Contracts help establish and maintain a company’s most important relationships with partners, vendors, and customers. As organizations have gradually come to realize the potential for well-managed contracts to add value outside of just the legal department, contract management has rapidly become a part of daily business practices.
At its core, contract management involves creating, negotiating, executing, and maintaining contracts throughout their lifecycle. It’s a lot of work, especially when done manually, but the right contract management technology can help contract professionals streamline their contract processes, reduce risks, and increase efficiency across the entire organization. Here’s how!
The Challenges of Manual Contract Management
Manual contract management involves using spreadsheets, emails, and paper documents to create, track, and manage contracts. However, this approach often leads to frequent human errors, missed deadlines, inconsistencies in contract language, and long delays.
Here are some of the challenges of manual contract management:
- Time-consuming process. Creating and managing contracts involves multiple stakeholders and steps. When communications happen manually over email, it typically results in unnecessary delays in contract approval and execution, which drastically impacts business operations, especially the revenue cycle.
- Human error and inconsistencies. Errors and inconsistencies are commonplace in manual contract management. Examples may include typos, missing information, and conflicting terms. These mistakes can be extremely risky for organizations operating in highly regulated industries, sometimes leading to disputes, lawsuits, and financial losses.
- Difficulty in tracking and storing contracts. Without technology, it is very challenging to store contracts securely, find the necessary contracts when needed, and keep track of the wealth of data locked inside the company’s agreements. Contracts that are lost or misplaced in a manual filing system or scattered across various hard drives may become a liability both legally and financially.
The Benefits of Technology in Contract Management
Contract management software helps organizations overcome the challenges of manual contract management by removing bottlenecks that increase cycle time and allowing lawyers to focus their time where it really matters.
Here are some of the benefits of implementing contract management technology:
- Automation of contract creation and approval processes. Automate many pieces of the contract lifecycle, from drafting to approval to renewal. These automated workflows save time for employees, reduce errors, and improve contract compliance.
- Real-time tracking and monitoring of contract status. Obtain real-time visibility into the status of contracts, such as pending approvals, renewals, and expirations. Stay on top of new and old contracts while proactively managing risks.
- Centralized storage and organization of contracts. Store all contracts in a centralized repository that is easily accessible and searchable. Avoid lost or misplaced contracts and ensure compliance with record-keeping requirements to make audits easier.
Types of Contract Technology
There are several types of contract management software available on the market, each with its own set of features and capabilities. Here are some of the most common types:
- Contract lifecycle management (CLM) software. Streamlines the entire contract lifecycle by automating workflows, tracking changes, and providing real-time visibility into contract status.
- Electronic signature software. Allows parties to sign contracts electronically, securely, and legally, without the need for paper documents. Often included in CLM tools.
- Contract analytics software. Uses machine learning algorithms to analyze contract data and extract insights on topics such as contract risk, compliance, and performance.
- Enterprise legal management (ELM) software. Provides tools to help internal legal teams streamline their legal operations, manage legal spending, and generate analytics.
Tips for Selecting the Right Contract Technology
Choosing the right contract management software can be challenging, as there are many options available on the market, but organizations must take the time to find a solution that fits their needs. Here are some tips to help businesses settle on the right software:
- Assess business needs and requirements. Before selecting software, organizations should identify their contract management challenges and goals and assess their current contract processes and the available legal ops resources.
- Evaluate software features and capabilities. Businesses should evaluate software features and capabilities based on their needs. Notable features to consider include workflow automation, data reporting, and integration with existing company systems.
- Consider software implementation and integration. Think about the time, resources, and costs required to implement the software, maintain it, and train users to be ready to use it daily.
Contract management has only recently entered the spotlight, but it has quickly become an essential part of everyday business practices. Organizations that want to make the most of their contracts and help the legal department contribute as much value as possible to the business need to think about how they can manage their contracts better.
Contract management software can be the perfect solution for simplifying contract operations and turning the focus toward core business activities. If you’re interested in learning more about how contract management technology can benefit your organization, reach out to our expert staff today for a consultation.