Effective contract management represents one of the greatest opportunities within the enterprise to reduce business risks and improve profitability – according to one recent survey of federal contractors, a whopping 92 per cent of respondents said effective contract management is “essential” to their organization’s success.
But in spite of how much hinges upon effective contract management, many businesses take an ad hoc approach to key tasks throughout the contract lifecycle, from disorganized storage practices that make it hard to refer back to these important agreements to a failure to monitor contract compliance.
Though frequently underutilized, contract management software can greatly reduce the challenge and manual work of abiding by established best practices. Software can improve contract management processes and results, but not if your approach is chaotic and disorganized from the start.
Before you can begin to evaluate the various contract management software products on the market, it’s helpful to understand their potential and limits of such solutions.
Contract management software can help you get organized
One of the greatest challenges in contract management is staying on top of hundreds, if not thousands, of agreements. When you consider the full scope and volume of contracts that exist within most businesses’ contract portfolios, including NDAs, employment agreements, vendor contracts and so on, it’s no wonder even the act of simple storage has become so unwieldy.
The new good news is that contract management software makes it easy to get and stay organized. More than just a catch-all spot for your agreements (although simply having a single storage location is helpful too), contract management offers tools that also help you get organized, from familiar and customizable folder-style storage structures to tagging and search functionalities that improve the visibility and discoverability of the contracts stored in your repository.
(But not if you don’t know where your contracts are to begin with)
Employing ad hoc organization tactics – or having no real tactics at all – to contract storage and organization can take a toll: one survey found that most companies can’t even find at least 10 percent of their contracts. If this sounds like you, there’s some work to be done before you can start reaping the organizational benefits of new contract management software. Specifically, it’s helpful to start with an audit of existing contracts, detailing the types of contracts and volume contract managers must deal with. Knowing what – and how much – you’re looking to store will both help you to select the right software in terms of storage capacity and inform your organizational strategy.
Contract management software can improve the security of your documents
From trade secrets to personally identifiable information, there’s a lot of sensitive data contained within contracts, making security a key aspect of your contract management strategy. The right software can augment your security strategy by building in features that help to safeguard your documents and reduce the risk of unauthorized access.
(But only if you select a solution with state-of-the-art security features)
Not all software is equal when it comes to security features. As you evaluate the options, look for a solution that takes a multifaceted approach to protecting your data. This includes offering features such as multifactor authentication, which requires more information than the standard username and password combination to grant login access, and user-level permissions which allows administrators to more granularly control who can view, download or perform other actions on each specific contract. If your software is in the cloud, you should also look for a provider that encrypts data both in transit and at rest and consider the measures that are employed at the datacenter to safeguard and back up your files.
Contract management software can help you use the best possible contract every time
Whether your contract needs to address a standard type of deal that comes up all the time or encompasses a highly unique scenario, contract management software can help ensure that you use the right agreement every time. For starters, contract management software that allows you to create a well-organized, clearly-labelled library of boilerplate templates makes it easy to find the appropriate agreement for more typical situations.
But your contract management software can also help you to more effectively and easily draft agreements to address more unusual situations. How? By making it easier to find and review past agreements with applicable terms that could then be adapted and/or incorporated into your new contract. While it might not be feasible to manually look through hundreds of old contracts blindly looking for parallels, metadata and search features can help you to zero in on similar agreements – and review how they performed – so that you can carry over effective wording or know what terms to avoid.
(But software can’t write your contracts for you)
Don’t fire your lawyers just yet. Though contract management software offers advantages within the drafting phase and can speed up numerous aspects of contracting, it can’t automate the task of actually writing contracts. But software does carry an added benefit that can improve all aspects of the contract management lifecycle; by automating some of the most time-intensive tasks of implementation, contract management software can free up resources that can be better focused on tasks that grow value, and that includes drafting new contracts.