Contracts are the universal language of business. Almost every dollar that enters or exits an organization is predicated on a contract—even through the vending machine. For this reason, organizations of all sizes are moving toward contract management software. These systems automate the steps to request, approve, and maintain a contract. They can also do much more to drive efficiency, support business relationships, and protect an organization’s interests.
When someone uses the term contract management, this could mean a variety of different things. For some businesses, managing contracts equates to a folder in a desk drawer. For others, it is a single team member managing a spreadsheet and attempting to keep pace with changes. When people use the term contract management system, they mean one thing: an automated software that digitizes contract lifecycle management (CLM).
With a contract management system in place, companies are accelerating contract reviews and approvals. They are also reducing their risk while ensuring compliance and using advanced document management to get the data they need when they need it. CLMs are increasing the visibility of information across their company. This, in turn, allows for best practices in negotiating renewals and, sometimes, reducing spend. It also gives them the right enterprise-level tools to protect their most important assets.
Cut through the red tape without compromising compliance.
Accelerating Contract Review and Execution
Contract management systems automate highly complex approval routings so that the contract process takes less time from start to finish. This can include a combination of parallel and conditional approvals resulting in improved collaboration across different departments.
To further improve the process and reduce time, you can leverage e-signature capabilities through email and SMS messaging to ensure approvers have everything that they need. Many companies take things to the next level and integrate their contract management system and enterprise software, like Salesforce, to generate proposals and agreements.
For some organizations, the delays start even before review and approval cycles: during contract creation. For these companies, contract management software can make available templates, standardized terms, and clause libraries selected by legal and recommended for specific use cases.
The team member who initiates the requested contract has the option to configure all the customized fields specific to their enterprise needs including the type of contract, the team, the priority level and any other unique elements. Then, when the contract request does enter the company review and approval cycles, all of the necessary details are already there. The experience is much improved and execution of the agreement happens on time.
Reduce Business Risk and Improve Compliance
Contract management software reduces three main categories of risk. The first category of reduced risk is compliance management with a full audit trail. Rather than searching through email for a missing approval or attachment, the contract management software does the work for you. When everything is automated, there is a digital record of each action and signature—the system provides an audit report with just a few clicks.
The second category is contract compliance. The software has the functionality to run the analytics on the health of your business relationships. These reports can include the supplier’s regulatory compliance and how well they are adhering to their service level agreements.
The final area of reduced risk comes as a result of the contract templates and clause libraries mentioned previously. When companies can ensure that contracts comply with corporate standards, they maintain better control over how they do business.
Expanding Contract Visibility with a Single Source of Truth
Contract management can mean a desk drawer or a spreadsheet, but contract management software provides an enterprise level solution available to anyone with access. That means that more team members can initiate contract requests and watch the progress of their agreement. This allows teams using the contract management software to see suppliers, pricing, and contractual obligations—and increases their negotiating power.
Some companies opt to increase their suppliers’ and customers’ contract visibility as well. This gives their partners access to the contract—the backbone of the business relationship. And with built-in prompts for vendors to get forms completed and fulfill commitments, they accelerate supplier pre-qualification and onboarding.
Some organizations take it a step further, recognizing their contracts as a single source of transactional truth. By extracting and organizing data from their contracts, they inform their other commercial activities and better track their key performance indicators.
Negotiate Better Renewals in Less Time
Contract management software automatically recognizes the renewal date listed within a contract and will trigger a reminder to the contract owner or legal team when the contract will terminate. Knowing the timing of this renewal is just the beginning.
The software will also keep track of terms and obligations and other related contracts with this same party. If the contract is with a supplier, this can aid in negotiating future contract rates, possibly reducing spend. It can also support discussions related to performance, and building future KPI measures into the next statements of work.
You can let the software report out on performance obligations, contract end-date, and renewals as well as support accurate invoicing, spend and recommended actions to maximize revenue. On the sell-side of a company, an email alert that a contract is set to renew in the near-term, allows the team to guarantee that all obligations are met and that the client or customer is satisfied.
Value-added Document Management
An improved filing system will help you find the information that you are looking for when you need it. A contract management system helps you find the precise word or figure, no matter where it is across the entire enterprise. It does not matter if that document is a PDF or a JPG. The contract management system converts it into fully searchable text, accessible from a desktop or mobile device anytime and anywhere.
Best Practices in Contract Protection and Privacy
For some, a better protected contract is one that sits at the bottom of a drawer where only one person has the key. In this scenario, there is no way of knowing if 100 or 1000 people have managed to access that key and view the contract.
The only true way to protect a contract is by using stringent access controls and constant vigilance. Contract management software provides these benefits with privacy standards down to the specific field within a record and who has permission to view that field. System administrators have the right tools to go in and view who has accessed a file and even who has attempted to access a file.
As business operations grow in complexity, it is imperative to look at ways to streamline how work gets done. We also need to go beyond this basic referendum to make sure that the most foundational elements of our commercial activities do not slip through the cracks. Contract management systems were born out of this necessity and they have continued to adapt in step with the global landscape, increasing demand for efficiency and advancing technology.
To learn more about Agiloft contract management software, schedule your free custom demo with eliteBco here.