As a follow-on from a previous post on contract compliance audits, we want to share some of the benefits of setting up and maintaining a contract management tool. A contract management system makes any future audit easier, faster, and less costly.
There are various options to setup a contract management system that works for your business, making it easier than ever to make sure you have full visibility and foreseeability into your contractual stack.
This article explores some of the key benefits, software options, and gives the reader an example of a tool that can be deployed within days or weeks.
What is contract management?
Contract management refers to the task of performing and ensuring performance under a contract. Most times, performance on a contract is left to the various business units executing or receiving a product or service. This leaves management or a legal department without the right level of visibility into the performance and status of company’s contractual stack (combination of all contracts). Failing to implement and execute a proper contract management system may result in added costs, risks, and waste of time, money, and opportunities.
What are some benefits of establishing a contractual management system?
Visibility and Projection
Seeing your entire contractual stack helps you better understand your business’ status and evolution. It also helps your company plan ahead and allocate resources accordingly. Contracts represent your company’s rights and obligations, making them an integral part of your business. An appropriate contract management system will give you insight for better and faster decision-making.
Managing a contract is expensive. Your managers and team-members must be able to see and learn its terms to properly execute your company’s vision. A centralized solution may improve collaboration and speed during cross-functional processes For example, accounting can record entries faster with the right visibility into the parties involved without having to engage legal or the relevant business unit. Contract management solutions can be tailored to address not only performance of a contract, but also approval workflows through business units. From negotiation to litigation, a contract management system will equip you to be more efficient and less wasteful.
Failing to perform under a contract may carry penalties and losses. Failing to timely renegotiate a contract may expose your company to losing an important client, supplier or key vendor. A contract management system can help you be proactive in managing your business. For public entities, for example, a contract management (procurement) system can avoid loss of public funds and improve anti-corruption practices.
Be prepared to renegotiate an agreement. Be mindful of the shortfalls, the failures to perform, and keep what was right with the current agreement. Knowledge is both power and money. Negotiate better and faster by being on top of your contracts — not just when you need to.
It’s not that complicated
From an Excel workbook to an enterprise-level software as a service solution, contract management tools abound online. No single tool is right for everyone and something is better than nothing. Having the right guidance to setup a solution that works for your is more important.
What are some of the software options?
MS Excel or Google Sheets
Good old MS Excel or Google Sheet can be sufficient for your small or medium sized business. You can setup a workbook to organize your entire contractual stack. Use drop-down menus to assist team-member in selecting the right categories, hyperlinks to access documents in a shared folder (OneDrive, Google Drive, Box.com, Dropbox) or collaboration space (SharePoint, Google Site), and conditional formatting to create alerts.
A spreadsheet visualized and pre-integrated into your favorite SharePoint. MS Lists is easy to setup and with sufficient options to deploy an easy to understand solution for most companies. Collaboration will mostly still happen in MS Teams, but you may visualize your contract management tool directly in MS Teams. Best of all? It’s included in your Microsoft 365 business membership and protectable under your company’s cybersecurity protocols.
Click on the image below to see a demo company contractual management tool set up in MS Lists. A simple visibility and planning contract management system such as this can be deployed by our firm within weeks.
Like MS Lists, but better. It allows you to create tabs, add documents, and collaborate all within AirTable’s application. You can also integrate third-party apps to AirTable. You can also push AirTable data to third-party applications. It does comes at a cost once you reach a certain records threshold.
There are many contractual management software providers. One industry leader is Ironclad. Other options include Dock, Conga, DocuSign CLM, SAP, Oracle, and many others. These providers work directly with your company throughout implementation. However, as non-lawyers, their work is limited to deploying and maintaining the software. Interpreting and advising on the contract will remain your company’s (and your lawyer’s) duty.
A contractual management tool, whatever you choose, is a crucial component of your legal and business arsenal. It shows proactiveness and preparedness, two core values of most successful businesses. Make sure you stop wasting time and money sorting through emails, asking for copies, DocuSign records, or your files folder looking for each contract whenever they suddenly become relevant.