For companies, one of the key aspects of digitalization is implementing technologies to eliminate media discontinuities in their processes. This aspect is particularly relevant for contract management. But what are important contract management functions? to keep an eye on when deciding for implementation?
What is contract management?
To get to the bottom of particularly important functions, we first need to look at the definition of contract management.
What is contract management?
“Contract management includes negotiating the terms and conditions in contracts and ensuring cmpliance with the terms and conditions, as well as documenting and agreeing on any changes or amendments that may arise during its implementation or execution. It can be summarized as the process of systematically and efficiently managing contract creation, execution, and analysis for the purpose of maxmizing financial and operational performance and minimizing risk.”
We get it: Contracts are a key requirement for conducting business. As such, there is usually a wide range of different contract types in a company, for example contracts with customers and suppliers, rental contracts for buildings and employment contracts.
As is the case for many other processes, there are significant benefits to be gained from switching from analog contract management to digital contract management – with the help of the right contract management software, of course.
That’s why it’s a good idea to put your process to the test – because there are many advantages that come with optimizing your process through digitalization, such as cost savings from faster processing and active deadline management, to name just a few.
This article will show you all the different things contract management software can do.
Providers of digital contract management software are a dime a dozen
If you want to fully utilize the potential of digital contract management, there are a few important things to consider. To help you choose the right software, this blog article summarizes seven important functions that any contract management software must have.
Seven must-have functions for your contract management software
Function 1) – Deadline management
Anyone who works with contracts knows how tiresome it can be to manage contract terms. After a contract has been created, the documents are filed and often not retrieved for months or years. If you don’t actively set reminders in advance, you can quickly lose track of termination deadlines.
This is where active digital deadline management can help. Right when the contract is created, the termination deadline is automatically calculated from the term and stored, and a notification is set up to remind the person responsible with sufficient time before the deadline passes.
This enables you to renegotiate contracts and conditions before the deadline and therefore save on costs.
Function 2) – Fast creation of new contracts
Most employees don’t create a hundred new contracts a day, which means they may lack experience or find the process of creating new contracts difficult. They may not know what they have to fill out, for example, or they may not have the necessary information. Creating a new contract can therefore take a long time.
Digital contract management tools are designed to simplify the creation of contracts. Readily available templates are therefore a core component of any contract management solution, as they come pre-filled with all the information required for contract creation. Ease of use ensures high user acceptance and fast creation of new contracts—so that users have more time for other important things.
Function 3) – Searching for and finding contracts
Where is the contract? That’s a question that gets asked a lot. If contracts are not stored in a central system, a great deal of searching is required to find the necessary information. Time and again you have to go searching for relevant details in different documents— which are usually located in different dossiers.
Contract management functions should therefore enable you to find existing contracts quickly. Ideally, the tool should offer two options: a full text search and a structured search using metadata. Metadata may include the dossier number or the name of the contractual partner. This search enables users to find relevant information quickly and easily.
Function 4) – Workflows
There are usually several people working together on a contract draft. A first draft is produced and revised, and then a final version has to be checked and released. This requires the triggering of different workflows, for example for contract release.
In the analog world, it’s often not clear which version of a draft is on whose desk and who is supposed to edit the document next in the process.
A contract management system should let you design simple workflows, or it should already contain standard workflows for editing, checking and release. An overview provides transparency for all employees responsible for the contracts. That way everyone always has the same information about a contract’s release stage and which employee is currently processing it.
Function 5) – Collaboration and distribution of tasks
With paper-based processes, collaborating on contracts requires a lot of communication to ensure that important information isn’t lost. This is no different in the digital world.
However, this process becomes easier if digital notes can be attached to contract documents, which can be read by any person working on them. In addition, users can create contract document tasks for themselves or assign them to other employees.
To improve cooperation and make work on contract documents transparent for all parties involved, a contract management tool must support collaborative work.
Function 6) – Reporting
Transparency is indispensable to cost control. Employees who are responsible for costs in the company (e.g. purchasing, controlling) must always have up-to-date overviews of costs and expenses arising from contracts. In the analog world this requires a lot of effort, as all this information must be compiled and kept up to date. A manual process is also very prone to errors.
Digital contract management functions must therefore include overviews that are updated daily—both of contracts in the portfolio and of associated liabilities and impending deadlines.
Function 7) – Digital signature
What better way to complete the process than with a digital signature?
Printing documents, sending them out for signature and then entering the signed documents back into the system is a tedious and time-consuming process. A contract management tool must therefore offer legally valid digital signing of contracts, i.e. with a qualified electronic signature.
This is the only way to ensure a seamlessly digital process, from the start all the way to the final contract signing.
Conclusion: Your contract management software
As we have seen, there are many different process steps and functions that can be improved with contract management—from contract creation, to release and signing, to deadline monitoring.
Utilize the advantages of a digital contract management tool and increase efficiency and transparency in your company—so that you have more time for important things. But make sure that the software you choose contains the seven important functions described above.
Read more about our contract management software and get a preview of how functions look like.
If you’re already using SharePoint and Microsoft 365 – great news! We can support your document system with a fully integrated contract management functions.
Or learn more about digital contract management and how to make it effective in our blog article: Use contract management effectively in SharePoint and Microsoft 365
Definition based on the following source: “Best Practices in Contract Management: Strategies for Optimizing Business Relationships<“. Aberdeen Group.