What is contract management and do I need a system?

Contract Management Software Systems offer a unified platform for creating, editing, tracking, and renewing contracts across their entire lifecycle. A CMS brings many functions into one tool to provide myriad benefits like a centralized contract repository for information so your staff can find what they need easily; templates and other automations to cut down on manual repetitive tasks; and analytic reporting capabilities that help you analyze and optimize future contracts.

Most companies place a lot of emphasis on contracts in the formulation of an agreement, but have a tendency to forget them once they’ve been signed. However, the lifecycle of a contract goes far beyond its signing. The contract should serve as a compass throughout the agreement. It should be continuously consulted to ensure each party is living up to the expectations of the agreement.

But as a contract changes hands from one department to the next throughout the contract lifecycle, a lot of critical aspects of the contract process can get lost in translation. Mismanaged contracts can cost your business up to 9% in annual revenue. Contract management systems help keep the contract accessible and relevant at all times, keeping the agreement on track every step of the way.

Simplify the Contract Lifecycle with a Contract Management Software System

Contracts themselves can be quite complicated, but the contract management process is rather simple. Contract management begins with the composition of a formal contract (the Pre-Award phase), continues through the signing of the contract (the Award phase), and lasts through the end date of the agreement (the Post-Award phase). It begins all over again with the Renewal phase.

The Pre-Award phase starts with your search for a vendor, partner, or potential employee. Their prices and capabilities will shape your project and significantly inform your contract. Once you understand your options, you’ll collaborate with your team to create the first draft of your contract.

When you start negotiating the terms of your contract with your vendor, you’ve entered the Award phase. During this phase, you’ll formulate the timelines, terms, pricing, deliverables, termination requirements and more. Finally, when all parties have agreed and signed the contract, the Award phase is complete.

The Post-Award phase starts when the contract is signed and lasts through the end date of the agreement. This is the time period in which the work is done. If the scope of the work changes and the contract needs to be modified, that all happens during the Post-Award phase.

Finally, the Renewal phase initiates a new term of the agreement. At this point, both parties of the agreement will renew their contract and keep the same conditions or negotiate new conditions. This step is vital to honing the contract for the benefit of all involved, yet, thanks to auto-renewals, many businesses let this phase pass by unnoticed.

Each part of the contract lifecycle is manual, tedious, and difficult to keep track of. A contract management solution can help streamline each leg of the process.

During the Pre-Award phase, a contract management solutions can cut the time it takes to draft your contract. By creating templates of contract clauses, you frequently use, like service level agreements and NDAs, you won’t have to write or check these sections manually. You can even automate many aspects of contract creation by linking certain clauses to certain workflows and objectives. It also streamlines collaboration across departments in your organization who give input on your contract.

During the Award phase, a contract management system simplifies versioning so all parties can access and make changes and comments to the same cloud-based document, rather than sending multiple files back and forth. This ensures everyone’s input is heard and helps arrive at an agreeable contract faster. With e signatures, contracts don’t have to be mailed to be finalized.

During the Post-Award phase, a contract management solution uses your contract as the backbone of your project management process. Your system can monitor the actionable milestones of your contract and notify the right people when approvals are needed or when a renewal date approaches. With system-wide alerts, you’ll stay a step ahead of key dates and obligations. By putting you in the best position to fulfill your end of the agreement, you’ll preserve your business’ reputation and keep your project on track toward success.

During the Renewal phase, contract management software will help you prepare to enter a refreshed agreement. Automated alerts and reminders keep you apprised of upcoming end dates. Version tracking and audit trails show you how the contract has changed from renewal to renewal. In-depth analytics around value and risk help you evaluate a renewal’s potential.

Whom Does Contract Management Software Help?

At their core, contracts serve as a formalized handshake between two parties, providing transparency, accountability, and room for the project to shift, if necessary. Contracts serve as the vehicle for almost all business relationships, whether they be with clients, employees, vendors, or someone else.

Procurement Teams

As procurement teams work to find, establish, and build new relationships with vendors and suppliers, they do the work of negotiating the terms and conditions of a contract. A contract management software system increases the speed and ease of contract creation by allowing cloud-based proofing, compliance analytics, and clause templates.

A contract management software system gives procurement teams greater insight into the efficiencies of a contract, so these teams can make better evaluations on whether the business relationship will facilitate the greater goals of the business.

Legal Departments

Legal teams face perhaps the most demand of any department that touches a contract. contract management software helps mitigate risk and ensure compliance by making it easy to bring a contract into the platform and quickly find potential problem clauses. The software can analyze all contracts across the business to produce risk analysis reports, compliance tracking, and more.

Legal teams also gain access to a library of pre-approved clauses and other tools that streamline the document assembly and submission process.

HR Departments

With a contract management system, HR teams can simplify the meticulous process of hiring and onboarding new employees by centralizing and tracking hiring documents like offer letters, NDAs, and other forms.

A contract management system helps HR teams keep company documents organized and allow appropriate access across a range of materials. From employee handbooks and company policies to expense reports and individual employee information, the right information stays within reach.

Finance Departments

Finance teams deal with so much data that it can be difficult to parse out meaningful insights. A contract management software system makes it easy to locate unpaid revenue and identify services that are underperforming.

By keeping a contract connected to your workflow, you’ll avoid fees for missed deadlines and unmet terms. A contract management software system lets you create addendums and terminations in real time while still ensuring all parties are working from the most current version of the contract.

Does my Business Need a Contract Management Software System?

Every business is unique, but many companies reach a breaking point where managing contracts through Word documents and PDFs or other rudimentary tools becomes detrimental to your business’s bottom line and stymies your work rate. Many companies start to feel the pressure when their contract management load reaches around 20 contracts per month.

Many companies hire a contract specialist or contract manager, whose sole job is to manage and maintain contracts. If you are considering hiring a contract specialist, your business could most likely benefit from a contract management tool.

While hiring a contract specialist offloads much of the contract management burden, it doesn’t treat the root of the problem — that contract lifecycle management processes are often manual, meticulous, and prone to human error. As your business grows, you’ll eventually need to hire an additional contract manager. Eventually, you’ll need someone to manage the contract managers. The more contracts you accumulate, the more information there will be to sift through, and the slower your contract practices will become to revise.

Success shouldn’t be cumbersome.

The best contract management software systems allow your business to scale without creating the need to hire more staff. These platforms are built with features specifically designed to bring clarity, convenience, and integrity to your contracts. Some businesses manage literally thousands of contracts with a small team using a contract management platform.

Your Contract Management Practices Either Help or Hinder Your Business

Your contract management processes are impacting your business whether you realize it or not.

If you tend to sign a contract, then forget about it, your contract becomes disconnected from your workflow. This allows the project to drift, scope to creep. An unutilized or imprecise contract can lead to missed deadlines and unmet terms that may cost you revenue in penalties.

The best contract management software systems keep the contract visible as the anchor for the agreement, keeping key dates and milestones top-of-mind throughout the project. Contract lifecycle management CLMs help you gain a retrospective of the agreement, pinpointing why one agreement successfully met your expectations and why another failed to meet your expectations. You’ll also see where you can spend less money and recover unpaid revenue. With these valuable insights, you can make those positive processes repeatable and instill those processes within your platform.

The time it takes to assemble contracts can drag out during the negotiation phase. That time is costly, let alone the impact of overextended negotiations on the project’s timeline. That time is costly. With templates, a ready-made clause library, and other contract-focused tools, you’ll increase the velocity of your contract drafting and keep your agreements on track.

When the result of an agreement falls short of expectations, it can be tough to know whether the error resulted from the contract itself, or from a deviance somewhere after its approval. A contract lifecycle management CLM lets you evaluate each contract to spot inefficiencies that allow work to drift off track.

What Are the Benefits of Contract Management Software?

Contract management software helps you do more business – and do your business better. Not only does a contract management software system give you more insights into your contract efficiencies, but it also helps you take action to quickly optimize for efficiency.

Increased Speed

By harnessing contract management technology for your contract creation, you won’t have to start from square one each time you need to build a contract. As you optimize your contracts, you’ll be able to update your terms and clauses across your entire system automatically, rather than manually.

Better Collaboration

Contract management solutions lets collaborators make edits to a single document in real time. This ensures everyone is working from the same version of your contract and gives you greater ability to fine-tune its details.

Easy Sharing

Location is no longer an issue with a contract management software system. Collaborators can access your contract through a link that gives them access to edit the document. E-signatures and other features are not only easy to use but also allow contracts to be approved from anywhere.

Enhanced Searchability

Within your contract management platform, your contracts are text-searchable, simplifying research and allowing you to navigate a huge volume of data with precision.

Top-Tier Security

In this era, all information is sensitive information. A contract management software system keeps your contracts safe behind digital encryption and other cybersecurity protocols.

Cloud-Based Storage

Even digital versions of contracts can be lost if stored on a simple hard drive. Contract management software uses cloud-based storage so your contracts never fall into harm’s way.

Scalability

Success shouldn’t be a burden. With a contract management software system in place, you can meet the demands of speed and efficiency that come with taking your business to the next level. As your business grows, your contracts and the processes around them will evolve. As new technologies emerge, they will present new opportunities for business and bring with them new legal and compliance requirements that you’ll need to abide by. A contract management platform lets you upgrade your protocols without missing a beat.

Global Reach

With the ability to edit and approve in real time, you extend your business’s reach and create connections with suppliers and vendors around the world. Signing a services agreement with a vendor or client across the globe is no more difficult than with a vendor across town.

An Endless Contract Repository

Over the years, you’ll work with thousands upon thousands of contracts. A contract management software system stores and organizes them all, keeping them from cluttering your space and processes while keeping them accessible with just a few clicks.

Support Your Contracts, Support Your Business

Contracts may feel like an obligatory part of your business, but they capture the foundational promise of every agreement. Because contracts are cemented before the work begins, and they are soon forgotten after work begins, it can be difficult to connect problems with the end result back to the initial contract.

But contracts heavily influence the outcome of the work and the success of your business. Bad contracts expose businesses to legal risk, waste revenue, and fail to support the objective of the agreement. Bad contract management practices prolong negotiation times, fail to identify inefficiencies, and cause businesses to lose money on fees, penalties, and unmet terms.

A contract management software system removes the manual burden to build better contracts faster. The insights you gain into your contracts will often translate and inform other parts of your business. Most importantly, contract management software equips your business for growth.

By investing in an enterprise-level CLM system like Agiloft, your organization can ensure your vendor contracts are efficient, compliant and secure, perform to optimized standards, and are managed in a streamlined and centralized system that significantly reduces costs.

To explore how a CLM system can benefit your organization, schedule your free custom demo here or contact us at +1 650 459 5637 or info@agiloft.com.