Contract management systems (CMS) are structures for managing the production, negotiation, execution and storage of contracts, such as Non-disclosure Agreements (NDAs), Master Service Agreements (MSAs), Procurement Master Agreements (PMAs), and more.
These systems can be either manual (relying largely on paper documents), or digital with a mostly paperless operation. While both processes have their benefits, many medium-sized and enterprise businesses have now adopted digital contract management systems.
It is crucial that the business has a way of creating, approving and executing these documents easily, as well as storing them securely.
Contracts are important! Business is built on the understanding that when two parties agree on something – e.g. a sale, new employment, a purchase – they can trust the other party will fulfil all their obligations as part of the agreement.
Contracts, while only pen and paper (or pixels on a screen), are proof that the agreement (including all terms) was made. It is critical that they are kept secure, but easily accessible should the agreement need to be reviewed.
What are the benefits of a contract management system?
While the contract lifecycle is fairly standardised, a business’ contract process will always be unique to the individual business. Establishing a system which documents the process is a common tactic that many Legal teams use to improve clarity and efficiency around contracts in the business.
As the number of contracts a business enters into increases, establishing an effective system or process for managing contracts becomes more and more crucial. While Legal are the main point of contact for all things contract-related, the benefits of a contract management system flow on to the whole business:
Benefit 1: Mitigate risk
One of the biggest benefits that contract management systems provide a business is risk mitigation. By establishing clear-cut rules and processes around contracts, the business knows when Legal should be involved in the contract process and therefore, is less likely to enter an agreement that will hold significant risk.
For businesses that manage their contracts with a digitised contract management system, contract compliance is further secured with automated contract workflows so Legal is immediately notified when a contract carries a potential high-risk level. As the contract lifecycle is digitised, there is also an easily accessible audit trail for reference should it be required.
Further, these contract management platforms are largely strictly permission-based with end-to-end encryption to ensure all contracts are kept secure.
Benefit 2: Optimise time to execution
A major benefit of contract management systems is their ability to provide a framework for the business to measure (and identify opportunities to decrease) the speed at which a typical contract moves from briefing to execution.
This process is further optimised through digitised contract management systems. Through these systems, businesses are able to automate and customise contract workflows to expedite the contract execution process.
Contract management software cuts down the time to execution by making it easier for a contract to move through its process. The automated workflows immediately notify the next stakeholder when it is their turn to review, approve or sign the document, and even allows them to sign the contract remotely with e-signature technology. This dramatically reduces the time lost typically spent waiting on stakeholders to receive and action the contract, increases the time to contract execution and increases time to revenue realised!
As cloud-based contract management systems support contracts throughout the entire lifecycle, they also ensure that all users have access to the most up-to-date contract at all times. This single-source of truth reduces unnecessary admin and re-work time for your team, and saves the business potentially hours in lost productivity cost.
Benefit 3: Organisational efficiency
Establishing a contract management system is a great tactic for optimising organisational efficiency around contracts. Having a set system in place helps maintain consistency around contract language and workflows, and simplifies the contract process for all team members across the business.
Businesses can also streamline their contracting process by incorporating digitised document management systems within their contract process. These contract management systems, such as Plexus Gateway, seamlessly integrate with applications that businesses already rely on such as Gmail and Outlook, Salesforce, Dropbox, Oracle and more.
How often should you review your contract management system?
Reviewing your systems and processes is key to ensuring that your business does not get caught up in activities that don’t serve business growth objectives, this includes your contract management systems.
There is no definitive answer to how frequently you should review your contract management systems, as each business’ systems should be unique to them. However it is generally best to review more frequently if your business is rapidly growing.
While manual contract management systems might be best for smaller organisations, it is important to review if those systems are still the most effective way for your team to manage contracts as you grow.
A good place to start your review process is to ask yourself: What are the stickiest issues my organisation faces with their contracts?” “Where could we be doing better?” “Which part of the process will help my organisation reach its goals?”
Alternatively, take our two minute Legal Health Check quiz.
Over to you –
Contract management systems are a key component in a business’ overall operational structure.
For some businesses, contract management can be as simple as documenting the process a contract should go through during its lifecycle, who should be involved and where it should be stored.
For many others, their contract management system can and probably should be a more sophisticated system which includes a digitised and automated contract workflows, e-signature and automatic digital storage for all contracts.
Is your contract management system optimised to your business’ requirements?