- What is contract management software?
- What does contract management software do?
- What are the benefits of contract management software?
Contracts used to be straightforward.
Several parties get together and discuss the concerns and obligations of each side and determine a set of principles that both parties will abide by.
Should expectations not be matched, then either party can refer back to the contact and determine what has not been fulfilled.
The complexity of contracts has increased — digital licensing agreements across multiple streaming platforms, for example, or complex financial derivatives contracts, present a real challenge to drafters.
Drafting contracts like these can reach tens of thousands of dollars! It’s imperative, therefore, that the contract creation, negotiation and execution process are transparent, clear, and easy to audit to avoid these costs.
To compete in today’s local and global marketplaces, it is vital to understand the benefits of contract management software.
What is contract management software?
Contract Management Software (CMS) is a digital solution to manage and automate contractual processes. Contract management software creates a dedicated digital workspace for all parties to share documents and workflows.
Basic CMS only allows users to draft and store contracts. Contract lifecycle management (CLM) software functions more like a digital contract manager with highly advanced features like monitoring and analysis.
Top CLM systems cover all contract lifecycle phases — from contracting workflow, e.g., creation, negotiations, and signing, to post-execution, including storage and deadline tracking.
While all CMS differs a bit, the most important features include:
- Smart drafting with custom fields
- Possibility to automate and customize your templates
- Automating the approval process
- Automated alerts and reminders to keep the operation running from pre- to post-execution
- Tracking changes
- Document storage in a centralized document database
What does contract lifecycle management software do?
CLM automates and streamlines contract processes during crucial business stages, ranging from:
- workflow processes
- contract renewal
Most contract lifecycle management software is designed to provide greater organizational efficiencies by lowering administrative costs.
Vast amounts of time are wasted due to inefficient manual contracting — the IACCM found that 92% of the resource time is consumed in creating contracts. CLMs can help with:
- Standardizing and controlling contract development
- Automating contract lifecycle management from start to finish
- Creating contracts quickly and easily using pre-approved templates
- Boosting contractual and regulatory compliance
👉 Here you’ll find everything you need to know about contract lifecycle management.
What are the benefits of contract management software?
Typically organizations invest in contract lifecycle management when they reach a sufficient size or stage of growth to prevent contract volumes spiraling out of control. However, it’s best to begin as soon as possible to avoid creating duplicate workflows from more traditional paper-based ones to an all-encompassing digital workflow.
Below are several key benefits of contract management software.
1# Reducing risks
Contracts typically have hidden risks contained within the text, from unapproved terms to missed obligations. Contract management software mitigates various risks with:
- pre-approved clauses
- easier contract audits
- and a well-managed contract portfolio.
Automated workflows and alerts ensure compliance, and users never miss a deadline, improving compliance by 55%.
2# Improve auditing
Contract management lifecycle software usually offers a digital portal with a range of features, including audit trails that users can view the entire amendment history in only a few clicks. Not only does this ensure a business can track what has been done and when it can be easy to spot errors and mistakes and correct them.
3# Saving time
65% of legal professionals state that time lost on repetitive administrative tasks is their most significant frustration. Automating contract workflow will reduce the time taken to do these administrative tasks by half. For example:
- pre-approved templates let you kick-start the draft faster by 83%
- communication happens in one shared environment: negotiations, amendments, data input – no email threads going back and forth
- e-signing as the final step to execute a contract — no need to sign, scan, and send back
4# Reducing contract costs
Reviewing and managing contracts significantly increases labor costs and can run into the tens of thousands. The average price of a basic contract ranges from $6,900 and $49,000 for more complex agreements based on average salaries.
For instance, the Tele2 legal team would have been able to draft two NDAs per hour. Thus, if they had to prepare 100+ NDAs, this would have taken them on average around 50 hours of labor time. However, since they adopted Avokaado, business units are drafting and signing NDA’s themselves on the platform taking approximately 5 minutes each.
5# Increasing transparency
Organizations using paper-based systems means that they must be stored in filing cabinets in offices. Not only does this mean staff have to move around to find the proper contracts and templates, but they are also unable to view what others have done in real-time.
Using a digital CML system means that every staff member can log in and view every contract and work on them with the amendments made. Furthermore, there is no need to store the contracts in large filing cabinets. Employees can access them all from the cloud, from wherever they are located.
6# Growth and scalability
Automation is critical to growing a company because it reduces the manual labor needed for accurate contract management. CLM software is customizable, meaning it can grow as your business grows, thus not requiring you to buy expensive enterprise systems with a range of complex features you may not need.
7# Optimizing finances
Contract management software eliminates unplanned renewals of unwanted services and reduced legal fees. It permits users to view where costs are being spent, ensuring they obtain the best value for their business needs.
Within specific industries, contracts must be more detailed – healthcare, construction, and telecoms being a few examples. Legal organizations know that these sectors require extensive arrangements meaning they should charge more for hours spent on the contract process, thus boosting business profitability.
8# Better contract storage security
Storing documents in several shared folders is disorganized and highly insecure as others who should not have access may stumble on them when searching for similar type files.
Using generic storage systems like Google Drive is opened for all with access to the folders. Contract lifecycle management software has contracts and agreements that not only can have different access levels, but the files themselves also require passwords to access, so even if someone with a similar access level finds the file, they would still need a password to read its contents.
Unlike generic cloud storage services, contract management software offers strengthened security.
9# Better document management
Documents not only need to be secure, but they also need to be stored accurately for easier management. Co-workers can scan paper documents directly into the CLM system from any location so that there is no need to store paper documents in a filing cabinet.
Plus, users can import electronic contracts from other sources into the platform, allowing all documents to be centralized in one hub.
10# Easier to share, collaborate and retrieve
A centralized cloud-based contract management system makes day-to-day contractual work more accessible and organized for everyone. Internal and external stakeholders can access and retrieve contracts from any location where they are based, thus speeding up the workflow.
CLM software can decrease contract approval time by an average of 82%. Also, a searchable centralized document hub ensures organizations never lose a document or contract. A lost contract can be a considerable risk for any company.
11# Using integrations and customization
Unlike legacy software that requires constant upgrades and an IT team to add on functionality, contract lifecycle management software can easily integrate with newer software tools in a few clicks.
Not only is this cheaper and more cost-effective to set up, but it instantly boosts business operations and data exchange, thus freeing up more time to work on other work.
With integrations, organizations can freely customize which newer software tools they need, from:
CLM integrations improve accuracy and enhance visibility in ways that reduce risks and assure compliance.
12# Boost productivity
Using a contract management process allows organizations to automate and determine where workflow bottlenecks are occurring, like manual work or through legacy systems like Excel.
Using a CMS means that organizations are using the best tools to meet their deadlines, improve accuracy, monitor workloads, and make reports that can be used to improve business profitability.
Why the best contract management software matters
Inefficiencies in the contracting process cost organizations thousands of dollars every month. Yet, CLM software can easily eradicate this inefficiency if businesses and their legal departments use the best contract management software.
The benefits of contract management software listed in this article are enormous. Although daunting it may seem to begin using one, many, like Avokaado, are easy to get started with and only have the features you need to get going with.
Avokaado is the best contract lifecycle management software that is fully adaptable to your business requirements.
Avokaado’s contract management and document workflow automation allow SMBs to manage all contracts and related workflows in one place — storing documents, creating, collaborating, and executing all forms of legal document management.
For the features, check it out here under pricing.