Very little in business is as important as contract management. In one way or another, contracts authorize most of the activities that take place in any organization. If not implemented correctly, contracts can cause significant problems. Implementing contract management software is one of the best moves an organization can make to ensure it operates at peak efficiency.
Benefits of Automated Contract Management
Managing the creation, execution, and analysis of contracts to maximize an organization’s operational and financial performance while minimizing risk is what contract management is all about. In layman’s terms, managing contracts ensures that the agreements made by a business or entity with another business or entity are clear, actionable, and as mutually beneficial as possible.
Automated contract management brings clarity, accountability, control, and efficiency to the contract management process. In every phase of a contract’s lifecycle, automated processes benefit all parties.
Automated contract management software allows control of access to your contracts—ensuring that only those associates that should have access do have access. With software such as M-Files, relevant people on both sides of the contract will have access so all parties are working off the same version of their contract at all times.
Automation also provides clarity for the context of the contract, not just the text of the contract. Information about the contract such as clients, properties, deadlines, projects and other information unique to each organization, all provide context and clarity about the contract. Organizing that contract specific information with dynamic, intuitive searches, lists, and dashboards to track milestones, expirations and other key metrics provide unparalleled insight into the contract lifecycle.
Auditing functionality and automatic cataloging of retired versions of a contract protect all parties. It ensures all parties are aware of changes made to a contract. The versioning function also ensures that weeks of work can’t be summarily deleted because an associate hit the wrong key when editing.
An automated contract management system increases efficiency by ensuring a standard operating procedure for all the processes throughout a contract’s lifecycle. From initiation to execution, an automated system keeps all aspects of your contracts running smoothly.
Stages of Contract Management
Whether a contract is between large, corporate entities or between a company and a freelancer, there are several stages that a contract goes through—each of which requires management. Contract lifecycle management looks like this:
Initiation and Negotiation
When the need for a contract has been identified, the involved parties initiate contact and begin to construct the contract. This entails gathering pertinent documentation and revising contract drafts until all parties are satisfied.
Approval and Execution
When negotiations are complete, the process of securing management approval begins. When approval has been secured, the final signatures are signed, bringing the contract to life.
This is the phase of a contract’s lifecycle that most laypeople would point to as the time which contract management occurs. Contract managers monitor deliverables and track milestones and deadlines to ensure the contract is being followed. If documents arise that should have been introduced in the initiation and negotiation phase, this is where revisions and amendments can be made to ensure the contract remains mutually beneficial to all parties.
Auditing and Reporting
During a contract’s lifecycle, performing audits and reporting on progress ensures that all sides comply with their contract. While it is always important to trust the people with whom you sign a contract, this phase is where you verify that your trust is well-founded.
As your contract comes to its end, if it was profitable, renewing the contract should be a priority. Contract managers ensure that good contracts don’t expire before an opportunity for renewal. A missed expiration means the entire process has to start over at initiation—that would be a costly mistake.
Each phase in the life of a contract carries the risk of compromised contract management. Forgetting to include a negotiated point, bringing an out-of-date version for approval or execution, missing obligations, letting a renewal date pass —any of these errors could have significant financial costs for an organization.
When contracts aren’t properly managed, problems arise. Missing agreed-upon deadlines can result in a loss of profits or, in some cases, nullification of an entire contract—wasting significant amounts of labor. Miscommunications between parties in the creation of the contract because each party is looking at different versions of the contract can result in costly legal actions and more money getting poured down the drain.
Taking into consideration numerous contingencies on clear communication as well as understanding between contracted parties, executing steps to eliminate as much human error as possible is essential. The best way to do that is to bring automation into your contract management process is through the use of modern contract management software.
How Does Automated Contract Management Work?
With automated contract management software, each step in a contract’s lifecycle is augmented. Automation makes contract management a more efficient, streamlined task. From providing a more secure home than an email inbox to save drafts of a contract, to creating a standardized process for introducing changes to a contract and securing approval, to notifying contract managers of every milestone and deadline as it approaches to ensure compliance and achievement of deliverables, and much more.
The most effective contract management software includes auditing functionality and processes that track all versions of a contract from initiation to renewal.
The Time to Automate is Now
Automated contract management software like M-Files are the perfect tools to protect your business from human error in contract management. By creating standardized, scalable, and secure procedures for contract management, M-Files protects your business and streamlines some of the most important tasks for any business.
Don’t run the risk of human errors creating chaos in your contracts. Automate your contract management systems now so you can focus on delivering your products and services — not on your contracts. Contact us today.
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