What Is Digital Contract Management?

As companies grow, so too do the transactions that turn into volumes of contracts. Contracts range in complexity, correlating to the type of the deal and whether the contract is written for an individual, a small company offering services, or a merger or acquisition.

The corporate legal department knows all of this extremely well because they are the originators of contracts from start to execution. If a company is small, the legal department is small, too; as the company grows, implementing a digital contract management system becomes more critical.

Digital Contract Management

Digital contract management software helps mitigate risk to the company and improve financial performance. Legal operations professionals benefit from a more efficient methodology to process, store, track, and analyze contracts. The software saves, stores and manages contracts and related contractual assets in a digital repository.

The digital era created online document storage and retrieval, and these cloud repositories enabled the conversion of paper into digital files. Taking it a step further, the documents stored in the cloud became less one-dimensional and more active, in a technological sense.

Technology applications enabled documents to be accessible in the cloud, altered and updated in the cloud, and also shared with others, creating a collaborative environment for digital contract management. The pathway to digitization of paper documents to online documents contributed to higher productivity and performance, as well as efficient workflow.

From Old, Manual Contract Management to Digital

Recall traditional management of contracts?

Bulging file folders in over-stuffed filing cabinets and clerks sorting files by hand to locate the right client documents. Companies growing at the seams began to use banker’s boxes stacked in unused offices to store contracts. That clutter likely still haunts companies today, even with digital contract management systems.

This shift from manual and mistake-ridden processes to contract automation helped companies identify areas for cost savings, reduction in administrative duties, and easier access to the treasure trove of contract documents that form the core of a company’s business deals. Contract lifecycle management software allows for the cohesive alignment of contracts to a company’s business structure and deals. Compliance with regulatory requirements is also managed with great detail.

The essential advantage with a contract management system is finger-tip accessibility and knowledge of where contracts exist in a document storage system or in the cloud.

For example, lawyers who want and need to access respective contracts during matter workflow have a critical advantage with a contract lifecycle management solution. There is no more guessing about the whereabouts of a contract.

General counsel or the chief legal officer interested in a status check about the progress of all contract negotiations or closed deals can utilize the digital contract management system and easily access any prevailing document relevant to business transactions.

For any company interested in automation and efficiency, a digital contract management system improves monitoring of the contract lifecycle. The contract lifecycle begins with negotiations and drafting through execution and monitoring the terms of the agreement to ensure compliance.

Digital Contract Management Components

Essentially, an individual contract requires hours to negotiate, draft the contract, redline the document, correct it, proofread the entire document, and have both parties sign and execute. Following execution, someone must monitor the agreement's terms and conditions so that all parties are compliant.

Review these four core components of a digital contract process and compare these components to the manual procedures in the previous paragraph.

Process Automation

Digital Contract Management streamlines the entire contract approvals process by automating routine approvals, checks and balances, and efficiency controls. The outcome is to eliminate human error risk by removing the need for humans to engage at various points in contract execution. Any automation reduces contract cycle time, adds a faster response, and reduces challenges in the process.

Enhanced Collaboration

Stakeholders can collaborate at a higher level and more easily with instant communication and feedback. Instead of focusing on the contract minutiae, stakeholders can ideate and make decisions more rapidly.

Optimization of Regulatory, Compliance and Risk Mitigation

All contracts must comply with regulatory requirements to ensure compliance with legal standards. A contract without these parameters does not protect the company from risk, and that is why digital contract management is critical to tracking and monitoring terms and conditions. The system delivers periodic alerts to inform contract managers that a regulation requires updating.

Data-driven Analytics

A birds-eye view of all contract activity provides data-driven analysis and decisions. The legal team assesses the performance of the best contracts and uncovers areas for improvement. Manual contract management is unable to deliver this level of strategic information.

Purpose of Digital Contracts

If it is not readily apparent yet that digital contracts provide great advantage and benefits to the legal department, this list of reasons why you should engage in a digital system for contract management will help you sell the procurement of such technology to your leadership:

Contract Approvals

With a software system tailored to contract development, your legal team experiences shorter cycle times and approvals. Automation delivers efficiency, greater collaboration, enhanced workflow, improved productivity, and cost savings due to less time with manual operations. Moreover, the system enables contract database searches with one keystroke, creating additional efficiencies.

Data Accessibility

A digital repository stores all contracts and related documents in one convenient cloud-access platform and site. As mentioned, all the contracts, in their various stages of execution, are accessible and can be linked to respective matters. This access allows for higher levels of communication and collaboration among the legal team and third parties. If leadership seeks a report on the status of all contracts, the information is easily pulled into a data-driven analytical report.

Audit and Compliance Preparation

Imagine hundreds of new contracts flowing into the legal department monthly. How can this volume of data be managed? More importantly, how can a legal team comply with regulatory requirements and prepare for internal or third-party audits? Contract management software makes this task more efficient with accurate data about every contract, including its history and status. With automated software, audits are more easily prepared for and documents are readily available and accessible.

Following Terms and Conditions

Recall the reference to hundreds of contracts monthly. This volume of contracts creates an array of deadlines, expiration dates, renewal dates, and terms and conditions that need to be followed. It would be impossible and error-prone to attempt to manage this manually. Software configured with alert settings, whether one-time or recurring, is the only way to ensure compliance and not miss a critical deadline like renewing an important contract.

Integrate with a Larger Ecosystem

Digital contract management can be stand-alone software purchased by small-to-mid-sized companies, or it can be part of a larger technology ecosystem consisting of enterprise legal management.

The beauty of integrating a contract management solution with enterprise legal management software creates valuable opportunities for the legal department. There is more efficiency, collaboration, productivity, performance, and accuracy with an integrated system.

For example, end-to-end document management occurs within the software and related documents are stored in accessible repositories. Matters link with contracts enabling the legal team to have reference materials on hand, in real time.

Those responsible for contract drafting can use contract templates that reduce development time. Moreover, contract authoring is done with Microsoft Office 365 tools, enabling easier redlining, drafts and comments visibility, fewer errors, and reduced development time.

Choosing a Technology Partner

There are a variety of digital contract solution providers on the market today. Many are new because contract lifecycle management solutions have exploded in the marketplace. That suggests the importance of a thoughtful review of existing software providers with the following factors:

• Understand the status of your business and its growth goals. Is your company on the fast track and will it need scalable software that adjusts per needs?
• On that note, a software system should be customizable, scalable and flexible to adjust to market and economic factors.
• Look at the length of time a tech company has been in business. Review customer testimonials and other online reviews to ensure the provider has a solid reputation and understanding of the market.
• In this hacker age of cybersecurity, check carefully about the security of the software you’re considering. Is the software secure and redundant? Does it comply with regulatory requirements and legal standards?
• Is there training post-onboarding and deployment? Training users in best practices for the software needs to be ongoing, easily accessible and effective.
• Customer support with account managers to resolve daily challenges, or plan for growth are critical for any company. The support team should also look at customer success planning beyond day-to-day operations.

Interested in an integrated enterprise legal management system with contract lifecycle management? Schedule a call with us!