Those in charge of managing contracts know very well that contracts are not just another administrative function of their business.
In fact, contracts affect businesses significantly and in many ways.
So what is a contract management software?
In this article, we will elaborate on what a contract management software is.
Why do we need contracts in the first place?
Are you looking to protect your assets? Your brand? Perhaps to mitigate risk or handle compliance related obligations? Let’s not forget, ensure you work or offer a product and get paid!
It’s undisputed that a contract is crucial to your business.
Having said that, an effective contracting process will not protect your business but will also help you cut down on your cost of doing business.
Consider this, the International Association for Contract & Commercial Management (IACCM) indicates that companies lose more than 9% of their annual revenues in inefficient contract management processes.
This number is staggering for a business of any size.
A $100M business will lose $9M, every year, due to poor contract management operations. Incredible.
To address this pain point, a contract management software is a tool that will allow you to attack your contracting inefficiencies head on.
In the end, with the right software, you will increase your operational efficiency enough to not only pay for your software license but also leave more money in your jeans.
In this article we will look at:
- How is a contract management software useful?
- What is the contract management process?
- What are the benefits of contract management software?
- Who can benefit from a contract management software?
- Contract management software is suitable for what type of companies?
- What features are important in a contract management software?
Let’s get into it.
1- How is a contract management software useful?
A contract management software is a platform designed to support your contracting process and lifecycle, from start to finish.
This means: contract creation, drafting, negotiation, signature, lifecycle management, termination and post-termination.
Most companies handle their contracts manually, and that’s ok for some time.
However, as you scale your business, inevitably there will come a time where your manual efforts will no longer serve your purpose and you start negatively affecting your business operations.
Manual processes have a tendency of quickly breaking down when volume goes up or too many people need to get involved.
Do you see yourself using platforms like Dropbox, individual drives, Outlook, e-mails, scattered Word documents, spreadsheets and material that you no longer remember where you filed?
Well, rest assured, you are not alone.
With your manual processes, are you confident that you can handle a larger volume of contracts? Complex contracts requiring the intervention of many stakeholders? Can you stay on top of your contract negotiations and versioning when engaged in long negotiation of an extensive contract?
Today, are you able to quickly get a view of your contract portfolio, get analytics, extract your obligations and manage your contract lifecycle?
If you are mainly on manual processes, we venture to say: probably not! If you are, we would love to interview!! Give us a shout!
Coming back on topic, so a contract management software is a tool providing legal teams and contract administrators an efficient and effective way to manage their contracts from inception to end of life.
The advantage of a contract management software is that it is designed from ground up for this purpose.
Things like pre-closing, closing, post-closing, termination and post-termination. Check, check and check.
Many businesses, legal operations and contract teams do not have a centralized process in dealing with their contracts or managing them effectively.
Therefore, the right software tool will be crucial and highly strategic in such cases.
Manual processes or poor contract processes introduce unwanted risk to the business. You may lose your contracts, miss important obligations, deadlines or perhaps fail to exercise a contractual right on time.
A contract management software is therefore a system allowing you to support your entire contract lifecycle through a dedicated and digital system automating most of your contract-related tasks.
2- What is the contract management process?
The contract management process is composed of all activities, operations, tasks and processes.
Here is a quick overview:
- Creation and drafting of a contract
- Contract negotiation and version management
- Approval management and tracking
- Contract execution and signatures
- Contract lifecycle management
- Contract termination handling
- Post-termination activity management
Let’s put this into perspective.
For a short NDA, these steps may not be a big deal. But imagine a multi-million dollar licensing deal or services contract, it’s a different story. Perhaps a joint venture, a merger or a large transaction.
As a business owner, legal department manager, contract administrator or person responsible for your company’s contracting, you should assess your contracting process to see whether or not you may need to implement changes to better manage the process holistically.
Is your current process straining your business? Are you able to scale?
One thing is for sure, if you are part of the average, you may be burning 9% of your annual revenues and not doing anything about it.
The evaluation of your company’s contract management process will be quite useful and eye-opening for you.
Even if you do not intend on automating your processes, you should nonetheless do this exercise to better understand your business.
Inefficient management of your contracting tasks will lead to errors, missed activities, resource fatigue and overall frustration.
Using a software solution, your haphazard and manual contracting process can be transformed to something like this:
- Automated contract creation processes
- Draft contract version control
- Smooth approval process
- Collaboration capabilities
- Electronic signature integration
- Contract analytics and data
- Deadline management controls
- Special clause tracking
- Lifecycle management
- Integration with other software tools
As you may see at face value, with the right contract management software, you can quickly optimize, automate and digitize your contracting process.
We are strong proponents of leveraging technology to achieve operational efficiencies and growing your business.
You should consider what’s out there and make an informed decision for yourself. You may choose not to go the software route but you may be pleasantly surprised.
3- What are the benefits of contract management software?
Regardless of your organizational size, if you are regularly dealing with contracts, you stand to benefit from a contract management software.
What are the key benefits of a contract management software?
There are several benefits and here are just a few of them:
- Time saving
- Cost reduction
- Risk mitigation
- Contract version control
- Improved contractual audit
- Improved collaboration between teams
- Searchable contracts
- Secure and central repository
- Backup protections
One notable benefit is the ability to track and manage your contract versions in the context of contractual negotiations.
This can save you costly mistakes. Even worse, signing the wrong contract version! Let’s hope that never happens…
Another notable benefit is to manage the contract’s lifecycle.
Winning a deal is great but managing your contractual obligations is crucial.
With a contract management software, you can track your contractual rights and obligations, trigger the right tasks and activities at the right time, handle your renewals properly and ensure you remain on top of your obligations.
We also consider that scalability is a truly attractive feature of a contract management software.
Successfully managing your contracts is fantastic. The real question is, are you able to continue growing without hitting a bottleneck or dealing with an operational breakdown? Will your current process withstand the growing pressures of your business.
Considering a contract management software automates most of your contracting tasks and activities, you can easily scale your operations without seeing your process crumble and break down.
This is important in the life of a growing business as you can focus your time and energy on closing deals rather than internally feeling strained and stressed.
4- Who can benefit from a contract management software?
In every business, you will have a business unit primarily in charge of the contracting process.
In smaller companies, it could be the finance department perhaps or several teams sharing the responsibilities.
In mid-sized to larger organizations, you may have legal departments, procurement, sales, HR or other business functions managing specific types of contracts.
Legal departments and lawyers live and breath contracts on a daily basis! So they probably see most of the contracts.
So who can benefit from a contract management software?
Many business units can use the application:
- Legal departments
- Human resource departments
- Sales teams
- Procurement teams
- Finance teams
Pretty much any stakeholder in charge of negotiating a contract, managing a contract or handling tasks relating to a contract is a good candidate for leveraging a software solution for this purpose.
Contract managers and lawyers will particularly enjoy having a software tool.
On the flip side, lawyers are not particularly known to be major innovators either! Our advice to you lawyers out there, get on the technology bandwagon and embrace it, it is here to stay. You should leverage technology to give even better services and advice.
Enough with our editorial comment!
As a lawyer writing this article and a major proponent of software and technology, there is no doubt that lawyers must evolve and change their ways.
Tech-savvy entrepreneurs and high-tech businesses are taking all industries by the storm. Lawyers need to act to remain in the driver’s seat.
Many vendors offer a free trial, without any obligations. Perhaps that could be a good opportunity to get your feet wet, test it out. See how it goes.
Give it a shot and tell us what you think.
5- Contract management software is suitable for what type of companies?
A contract management software solution may be suitable for any type of organization, particularly those dealing with limited resources, having high contract volumes, dealing with high-valued contracts or very complex contracts.
Every business is unique and may have a different challenge or pain point. However, every business can stand to gain through automating its contracting process.
Some businesses that can see value:
- Mature businesses
- Regulated businesses
- Process-conscious companies
Start-ups can see value in a contract software management as they will typically have fewer resources to manage this process or grow at a pace faster than their contract process can handle.
A start-up can leverage the powers of a contract software management to alleviate the workload on the founders, CEO, CFO or strategic business stakeholders so they can actually focus on the business.
Mature organizations will most certainly benefit as they may have different contracting processes per region, territory, department and unit.
They may have a lot of volume to deal with, need visibility into their contractual obligations and struggle to manage their contract approval process.
With a contract management software, a mature organization or one heavily regulated can:
- centralize its processes
- implement a standard set of approval workflows
- manage and track the negotiation process, contract versioning
- have searching, indexing and reporting capabilities for more visibility into their global contracts
- Ensure the proper lifecycle management
- Ensure compliance and regulatory requirements are tracked and managed
Process-conscious organizations can also benefit. These are companies constantly looking to improve, find efficiencies and be better every day.
For many, the contracting process is a challenge. You can continually achieve efficiencies in the way you do and conduct your business.
Process-conscious organizations strive to push the envelope and compete with themselves internally but also beat the competitors externally. It’s a winner’s mentality that pushes you to constantly improve.
They will love contract management software!
In substance, most organizations have potential in benefiting from a contract management software.
6- What features are important in a contract management software?
To maximize your benefit in using a contract management software, you should pay attention to the features and functionalities that come standard with the solution.
The ideal scenario is that the software solution handles, out-of-the-box, your main requirements and alleviates your biggest pain points.
Before evaluating the feature-set, you must have a good grasp of your own processes. You should know what you are good at and what you need to improve.
Once you’ve identified your areas of improvement, you should then put them on a scale starting from critical, high, medium or low in priority.
What’s critical is what you absolutely need to fix. In other words, the software that you will consider must have features that will directly address your critical process flaws or challenges.
What’s low is a good-to-have but not a big deal if the software solution does have a functionality that directly alleviates that concern.
Equipped with this information, you will be ready to go to market to evaluate a contract management software.
From our point of view, you should pay a special attention to the following features:
- Secure access to the system
- Remote access
- Access management
- Scope of tasks that can be automated
- Audit logs
- Deadline management functionalities
- Obligation tracking features
- Approval process and workflow
- Configuration possibilities
- Integration with your CRM systems and other tools
- Contract template management
- Searching and indexing capabilities
- Total volume of contracts software can handle
- Number of concurrent users that can use the system
- Storing capabilities
- Analytics and reporting for administrators and management
- Storage capacities
There may be more features needed on your list. Don’t hesitate to ask and demand it from the software vendor.
If you will pay for something, you must get value. Period.
A contract management software is a tool designed to support legal departments, lawyers, contract managers, sales teams, human resource professionals, procurement specialists and anyone dealing with a contract on a regular basis in a company to manage their contracts, automate and optimize their processes.
Automating your contracting process will work for any company, in any country, of any size, industry or market.
If you are dealing with lots of contracts, complex contracts, high-value contracts, regulatory obligations and compliance challenges, then you should consider the opportunity of leveraging a contract management software.
If you don’t have any plans to adopt a software technology, we invite you to minimally consider reviewing your contracting process and finding alternative ways to find efficiencies.
However, we strongly recommend that you engage with software vendors to see what’s out there. Worst case, nothing good. Best case, you find the right software.
Are you currently using a contract management software? What is your experience? Have you looked at different products out there? What do you think? Share your feedback with us, we would love to hear from you.
We hope that this article was useful to you in better understanding what is a contract management software.
Good luck in your business!