Unlike traditional ways of storing contracts in different locations, a contract database is a central repository where contracts are stored in an organized and accessible way.
What is a contract database?
Simply put, a contract database is a centralized, searchable, and tagged repository for all contracts for which an organization is responsible, as well as information about their status, approval processes, legal obligations, and compliance requirements.
The problem with storing contracts without a contract database
Many small businesses, out of necessity, have begun storing files in shared drives rather than using a centralized and organized contract database. On the whole, this is a good thing, but the more people accessing a file, the more opportunities there are to do something wrong.
A general file repository is only as good as the weakest link in the chain. Below are some ways a traditional file repository lets companies down when it comes to contract management and why a centralized contract database is so important:
- There is no record of who uploaded a file.
- Version control quickly goes off the rails.
- Uniform file naming becomes a challenge as time passes and staff changes
- Even when the right file is found, there is no contextual information, such as how many rounds of revisions were needed or which staff members were involved, that provides useful guidance on how to proceed.
- Regulating access to these folders is very difficult to do.
This list shows how important a well-organized contract database is to the success of the company.
Advantages of a contract database
Contracts, by their very nature, are not effective until the parties to the contract have executed them. Therefore, the post-execution phase of a contract is critical for a company and should be managed strategically. This makes a central and well-organized contract database all the more important.
Contracts are not only mutually binding agreements that establish rights and obligations. They also contain important data for companies. A contract database supports a company’s contract management in the following ways:
Storing contracts in a secure location When using a contract database as a business, contracts can no longer be lost as they are stored securely in a single location. When contracts are stored manually, it is common to misplace or not find individual contract information or even entire contracts.
Easy access to contracts When contracts are stored manually, there is a high risk of not finding relevant information or having to search through individual contracts. A suitable contract database solves this problem. With a central, searchable repository, contracts and the information they need can be found in seconds. The web-based, cloud-hosted repository of a contract database gives all team members the access they need to find information from anywhere in the world. In today’s home office and hybrid work model, a contract database is essential if companies value speed and efficiency.
Receive reminders of important contract deadlines Companies want to use a contract database to keep track of the critical deadlines of each contract. Often, employees:inside are relied upon to keep track of the lifecycle of a contract, but this carries enormous risks, as mistakes are almost inevitable. Missing a deadline to fulfill a contract can cost companies a lot of money. A contract database eliminates human error by providing timely reminders of important steps during and at the end of the contract lifecycle. Whether it’s a reminder to renew, terminate, or fulfill a contractual obligation, these notifications are definitely helpful to businesses.
Easily perform contract audits Companies regularly conduct contract audits to evaluate the performance of contracts and determine whether parties are meeting agreed-upon contract standards. A contract database gives you an overview of your contracts and enables you to conduct contract audits at the right time.
Contract audits are made more difficult without a contract database
Contract audits are often a company’s worst nightmare and an unavoidable part of doing business. As contracts proliferate, audits become more burdensome and cost companies valuable time.
The key is to store contracts in a central contract database where they can be searched and retrieved by the appropriate employee:s without the need to call in a specialist. With just a few keystrokes, a team should be able to find the most relevant contract (for example, the last signed version) and the context they need to review the contract.
This is achieved through metadata - the important keywords assigned to a document in a contract database, either by a human or a machine. A contract database searches for the metadata associated with a document and displays the most relevant based on your search terms, filters, and in some cases additional context such as the role of the person searching.eben.
Having a good overview of contracts, and therefore using an organized contract database, is important for any company. However, it is especially important for high-growth companies that need to go through due diligence in advance of a financing round or merger and acquisition activity. After all, contract reviews are onerous enough.
Lawyers entering expanding companies often start with a simple spreadsheet to keep track of legal documents. But they also quickly discover that this is not scalable, and switching to a browser-based contract database is the best way to stay in control.
Contracts can be enjoyable. Get started with fynk today.
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