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4 of the Major Contract Management Challenges for Nonprofits

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NPO (Non-Profit Organizations) work towards the betterment of society and single-handedly achieve several noble goals.

Depending on the cause they are fighting for, every kind of NPO functions on a different scale. From managing vendor contracts to drafting employment agreements, NPOs have to deal with multiple contracts at once.

While most organizations work with charitable causes, some may even set scientific and educational goals. However, a lot of challenges and factors affect the way these organizations function.

In turn, this limits their success and ability to function in the most efficient manner. One of the main challenges is drafting, floating, and managing contracts. Here are 4 of the major issues faced by NPOs when drafting and managing contracts.

  1. Lack of Transparency and Organization 

Whether it’s the casual working system or the documents relevant to the important departments within the NPO, lack of organization is a big challenge. Generally, NPOs are not obliged to pay income taxes, which can actually be a minor threat to them. They are usually scrutinized more than commercial entities.

In fact, some organizations have to provide detailed accounts of their expenditure and reevaluate their needs to redirect the money they are spending.

If an organization lacks contract management skills, it may not be able to provide accurate expenditure reports. This, in turn, can affect the amount of funding they will receive in the next quarter.

Furthermore, every official contract states the exact number of working hours that a company’s employees must adhere to. However, NPOs lack a relevant established working pattern, which can affect their long-term goals. As an NPO representative, you must ensure that your contracts specify the number of hours if needed by some volunteers. Even though most NPOs work on the basis of volunteers, some may expect a contract for future benefits.

  1. Limited Resources 

Most NPOs battle to receive adequate funding and often manage on minimum budgets. This can affect the way they draft contracts. Since you cannot dedicate your entire time to preparing paper contracts and filing them on your own, contract management can be a big issue for your organization. You may not have the money to hire additional representatives or the time to make the contracts. This lack of resources and time can make the process even more tedious. In turn, NPOs often end up missing important deadlines.

While receiving more funding or a higher budget in a short period is a false hope for most non-profit organizations, you can reduce the contract management issue by using a software program. With time, contract management software for nonprofits is increasingly sought after due to its multiple features. In fact, organizations that have undertaken such software programs no longer find contract management a pressing issue.

  1. Varied Needs

Your NPO may have different needs than commercial or standard business entities, which can pose a threat to your contract management system. With varied needs comes the requirement of forming entirely different contracts. The structure, clauses, and type of contract change too. Since most commercial companies design contracts to define their primary objectives and needs, NPOs usually lack this aspect. Some contract types of commercial companies are also specifically made to define their budget.

Some non-profit organizations flourish with time and make steady progress, which is when they need to redefine their goals and objectives. This comes with the need to change their contract too. In a way, the entire system of contract management should be altered thereafter to fit the new programs, budget, and location details. With an effective management solution such as a software program, you can alter and reevaluate your new contract just like a professional.

  1. Risk of Paying Fines

Not many know this but NPOs are also susceptible to paying fines if they are unable to manage their contracts. Every organization should fulfill certain requirements to avoid legal action. It can also damage their credibility and reputation. Since these two factors belong to the main ideals of NPOs, most organizations try to mitigate the risk as soon as possible. Even though you cannot entirely avoid risks, you surely can reduce its effect by drafting and managing your contracts with efficiency. You will not only reduce risks but also reach your goals sooner.

Contract Management NGO

Once NPOs manage to draft and float contracts effectively, they can focus on other important tasks and truly achieve their goals. If you run or work for an NPO, try sorting out your contracts and organize a system to manage them properly. You can seek help from contract management software as well. It will ensure that your contracts are in place and provide maximum benefits. Lastly, it will also increase your chances of receiving a higher budget.

Aduragbemi Omiyale is a journalist with Business Post Nigeria, who has passion for news writing. In her leisure time, she loves to read.

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