What Is Contract Management? An In-Depth Guide

Contract management used to be a behind-the-scenes manual task that didn't get much attention. Today, it's front and center. Why? Because organizations and legal teams now know contract management has a ripple effect that reaches a business's bottom line.

Optimizing this critical process from being a time-consuming pile of paperwork to a streamlined online system - powered with automated workflows - leads to greater peace of mind and greater profits.  

According to the International Association for Contract & Commercial Management (IACCM), 80% of B2B deals are governed by contracts. That means that while the global business landscape continues to change rapidly, with new sectors and trends emerging all the time, one thing remains ubiquitous - contracts.

Whether big or small, every company solidifies most of its transactions and partnerships with a signed contract. Think of all the back and forth that can go on between the internal teams devising any given contract as well as the parties signing it.

From employee hiring to massive business partnerships to purchases to NDAs - and everything in between - contracts are everywhere. And there's more fine print than ever. So you know there's much more going on than just getting that signature. How contracts are maintained across a full contract lifecycle is undergoing a necessary transformation.

Understanding what contract management is - along with its impacts, challenges, and future - is absolutely key to putting your team at the forefront today, and keeping it a leader tomorrow.

Why contract management is critical?

In 2021 - as technology and cloud-based work advances - legal teams are realizing that modernizing legacy contract management practices leads to huge benefits in saved time, increased compliance, and greater ROI.

The COVID-19 economic crisis has only added to the strain on legal departments that have to do more with less — and much of it remotely. With 60% of businesses surveyed reporting that the pandemic has had a “moderate to severe impact on their contracts,” 85% admitted a need to improve their current contract management systems (IACCM).

Now is the time for digitization. Yet 85% of businesses still manually handle their contracts (Aberdeen). And that means rethinking your own team's contract management by implementing a modern system is an effective way to get ahead of the curve.

Contract management 101: What exactly is contract management?

From handshake to wet signature to digital signature, sealing a deal has certainly evolved. But it's simply one part of contract management, which involves myriad steps and a more expansive timeline than people often think.

Simply put, contract management is the process of comprehensively managing the creation, signing, and ongoing analysis of a contract.

As a company or legal team grows, it becomes necessary to implement a solution that protects it legally and financially, while also improving employee performance throughout every stage of contract management.

The more contracts there are, the greater the role contract management plays in a company's overall health. Ultimately, effective contract management is a huge boon to efficiency, security, and finances.

The 5 stages of contract management

Here are the traditional stages of contract management and what to be aware of in each:

1. Creation

This the start of the contract management process. It's the phase when you and your team begin drafting the outline of an agreement to thoroughly and accurately include all the required parts and adhere to any regulations.

- Traditional methods have often involved manual word processing through the use of Microsoft Word and later Google Docs to assemble a new draft via copy and pasting. The general body of an older document is replicated, with the essential details updated to reflect the newest contract's requirements. When flaws are copied and unchecked during this foundational stage, they can be repeated and grow into larger problems down the line.

2. Negotiation

The negotiation stage of contract management can involve many back-and-forth rounds — between both internal and external parties. This is when you work out all of the terms and conditions, finalize legal clauses, and when you're constantly updating key information as changes are determined.

- Oftentimes, other legal team members or outside departments are brought in for full review and quality control. With many hands in the pot, having strict version control and transparency — all while retaining the utmost in security measures — is critical to keeping everything in order, up to date, and carefully handled.

3. Signing

This is the hold-your-breath stage of contract management. You've finalized all the copy and sent out the contract to get the signature (s) that will make the agreement official. Make this part as easy as possible for your signatories so that you have the quickest turnaround possible.

- With remote work more common than ever, and physical files taking a backseat to digital files stored in the cloud, it's become essential to have e-signature tooling to securely and rapidly solidify your contracts. Business people and now the wider public have come to expect painless digital signatures.

4. Monitoring

Just because you've acquired the necessary signatures, it doesn't mean the job is done and you can put aside that contract for good. This is the post-execution phase when ongoing monitoring happens to ensure the contract terms are fulfilled, payments are made, deadlines are met, and more.

- This stage of contract management requires a lot of oversight so that key action points and deadlines aren't missed. Manual follow-through has left contract managers scrambling to find what they need when they need it, and things often fall through the cracks.

5. Renewal

When a contract is at the stage of renewal, it can be a pivotal point of additional loss or gain for a business. At this point, you want to have enough time to review how the contract was fulfilled and then modify any terms for your greater benefit before renewing.

- Unfortunately, contract renewal dates can often go unnoticed, and this can lead to financial loss, legal compliance vulnerabilities, and more. Having a reliable alert system in place so that you're notified of approaching renewal dates and have time to evaluate a contract's terms before renewing it is key.

How contract management impacts business?

People often think of contract management as an administrative activity, not one that directly creates value. But contracts don't just complete a deal, they can actually lead to more deals and savings in operational costs when monitored precisely and efficiently.

Ineffective contract management, on the other hand, costs businesses 9.2% of annual revenue (IACCM). Three primary reasons?

1) Increased potential risks that take time and even finances to resolve.

2) Wasted time and money spent on low-value tasks.

3) Missed opportunities through lost files, overlooked renewals, and more.

Faced with today's increase in potential legal and financial risks, companies are strengthening their in-house procedures, and the cost of a contract is soaring.

According to an IACCM study based on more than 700 companies, the cost spent on even a low-risk contract, from drafting to negotiation to signing, has increased by 38% over the past six years.

But when businesses take what has traditionally been time-consuming and unreliable, and streamline it with technology to be quick, transparent, and easily collaborative — with automated steps for heightened efficiency — the rewards are exponential.

What are the challenges of contract management today?

Today's contracts are increasingly complex and more people than ever are involved in processing, reviewing, and validating them.

Most of the time, it can involve siloed teams with different goals. This can create confusion and too much opportunity for error without strict version control and transparency.

From collaborative contract creation and negotiation to execution, contracts are requiring more resources to monitor the fine print, increased regulations, and expiration dates.

Common challenges contract managers face during each stage of contract management include:

Creation

- Lack of control and consistency without standardized templates

- Risk of contract compliance with more regulations than ever before

- Too many emails and document versions to process

Negotiation

- Back-and-forth endless emails

- Unreliable monitoring of changes with lack of visibility

- Manual recording and lack of version control

Signing

- Lack of legal validation

- Risk of signing or involving someone who isn't authorized

- Endless reminders to obtain signatures

Monitoring

- Manual management of deadlines

- Wasted time tracking down info and finding contracts

- Lack of complete data on signed contracts or negotiated clauses

Renewal

- Manual follow-up

- Lack of reliable reminders or alerts

- Unwanted renewals or expirations; missed opportunities

Why legal teams are rethinking their contract management?

While 82% of companies are planning to reduce the cost of their legal departments (EY), 87% of them have seen an increase in their legal needs over the past five years. Being able to get more done with less is a must.

Legal professionals know all too well how so much of their time is spent (wasted) on contract creation, ongoing monitoring, and follow-up. Add to that the headache of searching for lost contracts — and the finances lost with them — in addition to errors involving legal compliance.

Now, more than ever, legal teams need to find the best way to save time, energy, and money spent on contracts — even as the amount of contracts grows.

The future of contract management is here

Companies must become more efficient long before (and long after) the contract is signed. At this point, simply having an online repository to store all your contracts is no longer enough. Tools like Google Docs or DocuSign can help along the way, but when on their own, they only solve parts of the problem.

The strength of a modern contract management solution is that it takes the best of many disparate tools and centralizes the important functionalities of each into a single environment. Cutting-edge contract management software is meeting the need for end-to-end success.

Today, complete contract management Software-as-a-Service (SaaS) platforms are streamlining (and hugely reducing) a legal team's legwork by automating contract management for extreme efficiency and compliance.

All-in-one solutions make it possible to manage every stage of the contract lifecycle on a single platform, from creation to follow-up to renewal.

While still providing so many functions, the most recent contract management solutions now also have a focus on quick adoption. Today's SaaS solutions can be configured in a few minutes, from your internet browser. Gone are the days of downloading software, complex onboarding, and the costly updates that go with it.

Finally, comprehensive contract management platforms integrate with essential business tools (Gmail, Outlook, Slack, Salesforce, Drive, etc.). These solutions can extend beyond the contract lifecycle to allow other teams involved to gain productivity as well.

The benefits of contract management software in 2021

Since no one has time to get lost in a complex product that brings about more confusion, the newest systems need to be highly effective and easy to use.

That's why contract management software is trending more than ever. You can finally centralize all your contracts securely, simplify the end-to-end process through automation, and save time with less emails — all without having to feel overwhelmed by a daunting product.

Here's the breakdown of how modern software is changing the contract management game:

1. Creation

Contract templates are imported then saved on the contract management platform to make the operational teams autonomous and ensure that the contracts used are in conformity.

- Pre-established contract templates are generated with the criteria entered by the operational staff: type, country, amount, etc.

- The data available on the company's CRM is inserted into the template

- Missing data must be completed by the counterparty

2. Approval

Automated approval workflows allow everyone involved in creating and negotiating the contract to intervene at the right time, with all the information easily accessible to make quicker decisions.

- Approval workflows are defined according to the characteristics of the contract (amount, department at the origin of the request, type of contract, etc.).

- A summary of the important elements to be approved is easily accessible for the decision-maker

- Email reminders are automated

3. Negotiation

Negotiation is done online in a shared document, making it possible to work together (from anywhere) and to track any changes easily:

- The contract negotiation is managed directly in a shared collaborative document

- Each new version of the contract is compared to the previous one

- The history of changes is accurate and transparent

4. Signature

The signature is carried out directly online, without having to leave the platform:

- The signing process is integrated into the solution

- The order of signatories is defined upstream, with automatic reminders

- The delegation of powers is managed in the solution

5. Storage

The contracts and their metadata are stored in one central place for easy access to information and to tightly secure sensitive company data:

- Permission levels are pre-established to manage access

- Contracts are recorded in the CRM enterprise with integration

- The history of old contracts can be imported all at once on the platform

6. Monitoring & Renewal

Monitoring and renewal of contracts in an effective platform is simplified and automated:

- Metadata is recorded, making it possible to search the content of stored contracts, in particular to find clauses

- Automatic reminders are set to alert contract expiration dates for easy renewal

- Reminders are recorded in your calendar using an integration

7. Analysis

Contract data can be easily located, filtered, and obtained in the form of reports:

- Reports on contracts are accessible (types of contracts, volume, amounts negotiated, etc.)

- Reports on operational efficiency throughout the contract lifecycle are accessible (review deadlines, signature deadlines, blocking clauses, etc.)

- An export of your data can be easily generated (ie, in the event of an audit)

Who uses contract management software?

The three primary teams leveraging the benefits of contract management software are:

- Legal : Manage all your contracts from negotiation to monitoring deadlines in one place

- Sales: Speed ​​up your negotiations with easier collaboration and instant signatures

- Procurement: Speed ​​up your negotiations and take control over the financial and legal risks

- Finance: Store your contracts in a secure environment and instantly access contract data when you need it

Effective contract management for legal compliance

Clearly, legal teams have a lot on their hands and a lot weighing on their minds — with compliance worries, government regulations, and both in-house and external client demands. Effective contact management lightens the burden by clearing up the juggling act. Legal can now maintain efficient — and accurate — oversight of all the complex, sensitive pieces.

A contract management platform provides a transparent audit trail, version control, and easy reporting. Lawyers can immediately find the evidence they need — whether it's for a court case or a business's partnership negotiations.

Legal firms can more precisely monitor their vast library of contracts when they're stored in a central and easily searchable repository that is GDR compliant and safeguarded with data encryption.

The worry of lost or leaked information is a thing of the past. Plus, a platform's built-in reporting system gives a legal firm full sight into how it is doing as a whole and on a contract-by-contract basis.

Contract management collaboration between teams

While contract management solutions are traditionally associated with the legal department, they are now used by all of a company's departments to simplify exchanges and offer more transparency.

They can facilitate interactions between internal stakeholders, thanks to an interface built to accommodate operational staff. Users can easily create requests, generate, or even approve a contract directly from the platform — no email needed.

With each person involved in the negotiation stage now able to collaborate on a shared document stored in a centralized place, contract negotiation has moved from the chaotic mailbox to a dedicated solution. The process is streamlined to be clear, transparent, and trackable.

Finally, modern contract management solutions enable easy access to information for those authorized to obtain it. Teams can directly explore contracts with complete autonomy according to the permissions defined by the company. This means that lawyers now save time and no longer have to play the librarian.

Tomorro is the right way to do contract management in 2021

Tomorro is the right — and newest — way to manage the entire contract lifecycle in a smart, collaborative, and secure way.

We have seen how the standard ways of contracting have negatively impacted business and employee productivity.  

These losses are linked to time wasted during the contract lifecycle, risks caused by manual management of negotiations, and finally, to missed opportunities when contract data is neglected after a signing.

There is now a major stake in reinventing the entire contract management process, which has been too fragmented with some key stages so complex that it is impossible to be effective.

Our technology dramatically reduces the number of back-and-forths during negotiations by intelligently generating a single version of the contract that remains updated according to the context of the negotiations.

The Tomorro platform empowers you to easily collaborate with all the various internal and external stakeholders involved in a contract.

Finally, your contracts are all stored and monitored within our platform so that your data comes to life to help you manage your activity and never miss a deadline.

And all through a simple, intuitive interface for a smooth adoption experience.

Want to learn how Tomorro can supercharge your workflow?

Discover in just a few minutes our SaaS solution for collaborative, intuitive, and secure contract management.

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