Contract management system
A contract management system is an indispensable tool for ensuring that the intent of all contracts that affect an organization are adhered to.
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What is a contract management system?
A contract management system is an indispensable tool to ensure that the intent of all contracts that affect an organization are honored. A contract management system is used to manage all tasks involved in a contract process, such as negotiating and recording data. It helps legal departments as well as law firms manage contracts without tedious manual work.
So basically, a contract management system is a digital way to handle all legal matters related to contracts. It maximizes contract fulfillment by enforcing contract terms, accelerating cash flow and time to revenue, and reducing the risk of non-compliance. Centralized capabilities allow users to work on a single platform.
What is a cloud-based contract management system?
A cloud-based contract management system leverages powerful and effective contract management capabilities that replace spreadsheets and paperwork. With a cloud-based contract management system, organizations can streamline and accelerate existing contract management processes. A digital contract management system provides an advanced compliance environment on a controlled and centralized platform, and users are notified when a change is made. In addition, parties to the contract can communicate in real time through this platform without having to create email versions of the contract. At the same time, digital signatures make it easier to finalize the contract. A cloud-based contract management system can also be used to centrally control the accessibility and templates of contracts.
Why is contract management important?
A good contract management system replaces manual contract creation, which consumes much of the time that could be used for more important matters. Likewise, managing deadlines is a challenge. Between all the stress of running a business, it’s important to meet deadlines. This also reduces expensive contract renewal costs.
Benefits of contract management systems
1. Contract management systems make contract creation easy and automated
Contract management systems bring automation to the contract management process. With a library of approved templates and clauses, contracts can be automatically assembled based on criteria associated with the contract, such as region, products, services, or pricing terms. With an advanced contract management system, users can automatically create contracts based on defined business rules and bulk data uploads. Self-service contract creation enables faster time-to-revenue and significantly reduces legal operating costs.
2. Contract management systems make contract review and approval cloud-based and traceable
Today’s modern contract management systems are almost entirely offered as cloud-based software-as-a-service (SaaS). That means teams can collaborate and review contracts from anywhere in the world. And contract management software allows companies to set up automated workflows to automatically route a contract to the right person. Throughout the contract creation process, the software captures changes to contract terms, creating an immutable audit trail and approval processes if unapproved clauses are introduced.
3. Contract management systems make contract data easily accessible and actionable via dashboards
As contract management systems continuously collect contract data, users can view intuitive metrics in configured dashboards. One common dashboard metric is contract risk. Contract management systems allow organizations to configure risk scores based on internal data and third-party sources. This allows users to identify risk early and take action to address the issue.
Which departments use a contract management system?
Every organization is different, and so some will use contract management systems in ways that may not be necessary for others. However, there are many commonalities, simply because the structure of most organizations requires similar departments to function, and each of these areas will use a contract management system for different reasons.
Many companies - especially those that are large or operate in multiple territories - have in-house legal departments, and as the name implies, this is the team that is most intimately involved with the company’s contract management system. As legal experts, legal departments have overall responsibility for the content of contracts affecting the company - meaning they oversee the drafting and approval process and deal with potential and actual disputes. As a result, the legal department uses a contract management system to create standardized templates and clauses for use throughout the company and to create automated workflows to mitigate risk and increase efficiency. Reporting capabilities also enable the legal team to monitor the timely fulfillment of contractual obligations and compliance across the enterprise.
The work of the finance department or team is closely tied to contracts and therefore a contract management system, regardless of the commercial status of the business. For sales-oriented businesses, the finance team needs visibility into the details of contracts to facilitate invoicing and forecasting of profits, losses, and related tax implications. This visibility is also required for effective payroll, asset monitoring and stakeholder interest reporting. Due to the specific requirements of finance teams, the reporting capabilities of a contract management system are of particular importance. Using contract metadata, customized reports can support the accurate monitoring of all financial aspects of the business and ensure that the generation of actionable data leads to financially beneficial decisions.
Human Resources teams deal with contracts and legal agreements on a daily basis. In addition to employment contracts of varying complexity, HR responsibilities include drafting confidentiality agreements and non-compete agreements, as well as additional agreements or settlements resulting from the arbitration of employment disputes. The HR department must also monitor compliance with the provisions set forth in employment contracts for the ongoing professional development of all employees. A contract management system enables HR departments to create standardized employment contracts based on documents and clauses created and approved by the legal department. This includes agreements on non-disclosure and non-competition clauses. Customized reports provide insight into compliance, and automated workflows ensure contract reviews are completed on time - reducing risk and increasing efficiency across the organization.
Procurement, while an important part of any business, is also a significant vulnerability in terms of security and efficiency, making risk management essential for the procurement team. This is because the procurement process is based on supplier or third party relationships that are governed by contracts and legal agreements. With a focus on risk mitigation, procurement teams benefit from the centralized repository that is at the core of a contract management system. This unified data pool, combined with powerful custom reporting tools, enables teams to make procurement decisions based on data and historical evidence. In addition, a contract management system enables procurement teams to process supplier terms and conditions in a standardized manner, ensuring the required levels of compliance. Automated workflows also support accurate and consistent monitoring of milestones and renewals of third-party contracts, making the most of every opportunity to assess risk and renegotiate.
Every company deals with contracts at some point, but not all companies have a sales department. For those that do have one, the sales department is a key profit and revenue generator, constantly leveraging contracts to ensure the overall company’s financial success. The sales department is the team that makes contacts and closes deals on the ground for the provision of goods or services, which requires the quick and efficient creation of accurate contract documents. A contract management system is the ideal solution for sales teams because it provides instant, secure access to standardized terms and templates. Employees can therefore proceed with pursuing business opportunities with confidence in the documentation created by the legal department. Automated workflows also ensure approval processes are fast and smooth, and risk is completely minimized.
A contract management system is now a critical resource for meeting the challenges of today’s business and proactively preparing for the challenges of the future. A contract management system and the contract data it contains are the foundation an organization needs to accelerate commerce, minimize risk, conserve corporate resources, and negotiate optimal future contracts. As a result, contracts become indispensable strategic assets for maximizing business success.
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