How Contract Management Has Evolved Beyond Contract Databases
The contracting process has seen many changes over the years. Businesses have moved from the traditional way of printing contracts on papers and wet-ink signatures to signing contracts, scanning, and sending them over emails, to digitally creating and signing contracts.
There have also been changes in how contracts are stored. Businesses have moved from storing contracts in file cabinets to storing them in emails or a cloud. Although this shows that there’s been growth, it hasn’t done much in changing how contracts are approached, negotiated, and accessed. This is why some innovative businesses have pivoted to having a contract database, which is for several good reasons.
What is a contract database?
Unlike the traditional ways of storing contracts in different places, a contract database is a central repository for storing your contracts in an organized and accessible way. If your organization still spends a lot of time locating and accessing contracts, you need a contract database.
A contract database is a powerful tool
Contracts, by their nature, are operative after the contracting parties execute them. Therefore, the post-execution stage of a contract is critical for your business and should be handled strategically.
Contracts are not just mutually binding agreements that create rights and obligations. They also contain essential data for your business, and having a contract database will help your organization’s CLM in the following ways:
Store contracts in one secure location
Has your organization been unable to find a contract? If you answered yes to that, you are not alone. 71% of companies are unable to find at least 10% of their contracts. When you use a contract database, you will eliminate the possibility of losing them as they will be securely stored in one single repository.
Access contracts with ease
How do you access relevant information while performing the contract? Questions like “when is the expiry date of contract X?” can cause a whole department to waste valuable time and resources while trying to locate contracts and get the information needed at each point in contract management.
A proper contract database solves that problem. With a central, searchable repository, you can find contracts and the information you need in seconds, not hours or days. A contract database’s web-based, cloud-hosted storage gives all team members the access needed to find information from anywhere in the world. In today’s remote and hybrid work model, having a contract database is non-negotiable if you love speed and efficiency.
Receive key contract deadline reminders
You want to keep up with each contract’s crucial timeline. Businesses often rely on employees to keep track of a contract’s lifecycle, but doing this can carry enormous risks, as errors are almost a given. Missing a deadline to perform a contract can cost your business thousands, or even millions, of dollars.
A contract database will eliminate human error by giving you timely reminders, when you want them, to take key steps during and at the end of the contract. Whether it’s a reminder to renew, terminate, or perform an obligation of a contract, these notifications can save your business and partnerships.
Perform contract audits with ease
Businesses periodically conduct contract audits to assess performance and ascertain whether parties comply with the agreed standards of the contract. Having a contract database gives you visibility on your contracts, and you’ll be able to carry out contract audits at the right time.
You need more than a pure database
A pivotal feature of contract lifecycle management software is its contract database. More than 20% of CLM software benefits are in the contract database. But it’s only a part of the digital contracting process. There is more to your needs than having a contract database alone.
A contract database allows you to store them in a single repository, easily assess them when you need to, and be reminded of key timelines in the contract’s lifecycle. But a contracts database is just what it says—a database of contracts. Your business needs software that will help with authoring, negotiating, and signing the contract itself. With only a contract database alone, you will still encounter the inefficiencies associated with the traditional ways of contracting, such as:
- Delays from drafting contracts from scratch
- Team members and stakeholders possibly being out-of-sync with the current version of a contract
- Higher costs of contracting
- Setbacks in the approval process
- Manual review of contracts, which is usually a bottleneck
Your organization’s contract management system needs more than a pure contract database. You need CLM software that can help automate workflows.
Automated workflows are designed to help you take charge of the contracting process. Think about workflow as the contract’s document itself and the process from its creation to execution. Workflows will cover the standard procedures your organization follows in contracting. A typical workflow will include the following stages:
- Contract creation
- Internal collaboration
- Negotiation of terms and redlining
- Approvals by authorized personnel
- Contract signing
It takes businesses an average of 20-30 days to create, negotiate, and sign a contract. In traditional context creation, a party drafts a contract and sends it to the counterparty. That counterparty reviews it and redlines any parts they are not comfortable with before sending it back. Next, parties negotiate, going back and forth as many times as needed until they reach an agreement when they both sign. Whether this happens via physical copies or in email inboxes, the result is still the same—a lot of time is wasted.
Having a workflow gives all parties visibility into the state of a contract. You and your contract partner(s) can see redlines and changes made to the contract in real-time. All parties can electronically sign contracts, both quickly and securely.
Improve efficiency and collaboration
Without an automated workflow, your legal will be tied down with mundane and repetitive tasks. Automating your workflow will free your legal team’s time to carry out value-adding activities. You’ll be able to create easy-to-use templates for similar contracts, and other departments can run their contracts process themselves without involving Legal.
Workflow addresses a common challenge faced with contracting: how will different departments work together without a bottleneck situation forming? When different departments are involved in a contract, they need to work together to implement it. An Automated workflow will allow the contract to run seamlessly from one department to another. For example, if the procurement team needs to get a vendor agreement sorted out (with approval from Finance), the system will trigger the next step for the legal department to sign off on it. With an automated workflow, every team performs their responsibility when it is due.
Ensure compliance and eliminate human error
Every organization has standard procedures to follows when contracting. For example, your sales team may be required to get approval from finance for contracts when the cost is above a certain threshold. When you implement workflows, you can set rules that will automatically inform Finance about an approval need whenever Sales inputs an amount above the threshold.
Workflows enable you to fast-track contracts. You can set up a system one time, and it will run without needing a person to monitor it, all without writing one single line of code.
But as amazing as the functionality workflows give to your business, you need more than workflows alone to get the job done. You need CLM software that combines contract database features and automated workflows to transform your contracts from blockers to enablers.
Ironclad provides the best of both worlds
Some CLMs are only contracts databases, while others only give you workflow functionality. Your organization needs Ironclad’s CLM software because it will do both. A good CLM will support your organization in all stages of the contract lifecycle:
- Contract request
- Negotiation and redlining
- Contract execution
- Managing contract performance
- Contract amendments
- Auditing and reporting
- Contract renewal
CLMs may differ in some areas, but there are key features they should have:
- One single, secure repository for all your contracts
- Workflows and accessible templates that can be easily built and implemented in minutes
- An organized, searchable, and time-efficient contract database
- Process automation to eliminate human error
- Streamlined negotiations and redlining
- A notification system so you can avoid missing important deadlines or milestones
- Contract reporting to gather information about your contracts in seconds.
Ironclad’s CLM software provides a powerful, automated workflow design for your business. It includes all of the important features needed to fast-track contracts and to deepen collaboration among stakeholders. Learn more about Ironclad to see how the CLM built for in-house legal teams can increase your efficiency in contracting.