No matter what type of business you’re in or the industry in which you operate, there are contracts being created and used every single day. Contracts regarding human resources, sales, vendors, clients, customers, and just about every aspect you can think of all relate to running a profitable business, so it shouldn’t be taken lightly.
Contract management refers to the administrative processes related to these documents, and it’s what allows all parties to be happy with the terms and conditions within. In the past, contracts were all created and managed in paper format which led to a whole range of issues and inefficiencies.
However, nowadays it’s more common for contract management to be electronic and automatic, thanks to amazing advancements in software and technology.
Choosing the right contract management software for your organization can be a challenging task, and it’s one of the most important purchases you’ll have to make as a business. When you have the right software working for you, though, you’ll see a huge return on investment and save your company so much more in time, money, and energy spent by your valued employees.
A contract isn’t as simple as some may think, as you generally assume the offer is presented and then agreed upon by all parties which create the contract.
However, there are quite a few areas to consider and a number of steps that must take place in the lifecycle of a contract which is why it’s so important to invest in the right type of software.
There is a business standard model in regards to contracts, and it deals with concerns over the following areas within a business. Here are just a few areas of contract management and what each of them attains to.
When we think about contract management it’s often easiest to break it up into the steps and phases, and why each of these is important. Depending on who you speak to, there may be some steps different, however, the general flow of contract management is the same.
The reason for a contract should be discussed and the request put in place to make it occur. All parties should have an understanding of the contract and what is required of them for this request to be undertaken.
The first draft of the contract should be created which will outline everything discussed in the request stage. This draft is intended to be a starting board for which changes can be made to ensure everyone is happy with the final result.
No matter how much planning has gone into a contract, there will always be the need for negotiating terms and conditions. In order for both parties to negotiate to the best of their ability, they need to be aware of all the essential details.
The back of forth of negotiating can be made infinitely easier with the right contract management software in place.
When all parties have come to an agreement over the terms of a contract, it can be prepared for approval. This is where a larger company would need to send the contract to an auditing center or higher authority for approval, or where a sole trader would need to reread the contract carefully before agreeing.
This involves the signing of the contract by both parties and although relatively simple it can become a hard task if there are constraints such as deadlines or geographic boundaries. This is another step where the use of contract management software is particularly beneficial.
Both parties in a contract should be upholding their end of the deal by meeting obligations and deliverables, and this needs to be managed and analyzed for the duration of the contract.
Reminders should be in place to keep up with compliance and there should be careful consideration not to let the contract’s value decline.
Contracts rarely stay as they are for the duration of their lifecycle, and this is thanks to the many edits and amendments made. Both parties need to be aware of any changes, and both will have to agree to a renewal.
If a renewal is agreed upon, these steps start again to ensure the best and most up to date outcome for both parties.
Contract lifecycle management is a term used to incorporate all of the processes and methods involved with managing a contract from its very early stages of initiation to the completion and renewal.
When a company has a stringent contract lifecycle management plan in place, the organization can benefit in multiple ways, including both efficiency and cost savings.
Because contracts are delicate and are rarely just black and white, it’s essential to follow the entire process from creation to completion to ensure that nothing goes wrong.
This is contract lifecycle management, and the process is now understood and used by most successful businesses who are looking to reduce risk, improve efficiency, and save money in their organization.
Without a thorough contract lifecycle management in place, things can get missed or looked over, and either party may be disadvantaged. For example, a study performed by Gatner Group found that 60% of supplier contracts renewed automatically without knowledge of the buyer, indicating a huge need for assistance in this area.
It’s been found that businesses lose up to 9.2% of revenue per year with ineffective contract management, so not only is it risky for compliance and legal sake, but it can cost a company a huge portion of their income.
By applying some simple principles and methods to look at the development, approval, and execution of these contracts, and teaming them with the right contract management software, you can ensure the very best outcome for your business.
Some companies have begun implementing a deal desk which serves solely as a contract management service, intended to close deals for salespeople and improve efficiency in the overall sales process. A deal desk is to act as the hub for all sales and work strictly on contract management so that the rest of the staff can continue working in their own specialties.
These desks consist of either an individual or a team of specialists who are dedicated to compliance, legalities, and negotiation.
And these roles have replaced the traditional contract focused roles from the past which centered mainly on administrative duties.
Although a relatively new idea, they have quickly gained traction in the business world and are getting more popular with each day.
A recent survey by SalesGlobe found that 70% of sales centered organizations now had a deal desk, offering a way to support non-standard deals and act as a hub for all sales related information.
Not only does a deal desk assist in closing the deal and finalizing a contract, but they can also help to project future growth and assist management in setting accurate KPIs for staff. Working with the very best contract management software, this approach ensures the very best deal for all parties involved, with absolute efficiency and accuracy assured.
Although the thought of being able to handle the contract lifecycle management yourself is nice, the reality for even the smallest of businesses is that it just isn’t viable. Businesses rely on contracts for their supplies, staff, sales, and more, and they are far too important to ignore.
For this reason, contract management software was invented as a way to assist with the lifecycle of these agreements and ensure efficiency across the board.
This digital revolution has moved old fashioned contract keeping from filing cabinets and desks to cloud based or on-premise platforms which make the entire process automatic. Everything from contract creation to renewals and negotiations can be performed with contract management software, and they can usually be customized to suit your organization exactly.
For many years, businesses relied solely on paper contract keeping and found there were countless issues with this process. Most commonly, paperwork was lost or misplaced, human errors meant that terms and fine print were written incorrectly, and usually, an individual or team was solely responsible for everything these contracts stood for.
With legal issues rising and the importance of making a profit more important than ever, it’s simply not efficient anymore to do manage contracts manually.
As we become more reliant on digitization it has become clear that these software programs are a far easier and more efficient way to handle contract lifecycle management.
They’re relatively easy to use, can be accessed by all relevant staff, and have numerous ways to ensure compliance and conditions are being met by all parties. When you choose the right fit for your organization there’s no end to how you can benefit.
For those companies who are still stuck with a paper or manual based contract management system, you might be wondering what all the recent fuss is about.
There are countless benefits to implementing a content management software in your organization, all leading to the ultimate goal of improving efficiency and profits.
When you use traditional contract procedures that require drafting, editing, and the back and forth during negotiations, it can take months sometimes for a contract to be finalized.
However, with the right CMS at your disposal, these contracts can be created with the click of a button and sent via email to relevant parties where everyone is able to edit and make comments as they wish, from anywhere in the world.
Where the job of compliance was once the sole responsibility of the contract management team, CMS now takes over this role more diligently. The best contract management software can red flag potential issues, send reminders relating to compliance measures, and ensure that everyone meets their promised deliverables by the stated time.
There are backups and copies of relevant data, so nothing can slip through the cracks anymore.
As thorough as someone might be in a contract administrator role, there is always room for human error. When you create and manage contracts with a CMS, you’re ensuring absolute accuracy and precision which means less chance for mistakes.
When you have just one person or a team of contract administrators working for your organization, you’re limited to the volume of work they can get done.
However, the automatic processes offered by a contract management software program means you can increase the rate of contracts created and completed and enjoy a more efficient workplace.
When a contract is created using this software it’s guaranteed to be of the highest standard and has already received input from all relevant parties during the drafting stage to ensure this. This means there are fewer amendments and less time spent in the editing stages.
Best of all, this software can indicate when a contract has been amended and alert the relevant parties so that no rogue edits can occur.
The latest offerings for contract management software come in two main types: cloud based platforms and on-premise systems.
While each of them has their own unique pros and cons, essentially they do the same thing which is to offer an automated contract lifecycle management service that is available on your computer.
When you’re trying to understand the cloud-based contract management system, it’s best to imagine it as in invisible entity.
There’s no CD to download or physical thing you can see, and the entire system is stored online and on a cloud which hosts the information and relevant updates.
Here are just a few reasons why people might prefer to use a cloud-based system rather than on premise.
Because there’s no need to download software or use a CD to install the program, you can use your cloud-based system from anywhere in the world.
With an internet connection, this cloud can be accessed which makes it helpful for companies with other parties involved who need to make amendments to contracts as they wish.
While you might think having your information online could be risky, most of these cloud-based systems offer far greater security than you’ll find anywhere else.
Provided you opt for one of the better-rated contract management software programs in terms of security, you will have no cause for concern over privacy issues.
When you rely on manual documents or an on-premise CMS to host your files, there’s a chance that they could become destroyed if not backed up.
When your contract management is performed through the cloud you will always have it ready when you need it, and there’s no chance it will be destroyed in a fire or lost along the way.
When your contract management system is on premise, this means your computer or a host computer in your organization runs the software themselves.
The program has been installed and all of the relevant files and documents are stored on your computer or server. Although this is considered a more traditional approach to CMS, it’s still the best option for many businesses.
When your CMS runs on premise, there’s no need to have a working internet connection in order to access it. This means you can work without the internet on the go, especially somewhere like a plane or with no signal, as all of the data is available from your own computer.
If you feel unsure about hosting all of your sensitive data online for people to access, an on-premise CMS might be the only way to go.
Although incredibly safe still, some might not be comfortable storing their information online and keeping it on their computer where they know it’s protected is the best option.
An on-premise contract management systems is generally easier to customize so they can adapt to your business’ needs, and in the case of larger enterprises, this is performed by an IT division. Cloud platforms usually run the same with little room for change, so if your business has unique contract lifecycle management needs then this is ideal.
Depending on your business, the number of employees, and the types of contracts you deal with, you’re likely to find that one approach works better than the other.
Thankfully, there are some great options available in both on-premise and cloud-based content management systems that can offer absolute efficiency to your organization, and even those which combine the best of both worlds.
Before you can consider whether contract management software would work for your business, you should make yourself a list of all the current contracts you have in place. Think of everything including clients and customers, to your staff, and the products and services you use or supply.
Chances are once you see them all on paper you’ll realize just how much you rely on a quality contract management system in place and will feel compelled to see what CMS can do for you.
There are a few industries that undoubtedly require a thorough contract management software already in place such as hospitals, recruitment companies, and those industries dealing with technology.
These entities usually have thousands of contracts in place at a time and with limited time available to deal with bottlenecks and mistakes, and so CMS is critical.
Contracts are an integral part of all businesses, and no matter the industry you’re in or the size of your company, there’s no excuse not to have a functional contract management system in place.
Nowadays, the realm of contract management software is far more adaptable than ever before and can be completely customized to suit your organization, budget, and staff.
It’s no longer acceptable to just rely on outdated methods of managing contracts, as there’s far too much at stake for companies to take this approach. Financial, legal, and compliance issues all arise when your contract lifecycle management isn’t handled correctly and is left to manual administration.
With the best contract management software in place, your company will benefit in countless ways with time, money, and energy saved on doing things manually or with an outdated system.
A good CMS will free up your efforts so you can instead focus on growing your business and improving profits, allowing the entire company to benefit from this one investment.