Nearly 80% of business operations are governed by contracts. Contracts are an integral part of any business. Whether yours is a budding startup or a large organization, chances are you will be dealing with hundreds of contracts like partnership agreements, non-disclosure agreements, general employment contracts, property and equipment contracts, the list is endless. How effectively are you managing them? Do you rely on papers, spreadsheets and other legacy systems? Have you thought about moving to contract management systems? If yes, then this article is for you.
Before investing in a contract management system, make sure you analyze these seven questions to avoid pitfalls.
- Does the software have AI capabilities?
With the sheer volume of contracts, maintaining uniformity, managing contracts and pulling out essential information pose a huge challenge. Organizations may not have a standardized way of organizing contract databases. Consider, your enterprise has a large number of procurement contracts with varying renewal dates and renegotiation terms. A team of representatives may have to spend hours tracing, reviewing and tracking the data to ensure no opportunities are missed. Instead, if you opt for an AI-powered contract management system, the task can be completed in minutes. Through Doc.AI capabilities, data like contract titles, renewal dates, negotiation terms can be extracted. This makes it easier for reviews, approvals and sign-offs.
And that’s not all about it. Further, advanced contract management systems with AI capabilities can help review contracts, compare clauses, and classify contracts according to the type of clauses. AI-enabled CMS can also help in staying compliant with the changing regulations. NLP analyzes every document and highlights the threats and opportunities.
- Are there standard templates for contract drafting and editing?
Drafting contracts is one of the most tedious things. Imagine how difficult it would be to prepare documents with similar clauses, terms and conditions, jargons, and almost the same content a number of times. And this is why your CMS should support easy-to-use templates and clause libraries across a variety of areas. Using these templates, pre-approved by your legal and editorial teams, you can quickly draft contracts without any language flaws. Plus, a provision to standardize and centralize contracts means you get a 360 degree view of the contracts to trace them with customizable filters and collaborate with peers to review, edit and store.
- What is the ROI potential? How much can my organization save?
The saving numbers are the biggest persuaders to help you make the final decision of whether to invest in a contract management system or not. A study by Goldman Sachs concluded that an automated contract management system can speed up negotiations by 50 percent, reduce payment errors by 75 to 90 percent, lower the cost of managing contracts by 10 to 30 percent and cut the headcount needed for contract management by 10 to 20 percent. And yes, contract management indeed can be a cost-effective option, if chosen correctly.
Ideally, you must consider factors like the time spent on audits and tracking renewal dates, reduction in contract disputes, creation of new opportunities, reduction in sales cycle.
- Is the solution customizable?
Almost every provider in the market claims to offer a solution that is tailored to meet the needs of every organization. But is that always true? Instead of spending a fortune on customization, detail down the workflow, critical processes, improvements needed, and then explore options with more precise questions.
For example: In a typical contract management workflow, once the author drafts the documents, the system automatically routes it to the approver. Without stopping at this basic feature, a customization could be an email notification containing the document link sent to the approver. And this link should support or work on all devices- smartphone, tablets, and desktops.
At the same time, highly customizable software can also mean cumbersome and complex to use, and simplicity may also prove too little. Hence, it’s always a good idea to look at the trade-offs and sophistication of the team that will be using the software and then device on customization.
- What are some of the unique features or highlights that can reduce manual processes?
In a contract management system, contracts are stored in a centralized, secure and searchable repository with user-based access. This allows optimum compliance and extensive reporting. For instance, contracts could be easily traceable and the process of reviewing and signing can be automated with e-signatures. Another example would be metrics and analytics. To pull out information on how long it took for negotiating a contract, users can easily analyze the bottlenecks, identify the number of iterations and prepare comprehensive reports. This will further help in adding to clause libraries, getting insights into historical performance and in reducing the contract cycle times.
Another important feature to look for is contract redlining or editing. Redlining is highlighting the text to indicate additions, modifications, deletions, approvals and rejections. This feature is useful, especially when two or more people want to work on the same document collaboratively. It provides a greater flexibility while reviewing and negotiating contracts.
- How easy it is to deploy and use?
A contract management software that has an intuitive interface, easy-to-use features will be loved by your end users. To gain maximum advantage, while deploying, try to integrate it with existing systems that reduce the time spent on navigating from one platform to another. Example, integrating CRM with the new contract software can help sales personnel to automatically feed customer information, create contracts and route them for approvals, in addition to being in control of all the renewals, expirations and other important dates.
Next would be to check for the onboarding process. Great if it is an out-of-the-box solution so that you can go live and become operational in a few weeks’ time. Remember long deployment cycles are no longer tenable.
7. Will the data and private information be secure?
Last but not the least, data security is of utmost importance. As contracts contain highly confidential and sensitive data, they must be restricted from unauthorized access to earn the trust of your circle, be it partners, vendors and customers. Plus, the increasing cyber attacks and malicious threats are making companies susceptible to risk of potential legal, financial and brand liabilities. If you are about to retain the trust of your key business relationships, double check that the provider hasn’t had any serious data breaches.
Connect with our experts at email@example.com to learn more about Vuram’s Contract Management Solution.