliverables require constant human intervention, increasing the likelihood of missed deadlines and forgotten obligations. These manual processes also make it impossible to maintain consistency across your contract portfolio, as each contract becomes a unique creation rather than following standardized templates and procedures.
Compliance and Risk Management Gaps
Regulatory compliance has become increasingly complex, with requirements like GDPR, DORA, and ESG reporting obligations affecting contract terms and management processes. Without an efficient system, organizations cannot systematically ensure that required clauses appear in all relevant contracts or track compliance across their contract portfolio. Risk assessment becomes reactive rather than proactive, with problems only discovered after they’ve caused damage. Organizations operating without proper contract management systems often discover compliance failures only during audits or, worse, when facing regulatory penalties.
Common Mistakes in Contract Management That Undermine Success
Even organizations that recognize the importance of contract management often fall into predictable traps that prevent them from achieving excellence. These mistakes in contract management stem from both operational oversights and strategic misalignments that develop over time.
Missed Renewals and Auto Renewal Traps
Contract renewals represent both opportunities and threats, yet many organizations handle them poorly. Valuable contracts expire without warning, disrupting business operations and forcing emergency renegotiations from weak positions. Unwanted contracts auto renew because no one tracked the narrow cancellation window, locking organizations into another year of unnecessary expense. Software agreements particularly exploit this weakness, with vendors building in automated renewal clauses that require a 90 day advance notice for cancellation. Without systematic tracking and alerts, these renewal dates pass unnoticed until the invoice arrives.
Lack of Standardization and Complex Contract Language
When every contract becomes a unique creation, inefficiency multiplies across your organization. Legal teams spend time reviewing similar agreements from scratch, unable to rely on preapproved language. Business users struggle to understand their obligations when contracts use inconsistent terminology or unnecessarily complex legal language. This lack of standardization extends to the contracting process itself, with different departments following different procedures for similar transactions.
The result is longer cycle times, increased legal costs, and greater risk exposure as nonstandard terms slip through review processes. Organizations that fail to establish contract standards and templates find themselves constantly reinventing the wheel, wasting resources that could be deployed more strategically.
Procurement Contract Management Challenges in Contemporary Organizations
Procurement teams face unique pressures when managing supplier contracts. Unlike sales contracts that typically follow standard terms, procurement contract management challenges involve negotiating with suppliers who bring their own terms, managing complex performance metrics, and coordinating with multiple internal stakeholders who all have different priorities.
Stakeholder Alignment and Crossfunctional Collaboration
Procurement contracts touch virtually every part of an organization. Finance cares about payment terms and budget compliance. Operations focuses on delivery schedules and service levels. Legal worries about liability and intellectual property. IT needs security and data protection clauses. Aligning these diverse stakeholders around common contract goals requires exceptional coordination and communication. Without clear processes and defined responsibilities, contract negotiations drag on as different departments pursue conflicting objectives.
The WorldCC reports that 42% of companies lack clear responsibility for contract management, creating confusion about who owns decisions and who monitors performance. This ambiguity leads to finger pointing when problems arise and prevents organizations from presenting unified positions during negotiations.
Supplier Performance Monitoring and Obligation Tracking
Once a procurement contract is signed, the real work begins. Organizations must track whether suppliers deliver promised goods and services, meet agreed service levels, and comply with contractual terms. Yet, without proper systems, this monitoring happens sporadically if at all. Performance issues go unnoticed until they become crises. Cost savings negotiated during procurement evaporate through poor contract administration. Service credits and penalties remain unclaimed because no one tracks the metrics that trigger them.
How to Improve Contract Management Through CLM Solutions
The path to better contract management doesn’t require revolutionary changes—it requires smart application of available tools and proven methodologies. Organizations that successfully transform their contract management capabilities focus on three key areas that address the root causes of challenges in contract management.
Centralizing Contract Data with Digital Repositories
Creating a single source of truth for all contracts transforms how organizations manage agreements. Digital repositories provide secure, searchable storage that makes every contract accessible to authorized users. Advanced platforms like Malbek’s CLM solution offer AI powered extraction that automatically captures key data points from uploaded contracts, eliminating manual data entry while ensuring accuracy. This centralization enables organizations to answer critical questions instantly: What contracts do we have with this vendor? When do our agreements expire? What are our total commitments? With all contracts in one system, organizations can finally see patterns, identify opportunities for consolidation, and ensure nothing falls through the cracks.
Automating Workflows for Efficiency and Accuracy
Automation transforms contract management from a series of manual tasks into a smooth, predictable process. Digital workflows guide contracts through each lifecycle stage, automatically routing them to appropriate reviewers, sending notifications when action is needed, and escalating delays to management. This automation doesn’t just save time—it ensures consistency and compliance. Every contract follows approved processes, uses current templates, and includes required clauses. Platforms with ensemble LLM approaches can dynamically select appropriate review levels based on contract complexity and risk, ensuring efficient processing without sacrificing thoroughness. Organizations using automated workflows report reducing contract cycle times by 50% or more while simultaneously improving accuracy and compliance.
Leveraging AI for Intelligent Contract Analysis
We’re entering what industry leaders call the Third Wave of AI—an era where intelligent, autonomous agents go beyond static automation. These Agentic AI systems actively orchestrate, execute, and optimize workflows. AI can analyze contracts to identify risks, suggest optimal terms, and ensure compliance with organizational policies. Natural language processing makes contracts searchable not just by keywords but by concepts, helping users find relevant information regardless of how it’s phrased.
The most advanced CLM platforms now offer conversational interfaces that eliminate traditional UI complexity. Solutions like Malbek’s Conversational Contracts enable users to interact through natural language commands, with AI agents handling the technical details behind the scenes. For instance, a pharmaceutical company implementing market share agreements across thousands of distributors can reduce program administration costs up to 90% through automated bulk amendments and intelligent routing. Manufacturing teams updating supplier agreements for regulatory compliance achieve 100% documentation in record time, reducing administrative burden while providing real time compliance reporting.
Malbek’s ensemble LLM approach, which dynamically selects appropriate AI models for individual use cases, ensures accuracy through multiple models verifying results and providing confidence scores that help users understand the reliability of AI generated insights. This intelligence augments human decision making, allowing contract managers to focus on strategic issues while AI handles routine analysis. Organizations leveraging these AI powered capabilities, including Malbek’s “Bek” AI assistant, report achieving 120% customer retention rates and 96% satisfaction scores—clear indicators that AI driven contract management delivers measurable value.
Building Robust Contract Management for the Future
Creating robust contract management capabilities requires more than just implementing new technology. Organizations must develop the processes, skills, and culture that support excellence in contract management. This transformation doesn’t happen overnight, but organizations that commit to continuous improvement position themselves for long term success.
Developing Clear Processes and Accountability
Good contract management starts with clarity about who does what and when. Organizations must establish clear ownership for contract management activities, whether centralized in a dedicated team or distributed across departments. Documented processes should specify how contracts move from request through execution and into ongoing management. RACI matrices (Responsible, Accountable, Consulted, and Informed) help clarify roles, ensuring everyone understands their responsibilities. Regular reviews of these processes ensure they remain aligned with business needs and incorporate lessons learned from experience.
Investing in Skills and Change Management
Technology alone won’t solve contract management challenges without people who know how to use it effectively. Organizations must invest in training that helps staff understand both contract management principles and the specific tools they’ll use. This includes not just initial training but ongoing education as capabilities evolve. Change management ensures smooth transitions from old processes to new ones, addressing resistance and building enthusiasm for improved ways of working.
Measuring Success and Continuous Improvement
What gets measured gets managed. Organizations achieving contract management excellence track metrics across the contract lifecycle: cycle times, compliance rates, value leakage, and stakeholder satisfaction. These metrics reveal where processes work well and where improvement is needed. Regular reviews of contract performance data identify trends and opportunities. Success in contract management isn’t a destination but a journey of continuous refinement and adaptation.
The Future of Contract Management: Emerging Trends and Opportunities
Looking ahead, the future of contract management promises even more powerful capabilities as technology continues to advance:
- Predictive analytics will help organizations anticipate contract risks before they materialize.
- Integration between contract management systems and other enterprise platforms will create seamless information flows that eliminate duplicate data entry and ensure consistency across systems.
The organizations preparing for this future are those building strong foundations today. They’re addressing current contract lifecycle management challenges while remaining flexible enough to adopt new capabilities as they emerge. They understand that excellence in contract management isn’t just about avoiding problems—it’s about creating competitive advantage through better supplier relationships, faster execution, and smarter decision making.
Conclusion
Contracts will always be complex, but managing them doesn’t have to be complicated. The challenges we’ve explored—from visibility gaps to compliance risks—are real and significant, but they’re also solvable. Organizations that take systematic approaches to how to improve contract management find that the benefits extend far beyond risk reduction. They discover opportunities hidden in their contract data, accelerate business processes, and build stronger relationships with partners and suppliers.
The key is to start somewhere. Whether you begin with centralizing contract storage, automating renewal notifications, or implementing AI powered analysis, each improvement builds momentum for the next. Don’t let perfect be the enemy of good—even small improvements in contract management can deliver significant value. The organizations that will thrive in tomorrow’s business environment are those taking action today to transform contract management from a source of frustration into a driver of success.
Malbek’s AI powered CLM platform combines conversational contract interfaces, ensemble LLM technology, and seamless integrations to help organizations transform their contract management from a source of frustration into a strategic advantage. With proven success metrics, Malbek delivers intelligent contract management capabilities. Contact our customer success team to explore what an AI driven CLM can do for your organization.
Sources:
* https://www.worldcc.com/Research/Latest-Research
** https://www.worldcc.com/Research/Latest-Research
*** https://procurementtactics.com/contract-management-statistics
