Why Contract Management Is Vital to Startup Success

When starting a business, most entrepreneurs are focused on getting the business up and running without overspending. This often means investing in only the most necessary software, while putting other tools in the category of “maybe later.” One type of software that often lands in that category is a contract management platform.

Contracts form the foundation of any company, from a single-person startup to a major multinational corporation. Businesses are built on contracts, from simple lease and employment agreements to vendor contracts to contracts with customers.

Without a centralized, comprehensive contract management system in place, it’s easy for contracts to fall victim to human error — or even be forgotten entirely, only to resurface when there is a problem. Research indicates that on average, companies lose nearly 10 percent of their revenues due to poor contract management, meaning that for a cash-strapped startup, poor contract management could mean the difference between success and failure.

Why Poor Contract Management Is So Dangerous

The most common reason that startups don’t invest in a contract management platform from day one is cost. When budgets are tight, and it’s possible to manage contracts using makeshift (and highly inefficient) solutions like spreadsheets and shared drives, contract management software feels like a splurge. Investing in contract management by Exari is an upgrade.

Some startups avoid contract management software because they don’t think they need it. Again, when other systems work, no matter how inefficient they are, it’s easy to become complacent.

However, the consequences of not properly managing contracts can be dire, especially for a new company trying to maintain a low overhead. Contracts contain risk, and if you aren’t fully aware of and on top of that risk, your company could lose money. For example, there are compliance aspects to contracts that cannot be overlooked. How can you be certain that all of your contracts are in full compliance and that none contain terms or conditions that will lead to trouble later?


Contract management isn’t only about reducing risk, though. It’s about increasing efficiencies and ensuring that everything in your business is correct and operating as it should. One problem in many small businesses is a lack of consistency across contracting.

When your sales team, for instance, can create their own contracts using templates, or just by changing terms in an existing contract, the potential for error skyrockets. It’s possible that contracts could be executed despite these errors, potentially leading to significant problems down the road.

Contract Management

Simply put, attempting to manually manage your contracts is time-consuming and, ultimately, dangerous. Not only are there risks inherent in the authoring process, without a comprehensive contract management program, there are likely to be slowdowns in the negotiation and approval process as well as potential issues in managing obligations. And when it comes to auditing and reporting, manual process are time-consuming and expensive, and they may not even reveal all of the information you need to make the right strategic decisions for your company.

Worth the Investment  

Because of the risks and time-consuming nature of poor contract management, it only makes sense that startups put contract management at the top of the list, moving it away from the “nice to have” and into the “must have” category. An automated contracting platform saves hundreds of hours of labor and reveals insights that lead to better business management.

By investing in contract management, you regain control over the contracting process, eliminating the risk of rogue contracts that are out of compliance and making it easier for your teams to create contracts that move the company forward.

Ultimately, your contract administration costs will be reduced as well since you can analyze your contracts and identify risks and opportunities more quickly, without tedious and error-prone manual administration. Contract renewals will also be more streamlined and accurate as your company won’t be caught unaware by automatic renewals and rate increases.

Contract management might not be the first thing you think about when you start your business, but it should be. By investing in the right technology right from the start, your growth process will be smoother, and you won’t spend more time and money than necessary on this vital process — or face the consequences of not managing your contracts correctly.

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