What is the purpose of a contract?
A contract is a legally binding agreement between you and another party - think of it as a legal representation of your relationship. A contract can be defined as a self-imposed court-enforceable legal obligation that follows public policy or law. When entering into a contract, the parties of the contract are agreeing that they both have certain rights they can rely on the legal system to enforce. Once a contract is signed, it means that both parties agree to a promise of certain rights and obligations.
Contracts are a crucial element of building relationships, extending existing ones and are especially important for businesses. Contracts govern all aspects of a business, as the source of truth for employment, revenue, and more. As such, companies need to have an effective contract management process in place to ensure not only the integrity of their contracts, but also their security & accessibility.
There are many reasons why contracts are important, but the three main reasons are:
- They hold each party accountable
Contracts serve as a record of each parties’ rights, responsibilities and obligations within the relationship. hey are used to hold parties accountable to meeting specific outcomes
- They prevent conflicts and mitigate risks
Clarity from the get-go can help prevent any future misunderstandings or disputes between the two parties. This means that conflict or dispute regarding timeframes, responsibilities and payments can be properly addressed, with all contractual parties coming to a consensus. .
- Certain contracts guarantee a level of security
Contracts can also ensure that different types of information you need to protect are under confidentiality and limited to certain people. An example of this would be a Non-Disclosure Agreement (NDA), where information regarding aspects of sales, customers or client databases would be protected.
Contracts are crucial for laying down the foundation for a productive working relationship. They work to clearly establish expectations and preferences at the beginning of a working relationship to ensure it runs smoothly and effectively and avoids the potential for conflict and confusion.
What is a contract repository?
In the past, companies used manual tools such as hard-copy storage to manage their contracts. However, contract management can become difficult, overwhelming and disorganized as companies continue to expand.
This is because hard-copy storage puts businesses at risk of losing contracts, misplacing them, forgetting to update their information and blocking employees from accessing them.
Online contract repositories however, offer a central cloud-based location in which data is stored and managed. It acts as a central hub for all of your contracts and documents, making it easy for you to access the information without losing or duplicating your contracts again.
What are the alternatives? Why don’t they work?
Some businesses are now taking a small step forward towards digitization by adopting programs like Excel spreadsheets to store contracts. This is because of a few reasons:
- Cost - Excel doesn’t require a significant amount of financial investment
- Usability - Most people already know how to navigate and use the program
- Accessibility - The program can be easily installed and used on most devices
- Security - Excel sheets can be password protected to maintain confidentiality
Drawbacks of using Excel spreadsheets as contract repositories
However, using Excel spreadsheets as a place to store contracts comes with many pitfalls to look out for. At first glance, using Excel may seem cheap and easy, but they rely on an in-house team of individuals to manage it. In other words, you need to manually manage your contracts which is time-consuming and risky for your business as humans are bound to make errors.
These human errors when entering data can lead to your contracts being inaccurate, badly managed and can cause serious problems further down the line. Although Excel may be a good step in the right direction, it is an incredibly limited one.
What are the impacts of ineffective contract management?
Without properly implementing software or the processes to help automate your contract management processes within the company, you are opening yourself up to a variety of risks, potential costs as well as missed opportunities.
Despite the availability of contract management softwares, many companies are still hesitant about switching to an automated system. Here are just a few ways your company will be affected:
- Inefficiency and disorganization
When businesses don’t have an automated contract management system in place, they leave tremendous room for human error. It may not seem like a few human errors could create a big issue, however, the culmination of these small problems will eventually build up to hefty costs for your business. When employees have to manually input, search for and update contracts, they are wasting paid working hours and resources that could’ve been used more efficiently elsewhere.
- Duplicate contracts
When employees are managing contracts, rather than updating an existing contract, they may create a new file for the same client which causes duplicate contracts.
- Missed deadlines and renewals
Since nothing is automated, you and your employees will have to manually check deadlines for contract renewals - which is extremely easy to miss. This disorganization can disrupt your business as it can lead to frustration for everyone involved, which could be anyone from stakeholders to partners.
- Inability to track contract version history
Being able to control your contracts’ version history is crucial in ensuring your business is running smoothly, productively and collaboratively. Contracts require frequent review cycles, so when you have an online contract repository, you can better manage and keep track of the history of each contract version. With this type of functionality, you won’t have to waste time trying to find the most up-to-date contracts and manually identifying what changes were made.
What are the benefits of digitizing your contract management system?
With a digitalized contract management software, you can significantly decrease the amount of time and resources that is spent on managing your contracts. Contract management systems are the most effective solution for businesses of all shapes and sizes to help them manage, track as well as automate steps in the contract lifecycle.
Let’s go through a few ways your business can benefit from an cloud-based contract repository:
- Shorten approval times
Keeping track of contracts and their approval status can get overwhelming, especially with the amount of emails, disorganized spreadsheets and phone calls going on. It can be hard to get your contracts reviewed by the right people on time if there is an inefficient contract approval process.
However, having a digitalized contract repository allows you to route contracts to the right people at the right time - which means a seamless task flow without any bottle necking. It also means everyone is held accountable for their duties and responsibilities within the company.
- Avoid missing renewal dates
When there are hundreds of contracts to keep up with, it can become difficult to remember the renewal dates for each one - which often leads to missed contract renewals. These missed chances can lead to costly consequences, but with a contract management software, you can ensure you always renew contracts on time while also having a strong negotiating position.
With a digitized contract management system, you can also get alert notifications when contracts are about to expire and never miss a contract renewal day.
- Ensure contracts are secure
Ensure nothing is accidentally deleted with better control over who has access to what contracts. Contract management softwares makes it easy to track every change made by each user to make sure that every employee making changes is held accountable and that each contract is held to compliance standards.
Employees can also be assigned set role-based permissions for better security. This means that you can prevent unauthorized users from accessing certain documents, in other words, you will have full access to who can read, draft, edit and approve each and every contract.
- Better document management
Setting up a digitalized contract repository software means you won’t have to outsource any document storage, and you can also avoid those unorganized filing cabinets. By storing your contracts on a cloud-based platform, you can ensure your business is operating efficiently by minimising the admin work.
Employees can self-service for minor contract queries and there doesn’t have to be a dedicated team in charge of the contracts. This not only reduces the administrative burden but it also means that employees can focus on their actual jobs instead of having to waste their time fumbling around trying to find the right files.
What makes a good contract repository?
Selecting the right contract repository will help save you time and resources as it will help keep your documents organized. Now that you know all the benefits of adopting a contract repository for your business, let’s go through what you should look for when selecting one:
- Hierarchical access control
This feature will ensure that only selected people with the right set of permissions will be able to have access to potentially sensitive data in the repository.
- AI-powered extraction technology
Being able to use Optical Character Recognition (OCR) or Natural Language Processing (NLP) means you will be able to convert scanned contracts into text-searchable format. This means it will be easy for you to search for any information you need within the document.
- Full-text search engine
Having powerful search functionality enables you to search for keywords, customers, dates, numbers, clauses and more across all of your contracts. This will give your employees a fast and easy way to find key terms within seconds.
Centralise your contract management today
Centralisation is crucial to the success of any contract management. Although many businesses are now trying to step into this era of digital transformation by switching to programs like Excel to manage their contacts, they are limiting themselves.
Having a good contract management system will help you better store, manage and create contracts and streamline your business. Lexagle is a contract management platform making contracts simple and a joy to use. We take a design-driven approach in creating a simple-to-use interface for everyone part of the contract ecosystem.
If your business is ready for the next step forward in this digital age, do not hesitate to contact us for a free demo today.