May 31, 2023
Contract Management Software - A Detailed Guide for 2023
If you're looking to improve the speed and efficiency of your business's contracting process, you’re in the right place. Welcome to our detailed guide on contract management software!
In this guide, you'll find all the essential information you could ever want on contract management software, including an explanation of what contract management software (CMS) is, which features you should be looking for, and which teams can benefit from adopting a contract management software tool.
What is Contract Management Software (CMS)?
Contract management software enables businesses to organize, streamline, and simplify the contract lifecycle, from creating contracts to getting approvals and signatures. It typically provides features that allow users to manage contract clauses and templates, create their own contracts, collaborate on contract terms, track contract expiration dates, redline changes, and create reports.
One of the main benefits of contract management software is that it can be used throughout the entire contract lifecycle. While there are many tool that can help with one step or another, for example, with signing contracts, contract management software can do a lot more than that.
The contract lifecycle doesn’t have an agreed-upon set of steps. However, it does commonly include: request, drafting, negotiation, approval and signature, execution, tracking, and renewal.
This all looks complex - and it is. That’s why it is so common for businesses to use software to help manage each of these steps. But before we move on, what exactly are contracts?
What is a Contract?
Contracts are foundational arrangements for defining business relationships. They consist of agreements between two or more entities and can be in a written or spoken form. However, the most common usages of contracts are between a business and that business’ customers, partners, investors, employees, and so on.
Benefits of Contract Management Software
There are a myriad of benefits when using contract management software from time saved to risks reduced, so it helps to think of the benefits in terms of teams. The four main teams that are affected are the legal team, the finance team, the sales team, and the HR team.
Benefits for the Legal Team
The legal team oversees the creation and management of contracts, which makes contract management a near everyday task, whether they’re drafting, renewing or simply monitoring the status of existing contracts. To put it simply, contract management software eases the everyday burden of managing contracts.
These tools help you create new contracts faster with seamless approval processes, which in turn generates more revenue for the organization.
"With Contractbook we have one place for all our contracts. It's ideal for us that we can create, sign and store all our legal documents on a single platform, so everything is streamlined, effortless to find and easy to execute on. Contractbook makes working with contracts easy and efficient."
Good Monday - Lise Buchhave COO
According to our research over the years, legal departments have several key pain points when it comes to contracts:
- Contracts are scattered and difficult to find
- Lack of control over versions as contracts are updated and evolve
- Collaboration issues
- Being perceived as a blocker to business
- Multiple tools causing a headache
Certain contract management platforms, the truly holistic ones, can be a major benefit to your legal team as they remove each of these pain points simultaneously.
Benefits for the Finance Team
Contract Management Systems (CMS) empower the finance team by simplifying decisions related to goals, budgets, revenue, and billing. When faced with unexpected challenges, whether it's a pandemic or an economic downturn, a clear view of financial obligations and opportunities becomes a beacon. This insight prepares teams for future twists and turns and offers a stronger footing for upcoming contract negotiations.
Accurate and comprehensive contract data is pivotal. For that, a reliable system with a trustworthy audit trail is non-negotiable. It's about making sure every team member has the clarity and confidence they need when it comes to contracts.
"By using Contractbook, we have a great overview of all our legal documents. Our team has easy access to all the right templates, we can follow our contracts through their lifecycle and it's easy to see what is the next step in the process."
Viggo - Mads ViethCFO
Benefits for the Sales Team
Navigating the intricate maze of contracts, the sales team often feels the weight of contract bottlenecks. Without an efficient contract management strategy in place, the sales team risks getting bogged down in contracts. Think about it: the endless copy/pasting, the exhausting wait for approvals, the unnecessary ping-pong of negotiations, and juggling a mountain of files through the contract's journey. Every minute spent on these obstacles is a minute not spent closing a deal or building a relationship.
"Contractbook is the perfect contract tool for a high-growth scale-up like ours. They have helped us automate key processes in our business and they make our sales efforts so much easier by integrating seamlessly with our CRM system which keeps everything in sync and reduces manual work significantly."
Pleo - Ida Støier Director of Sales & Partnerships
An effective CMS is a valuable resource for sales teams to close deals faster. It informs sales reps on targets they need to meet. Learn why contracts and sales are inseparable for Pleo’s Director of Sales & Partnerships.
Benefits for the Human Resources Team
The HR landscape isn't what it used to be. Gone are the days when human resources only juggled hiring and firing. Today, they're the beating heart of any organization, orchestrating everything from employee benefits and compensation to training, development, and performance assessments. Inevitably, HR professionals have to manage a myriad of documents, with contracts being perhaps the most important among those.
Contract management systems offer a similar solution for HR professionals as they do for other departments. Without this organizational tool, we risk interrupting the rhythm of operations, with countless hours lost to repetitive, manual tasks.
"Contractbook enables us to work as a team. We can easily share templates with each other, collaborate on the documents and we can oversee the legal work in the entire team, so we can rest assured that everything runs smoothly. It gives me peace of mind knowing that we have everything in Contractbook."
Soundboks - Hans August CarlanderChief People Officer
Given this shift in workforce dynamics, it’s no wonder that contract-related platform is becoming a priority for HR reps to streamline their day-to-day operations. Check out the story behind the importance of contracts for Soundboks.
Benefits for the Operations Team
Think of Operations as the backbone of an organization, working tirelessly behind the scenes to ensure everything runs smoothly. Contract management software supercharges the operations department with a management tool that resolves some of their main pains:
- No more scattered contracts
- Fixing file formats that are incompatible between programs
- Too many programs causing confusion and frustration
With a proper Contract Management System (CMS), operations is empowered to swiftly execute tasks with external partners and gain a bird's-eye view to ensure every resource is used to its fullest potential.
“With Contractbook, we have an organized, structured and safe repository for our legal documents. What is even better is that Contractbook has automated the creation and management of our compliance documents which saves us a ton of hassle and manual work.”
Pave - Nitin GuptaHead of Growth
Procurement is another department that deserves consideration when discussing who needs a contract management tool. The procurement department often has to request contract processing through the legal team. However, they can increase their efficiency with access to a tool that allows self-servicing.
Like the sales and procurement teams, managing a contract via tool is invaluable to the marketing department. For instance, a good handling system lets them deal appropriately with service and other working requests like campaign agreements and agreements with vendors or influencers.
“Contractbook has enabled me to grow and scale my business in a new way. We can automate repetitive manual tasks related to contracts to get rid of paperwork and work more efficiently. We ensure more consistent and reliable results. And I can easily keep track of all the contracts in my organization, so I always know what to do. We miss 0% of our deals, save 80% of our time, and our contracts are 100% correct.”
Mutebox - Christian Toft BachCMO
Importance of Contract Management Software
A typical Fortune 1000 company manages about 20,000 to 40,000 contracts at any time.
Is it a tedious task? Absolutely. Businesses have to create, negotiate, review, approve, and execute 20,000 to 40,000 contracts in a day.
Handling contracts manually can be costly and inefficient. Such an approach often results in mistakes, regulatory breaches, missed deadlines, and financial hazards. By setting the right contract management KPIs, you can unlock numerous advantages. The key benefits include saving time, enhancing contract visibility and an overall reduction in both cost and risk.
1. Improvement in Business Performance
Identifying the right contract management tool is a sure shot for improving the overall efficiency of a business. Because contracts are enablers for almost every business process, whether it’s dealing with vendors or signing employment agreements, having a tool that speeds up this process will lead to a company-wide efficiency spike.
The efficiency improvements generally occur in parallel with other advantages, such as an overall reduction in errors throughout every stage of the contract lifecycle. As more departments are involved in more complex contractual deals, having software that aids throughout the lifecycle can be a serious boon for everyone involved.
2. Yields Profit with Less Risk
At a first glance, the economic benefits of contract management might seem elusive. While the upfront costs of managing contracts might seem high and some benefits abstract, there's undeniable and measurable economic value in doing so.
It might be challenging for business executives to directly quantify these benefits and of course, the exact ROI will vary from business to business. But, the bottom line is that businesses that excel in contract management often see a substantial uptick in their overall value and other associated advantages.
3. Improves Financial Performance
Enhancing the financial health of a business often depends on effective management of its resources. Contract management systems allow companies to closely monitor transactions and their overall financial standing.
Often through automation, the platform ensures that a business's interactions with various parties – whether they are stakeholders, customers, clients, or investors – are seamlessly coordinated. A key aspect of a thriving business is financial transparency, and that's precisely what efficient contract management offers.
By having a clear view of revenue streams and expenditure patterns, companies can eliminate wasteful spending and pinpoint areas where costs can be reduced, leading to better financial outcomes.
4. Efficient Risk Control
Another factor that is usually challenging to quantify is risk. Regardless, there are ways to estimate risk such as judging the amount of uncertainty present in everyday processes. One of the benefits of contract automation management is that it clarifies business activities, thereby reducing uncertainty and risk.
With an excellent management system in place for contracts, companies can easily recognize ongoing and expired contracts. Contracts that have insurance obligations or indemnification clauses are brought to light. They can also identify contracts with auto-renewal or termination provisions which results in zero missed deadlines and great customer relationships. All these combine to give certainty and an acceptable risk level. Each data point will also be essential in other business decisions that assist with adequate risk control and management.
5. Enhanced Contract Compliance
Managing contracts benefits companies by ensuring and enforcing compliance with contracts and contract terms. That’s because the
The management system provides an overview that specifies each contract’s conditions, expected procedures, and required timeframes for all responsible parties.
This helps the organization maintain a high compliance level. And the higher the compliance level, the lower the risks and the higher the overall business value.
Essential Features of a Contract Management Software
Contract management software is often overflowing with features - some more useful than others. Here, we’ll try to point out the most high-value features to look out for when choosing a CMS.
1. Standardized Templates via Editor
One of the most often requested features is a database of standardized contract templates. Contracts can take a long time to write, and it’s expensive to ensure that they are written in the correct way.
We have a collection of templates on our website that can give you an idea of what types of templates you can get access to.
Just having a database of templates isn’t enough though, it’ll also be necessary to edit those templates so that they are specific to your business. After all, a vendor agreement in one company might not be the same as another. These templates should serve as a starting off point, but not always the final goal - so be sure to check that you can edit them if you need to.
2. Centralized Repository
Contracts aren’t much good if you can’t find them. In fact, not being able to find them when you need them makes the contracts a risk and a liability. Contract management software fixes that.
Many CMS platforms serve as a centralized repository for all the contracts in a business. This means that no matter which stage of the contract lifecycle a contract is in, it will, 100%, be visible within the software.
Centralized management is also a big win for collaboration. Contracts rarely exist within a vacuum, at minimum involving two parties. Having one source of truth that is automatically updated is a big improvement over having multiple versions living in different gmail inboxes.
Learn more about organizing contracts in a single repository. Book a demo today!
3. Streamlined Workflows and Renewal Reminders
Workflow management plays a crucial role in fostering seamless collaboration among teams. One of its key benefits is the automation of reminders, which reduces hiccups in the contract review process. By setting custom triggers, manual tasks such as contract renewals become automated.
Assess the power of automated workflows yourself. Book a time with our experts for a demo.
4. Digital Signature
A built-in digital signature feature is essential. Having multiple cloud-based eSign options ensures that contracts are easily signed and secure. It’s worth noting however, that eSignatures aren’t necessarily recognized worldwide. Be sure to find a management tool that is accurate in terms of legal validity across different jurisdictions and countries.
Find out how Contractbook provides multiple methods for digital signatures by booking a meeting with our team.
5. Version History and Secured Data
Traditional methods of comparing contracts side-by-side can be time-consuming and rife with errors. Any contract management tool worth it’s digital salt is going
The ubiquitous nature of PDFs makes them a common choice, but they come with significant drawbacks when it comes to contract management. They're not built for collaborative editing, and tracking changes between two versions can be a cumbersome process. Moreover, for analytical or integrative purposes, extracting necessary data from them proves challenging.
The choice to store contract data in a format like JSON is a forward-thinking strategy. It's not just about its lightweight nature or easy readability for humans and machines. The true advantage lies in the ease with which software can parse and manipulate this structured data, making integrations and analytics much smoother.
Future-proofing isn't going away any time soon. That's why most contract management systems provide a detailed version history ensuring every change is traceable, reducing risks associated with human errors. File formats like JSON keep your data manageable and make data a source of business value, not just something to be hunted down every few months.
Get the overview of end-to-end contract management in this video.
6. Integration with Other Business Systems
Seamless integration between your CMS and other systems is crucial for optimized workflows. For example, when customer relationship management software is integrated with contract automation software, the synergy enhances the sales process, leading to smoother transitions. This interconnectedness not only streamlines tasks but also facilitates easier onboarding, as individuals don't have to acquaint themselves with multiple tools.
For example, you can manage your contracts better by integrating Salesforce with Contractbook.
What is the best contract management software?
Contractbook is a cloud-based contract management platform that provides end-to-end automated workflows to streamline the entire contract lifecycle. It offers a range of tools and features for hassle free contract creation, negotiation, signing, storage, and management, all in one centralized location.
Contractbook is designed to simplify the contracting process, increase efficiency, and reduce the time and costs associated with managing contracts manually.
Additionally, Contractbook offers customizable smart templates, data fields, and countless integrations to help businesses of all sizes manage their contracts effectively.
With Contractbook, we have an organized, structured and safe repository for our legal documents. What is even better is that Contractbook has automated the creation and management of our compliance documents which saves us a ton of hassle and manual work.
PandaDoc is a document management software that allows businesses to create, send, track, and e-sign sales documents and proposals. It offers customizable templates, proposal editor, document analytics, and e-signature functionality. The software aims to streamline the document creation and management process for sales teams by ensuring their efficiency is not compromised.
DocuSign allows users to upload a static document and send it to one or more recipients for electronic signatures. It also provides tools for creating and customizing document templates, tracking document progress, and automating workflows, although it doesn’t cover full contract lifecycle management. DocuSign primarily aims to simplify the document signing process and reduce costs associated with printing, mailing, and manually signing documents.
The contract management landscape is rapidly evolving, with both automation and AI leading the transformation. While automation has already brought about solutions addressing long-standing challenges—enhancing accuracy, security, and efficiency in creating, reviewing, tracking, and executing contracts—AI's potential in the legal tech space is emerging. Given the high-stakes nature of the legal industry, the exact trajectory of AI's disruption is uncertain, but its impact is undeniable.
As businesses seek greater value, streamlined processes, and adaptability, it becomes vital to invest in contract lifecycle management software that not only harnesses the power of current technologies but is also poised to embrace future advancements. Such software should offer robust solutions, scalability, and user-friendly interfaces to ensure your organization's long-term success.
Frequently Asked Questions
In the past, firms managed contracts in many forms. They include hard copies that fill up office spaces and pdfs that get lost in inboxes. Today, it has shifted and expanded into using contract management software. A Gartner report reveals that contract lifecycle management has evolved from a relegated record-keeping system to an indispensable business practice. The report posits that contract lifecycle management addresses costs, risks, and revenue maximization.
The price of contract management software varies according to the product's capabilities, features, and size. While some have individual subscriptions, others cost several thousand dollars annually based on the number of users, storage capacity, integrations with other systems, amount of customizations, level of automations, and customer support. Moreover, setup, training, and maintenance expenses could be charged separately. Therefore, when choosing such a software, it is crucial to carefully assess your organization's requirements and spending capacity.
To choose the best contract management software for your firm, first assess your needs and objectives. Search for software that is integrate-able with your tech stack. Choose a software that is simple to use, provides thorough customer support and has a proper product onboarding. Lastly, consider the cost and compare it to potential benefits and return on investment.
The process begins with contract request and creation, where relevant details are identified and contract details are authored from a template. The next step involves collaboration with team members and third parties to confirm details and finalize negotiations. After approval, execution begins and necessary signatures are obtained. Tracking contract performance and making amendments to the contract is just as essential as previous steps in the system.
Finally, the process ends with contract termination or renewal, which is crucial to track. To make the contract process more efficient, the management system must incorporate adequate features for comparing, tracking, and changing document versions without creating confusion. To read more about the phases, check out this detailed blog post.
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