What is the cost of inefficient contracts for businesses?

Valentina GolubovicValentina Golubovic
Last updated on:
September 19, 2022
Published on:
September 16, 2022

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A YouGov survey estimated that UK SMEs are losing out on £13.6 billion per year by not taking care of their legal problems. The cost of inefficient contract management would contribute to this as it is the loss of time, money and profits to businesses. In this blog, I will discuss how much-outdated systems contribute to inefficient contract management. There are many solutions for efficient contract management so let's not forget that there is always room for improvement in our daily work.

Outdated systems

Contracts are essential component to most businesses. One of the most important elements of a successful contract is clear communication of the terms and conditions. Archiving or storing contracts in PDF format and a paper copy is easy. Unfortunately, what looks like a convenient practice can contribute to inefficient contract management, making it easy to overlook or misplace contracts.

Current ways businesses manage contracts may be spreadsheets, hardcopy filing systems or a CLM. If you don't have the latter in place, you will waste time pulling data out of contracts and converting it to your required format. Furthermore, as contracts get updated, you risk information being incorrect due to the manual management process. This can influence other business decisions and can lead to costly mistakes. 


Contract negotiation, as well as drafting, can contribute to inefficient practices. DocuSign reported that a third of employees said a contract takes 30-plus hours to negotiate. The same study reported that one of the most significant results, due to challenges faced in contracting processes, was delays in closed deals (65%) and lost revenue (30%). Negotiating simple terms can lead to lost sales and significant delays in projects. 

Accessing contracts

If you cannot access contract data in real-time or at all, you leave your business exposed to various risks. The journal of Contract Management reported that 71% of businesses lose 10% of their contracts. This opens companies up to several risks due to the inability to track their obligations, manage risks, and more. Furthermore, you delay business operations which can increase costs and reduce revenue. 

Curious about automated data extraction from documents?

Machine readability 

Storing contracts in Word or PDF format is as inefficient as it is costly. Protecting.co.uk, a health and safety software company, found that only 1 in 166 employees read their employment contract. While some skim-read, most admitted to never reading their contract. This likely extends to other contracts. Consumers shouldn’t have to read multiple pages to derive the information necessary. Having machine readable contracts allows users to extract relevant information in real-time. This is advantageous as it’s more informative to users.


The way contracts are handled is prone to major business risks. In 2019, DocuSign reported that 80% of employees sent contracts via email. Data in contracts is highly sensitive, especially when dealing with NDAs. Verizon said that 94% of malware delivered is via email. Furthermore, all businesses are subject to the risk of human error, one of which is sending an email to the wrong person. If information is sent to the wrong party, you could potentially lose a partnership, client or sale. You may also be liable to pay a fine due to a breach of GDPR if the individual suffers harm due to the error. Sending legal contracts should be done via secure methods. 


While there may be barriers to adopting new technology or a lack of awareness of what is achievable with such software, the consensus amongst organisations remains that contract automation is a priority. Whether it's to track obligations, draft contracts or post-signature management, there are efficiency advantages to be gained. More and more companies recognise the need for a more streamlined solution when it comes to contract management. 

About Legislate

Legislate is a legal technology startup which allows landlords, letting agents and small businesses to easily create, sign and manage contracts that are prudent and fair. Legislate’s platform is built on its patented knowledge graph which streamlines the contracting process and aggregates contract statistics to quickly unlock valuable insights. Legislate’s team marries technical and legal expertise to create a painless, smart contracting experience for its users. Legislate is backed by Parkwalk Advisors, Perivoli Innovations and angel investors.

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