As a business owner, you mustn’t stop asking and researching ways to improve your company. As many people would say, the difference between an employer and an employee is that the employer never stops working while employees can clock out and regain their lives. You can be enjoying a margarita at the beach and still be plagued with concerns about your organization. Don’t view it as a bad thing, though. It just shows that you care enough about your company that you want it to be the best version possible.
It’s best that you stay in the loop of the most recent developments in both the business and technology industry. Take advantage of the newest advancements so you can gain a distinct advantage against your competition. For instance, integrating a contract management software is a step that is now being undertaken not just by huge conglomerates but also by SMEs. A CMS brings your company’s contract management to the 21st century with full automation, statistical modeling, and analytics.
You may ask, what is contract management? Well, this article will discuss exactly just that and more. Read ahead, and best of luck with the business!
What Is Contract Management?
By definition, contracts are legally-binding documents signed by two or more parties, detailing the relationships of the parties mentioned above, such as specific obligations to each other. For instance:
- Mutually agreed-upon KPIs
- Due dates and deadlines
- Price list of Products/Services
- Payment methods
- Legal representatives and Point persons from each party
- A clause for cancellation of the contract; and the
- Appropriate sanctions in the case of the partnership falling through.
So, what is contract management? Contract management is the administration of contracts made with a company’s partners, customers, vendors, and employees. It involves the negotiation, support, and monitoring of contracts based on the information mentioned above, during contract implementation and before its renewal.
This information may be relatively easy to understand when you are dealing with just three to five. However, as you scale your company, the number of contracts you will be signing also grows exponentially.
This is where a contract management software comes in. Instead of having to hire multiple contract managers to handle your contract data, you can easily integrate software instead. A CMS takes all of your contract metadata and organizes it in no time at all.
You will be surprised at the sheer number of deals that you will make, even just as an SME! If your SME has only a handful of signed contracts because you prefer verbal agreements, then it’s time to start drafting! It’s best to have an ironclad contract with all of the parties involved in your company’s operations, from suppliers to distributors.
By putting everything into writing, you have a hard copy of a document, which proves or disproves your innocence in disputes, altercations, and disagreements. Take note that both parties are legally liable to uphold all of the terms inside once a contract is signed. Non-compliance can be subjected to sanctions such as price reductions, termination of the agreement, or even a lawsuit.
Benefits of Contract Management Software
Here, we have listed down the key benefits of integrating a Contract Management Software into your company.
Full Visibility Of Contract Metadata
A Contract Management Software (CMS) provides its users with full visibility of its contract metadata. Let’s put it into perspective. For instance, just how long will it take for you to know all the details about your most recent client? Will your employee be able to look for all the files quickly? Say you’re in a business meeting, and you have to make a decision soon. The time lag between you asking for the details and you getting the facts can already spell disaster. By making informed decisions, every time, you help your company flourish without taking any unnecessary risks.
A CMS dramatically reduces the risk that a company undertakes. Through complex algorithms and formulas, a CMS determines the risk involved with specific contracts. With the data that you get, you can identify any underperforming agreements. Similarly, this helps company owners decide whether to renew a deal or not.
The most crucial function of a contract management software is its data analytics capabilities. By running raw data and numbers through statistical models, it can predict future outcomes while identifying relevant data patterns. For example, you can see your best months and which are not, allowing you to prepare appropriately. Business owners will receive many more valuable insights through a CMS, all of which are calibrated to help him steer the organization towards success.
A study conducted by Aberdeen found that there was a 55% increase in contract compliance in companies who have integrated a contract management software in their company’s operations.
Aside from transforming raw data into valuable insights, a CMS also puts the data in aesthetically-pleasing charts and graphs. This makes it easier to present your data towards investors and your Board of Trustees. Instead of just reporting a huge increase in sales, you can show precisely how considerable through visual cues.
While costly at first, the price of a contract management software pays off in the long run. In fact, according to Aberdeen Research, administrative costs related to your contracts are reduced by 25-30%.
Secure Cloud Storage
Ask yourself. How exactly are you taking care of your contracts now? Where are they? Were they filed correctly? Are they in a box in your storage room? In a file cabinet in your office? Regardless, how secure are they? You can take all of the security precautions possible, and nothing will still be safer than uploading your data onto the cloud.
Doing so protects your contracts from physical harm such as malicious vandalism, fire, theft, etc. A contract management software has encrypted cloud storage so that only you can have access to your files.
With COVID-19 taking over the majority of the year 2020, remote work has become such a huge thing. The majority of the companies in the world have switched from an office setup to a work-from-home setup. What this means is that all the employees need access to the company’s files. If you rely on manual contract management, the physical contract can only be accessed by one employee at a time. He/she is limited to the physical constraints of your contract, much unlike digital contracts.
Gone are the days when signing international clients is a costly back-and-forth process. You can now have your contract signed through the internet through a contract management software — no need to send over a hard copy just for one measly signature. eSignatures or electronic signatures are still considered valid and official. Thus, they are still legally binding. Digital contracts with eSignatures affixed on them can even be used as a piece of primary evidence in court.