What is contract management?
By leveraging a contract management software, businesses can reduce the risk of errors and oversights, ensuring that all contracts are properly executed, tracked and stored.
What does contract management mean?
Contract management is all activities involved in the handling of written agreements (contracts), especially those concerning business partnerships, employment and sales.
To put it simply, contract management is all the work done before a contract can be signed. These include the negotiation, creation, execution, support and analysis of contracts.
An efficient contract lifecycle management (CLM) process keeps organizations in total control of business agreements and contracts by:
- Monitoring contract relationships between all parties involved
- Addressing concerns during contract drafting
- Making contract modifications
- Working with the contract’s actors to achieve the stated objectives
Why is contract management important?
Contract management improves an organization’s operational and financial performance while also minimizing risk.
Traditionally, reviews and approvals for a single contract involved time-consuming, repetitive tasks carried out by multiple people.
But when businesses rely heavily on guesswork and manual tracking, they leave too much room for manual errors and operational bottlenecks. This results in teams rushing to meet deadlines, overlooking important clauses in a contract, missing contract renewals and other potential problems that cost time and money to rectify.
Contract management streamlines how your organization handles an agreement — from creation to execution. Having the right processes makes it easier for business users across teams to collaborate on documents, accelerate revenue and stay compliant.
What are the stages of contract lifecycle management (CLM)?
Each business has its own methods for overseeing contracts categorized by their lifecycle stages. In general, this process may be broken down into these seven essential steps:
Before an agreement is drafted, a contract template is pre-built and, when necessary, approved by legal teams. These contract templates list custom fields, required clauses and other terms (country-specific regulations, etc.). Having standardized contract templates in place minimizes confusion and allows for faster auditing and reporting.
With the approved template in place, organizations can begin to fill out their required fields before negotiations start. Preparing a contract draft is best done in the presence of legal counsel to protect the best interests of the business.
Every contract must be examined and approved by all stakeholders involved. In the negotiation stage, all parties can communicate their concerns or exchange suggestions on the initial draft contract. Negotiation processes can benefit greatly from a transparent approval workflow, one that makes collaboration and revisions easy to track for faster final approvals.
Execution and signing
Renewals or termination
The execution stage happens when all stakeholders are ready to sign a contract. Organizations that utilize electronic signatures (or e-signatures) can speed up this process by eliminating the need to print, fax or mail these documents physically.
In some cases, a business contract still needs to be amended after it has been signed. This could happen when the terms of the contract evolve from what was originally agreed upon. Some reasons a contract would need to be revised include price revisions, new governmental regulations or unforeseen circumstances (force majeure).
Either party can decide to renew or terminate a contract once it reaches its expiration. Businesses can get automatically notified of expirations and renewals with a contract management platform. Contract management software makes it easier to view and track revisions made to the original contract — so that the new agreement reflects updated clauses, terms, services or regulations.
Once an agreement has been terminated or has naturally expired, it still needs to recorded and stored as a reference point for future contracts. Businesses who opt for a secure, cloud-hosted contract records management software can store and instantly access their previous contracts according to regulatory data compliance.
What is contract management software?
Contract management software is a centralized platform used to streamline and expedite the management of legal agreements. This is done through automated workflows, templates, electronic signatures, historical tracked changes and various collaboration tools.
Contract lifecycle management (CLM) solutions improve transparency and promote accountability. Deploying a secure contract repository unifies all activities that your HR, legal, sales and other teams need to accomplish for documents to be reviewed, approved and executed on time.
Key features of contract management software
An effective CLM solution is user-friendly and equipped with specific features to keep your contract lifecycle visible and easy to manage. Some of them are:
Approving and executing contracts must be done according to a deadline. Built-in automated workflows identify manual, repetitive actions that take up too much time, automating complex business processes altogether. This makes contract reviews, document routing, approvals and renewals much faster.
Growing, fast-paced organizations need a central database to store contracts.
Cloud-based systems allow everyone to find relevant information quickly, access contracts securely and collaborate effortlessly.
Notifications and alerts
Manually keeping track of contract renewals, expiration dates and terminations opens organizations up to error and losses in productivity.
Automated notifications and alerts ensure that important contract updates do not get overlooked or missed. This keeps people informed of deadlines, obligations and renewals — leading to faster decisions and operations that run smoothly.
“Wet ink” or physically signed contracts need to be printed, faxed and possibly mailed to relevant parties to get it acknowledged.
Electronic signatures (e-signature) tools, on the other hand, are a seamless process to capture digital signatures from anywhere at any time. E-signatures would also directly reduce the costs associated with handling paper contracts and the risks that come with losing documents in transit.
Secure role-based permissions
The right contract management system should come equipped with role-based access control tools.
This allows specific administrators to define and control access to sensitive contract information based on user roles. A secure platform comes with data encryption, password strength policies and inactivity time-outs to protect your business from data breaches.
Benefits of contract management software
You can manage, track and automate each phase of the contract lifecycle with CLM systems – regardless of how big or small your firm is. CLM software:
Securely captures and stores contracts in one place
You can avoid the inefficient processes that come with handling paper documents. An efficient CLM system uses optical character recognition (OCR) technology to scan physical documents into the system. This gives all involved business users one source of truth where information is stored. You could also use pre-existing contract templates to standardize drafting and negotiation processes.
Provides a 360-degree view of contact information
Organizations need real-time contract status updates. A CLM system keeps track of statuses, contract expiry dates, upcoming renewals and other actionable tasks so teams know where they stand with every agreement.
Streamlines final approvals
Workflows ensure that no one is confused regarding role responsibilities and what needs to be done. Automated workflows route documents to the right people faster, keeping them notified and helping everyone stay ahead of deadlines. CLM software that supports e-signatures is another way of getting contracts signed with greater speed.
Allows for greater collaboration
A CLM system enables you to track a single contract from the very first draft to its ‘ready to be signed’ final copy. Authorized users can use version control to access the most up-to-date version of a contract, exchange feedback and make edits from a single platform. This transparency over contract statuses and work in progress directly improves accountability and encourages efficient collaboration.
Supports compliance and audit procedures
A contract management system maintains regulatory compliance from contract creation to approval (and eventually archival). This is done through pre-built automated workflows that ensure the right review processes are followed and required contract terms are included. Contract documents with tracked changes and version control give organizations visibility into the full audit trail — so that they know what exactly has been changed, when and by which user.
Which teams benefit from contract lifecycle management software?
Every department that is regularly involved in the reviews, distribution, execution, negotiation and approvals of contracts will benefit from a CLM system. Here are how three of those teams streamline their contract lifecycles:
Human resources (HR)
HR teams handle many contracts during hiring, onboarding and employment processes. HR-specific benefits for organizations that use contract management software include:
- Saving time with a built-in clause library for offer letters, non-disclosure agreements (NDAs), employment agreements, payroll information, etc.
- Distributing and storing confidential employee information securely
- Increasing the efficiency of hiring processes with document workflow automation and electronic signatures
Legal teams must thoroughly analyze clauses, keywords and notations before a document is ready to be approved. But manual and repetitive reviews get tedious over time, putting your organization at more significant risks of errors, or having higher-value legal work placed on the back burner. CLM systems give legal professionals the ability to stay on top of a contract’s expiration or renewals and keep track of clauses that must be reviewed urgently.
CLM software helps sales teams with accelerating revenue generation. Sales teams can request changes based on customer redlines or securely make changes of their own to the contract without the need for email communications that slow everything down. The pre-existing templates stored on a CLM software’s library also allow sales teams to draft contracts, capture business opportunities and close leads faster.
Choosing the right contract lifecycle management software
There are several things to consider when evaluating CLM solutions in the market. Ask yourself these questions before making your choice:
Is the CLM software you’re choosing scalable?
As your organization grows in size and complexity, newer contract solutions in the market could fail to address your future needs. Always choose a CLM partner with years of relevant experience with contract management for different teams (HR, legal, sales, etc.), so they come equipped with the expertise needed to support business development.
Can you get a demo of the software before committing?
Look for a contract management solution that allows you and your team to navigate or experience it firsthand. This stage will enable you to evaluate the user-friendliness, features and capabilities of the platform before signing them on and beginning the migration process.
How reliable is their support?
Understand the level of support your preferred partner can provide (calls, virtual meetings, emails, chat boxes, etc.), so you know how to contact them in the future. You can always do your own due diligence and research their previous case studies, references and customer testimonials to gauge their timeliness and efficiency in resolving a problem.
How integrated is this CLM solution?
Some organizations go back and forth between different systems to manage customer relationship management (CRM) and use disparate data capture tools altogether. It would be a better use of time, resources and energy to choose a CLM software that integrates all the necessary contract management tools in one platform, so your team does not have to rely on multiple systems to get a document reviewed and approved.
Streamline contract reviews and approvals with OnBase
The OnBase contract management solution optimizes contract lifecycle management by:
- Streamlining every step of the contract management process
- Using workflow tools to route documents faster to the right people
- Providing the information and tools personnel need to drive work forward