5 Reasons Why Contract Management Software Is Important

Well-implemented contract management software unlocks significant potential for your contract management — and, because contracts get signed faster and more often, it tends to create more business opportunities every year.

The need for contract management

For many companies worldwide, managing contracts is a tricky and often daunting task. Scattered files, missed deadlines, and outdated versions rarely make organizing contracts any easier.

A simple end-of-term request or a search for the latest version of a contract can quickly turn into a poor experience for customers and employees alike. Contracts often can't be found without spending considerable time on the search, and changes made to a contract may never find their way back into the company's central system.

Today, many companies try to overcome these challenges with document management systems (DMS). Companies further along in their development, however, prefer contract management software — also known as CLM (Contract Lifecycle Management) — over a DMS.

For companies that rely on contract management software, the benefits include better functionality for tracking and negotiating contracts compared with conventional DMS tools. Advanced contract management software can also reduce supply-chain risk while ensuring compliance at every stage of the supplier relationship. Well-implemented software therefore brings more business opportunities on average, because optimized contract processes are signed sooner and more often.

With an expanded feature set, effective, advanced contract management software can be critical to success in product launches, global expansion, hiring, and other essential activities. Below, we list five reasons why contract management software is so important for companies today.

1. Notification of upcoming contract deadlines

Imagine having to manually manage hundreds or thousands of contracts your company is bound by — how are you going to keep up? If you don't get an alert in time, contracts may renew on the old terms simply because there's no easy way to tell whether an existing contract expires in a few days or a few weeks.

The end of a contract is always a good time to put the relationship with the counterparty to the test. It's an opportunity for both sides to reconsider the terms and, if needed, make room for a better offer. Advanced contract management software notifies you before a contract expires, so you can review it in advance.

2. Digitalization of documents

A lot of paper is harmful to our environment, yet many companies still rely on it. Imagine a paperless world where you manage deals and contracts in a contract management system and access them from anywhere — via your smartphone or computer, without rummaging through meters of file folders.

3. Effective collaboration when drafting contracts

Even in the 21st century, contract revisions are still handled over email or, sometimes, manually on paper. This usually costs a lot of time and money. With the co-authoring function of intelligent contract software, you can skip the hassle of exchanging drafts across different media: you read through drafts in the software and exchange comments for revisions right there, all in one system. The software also keeps internal comments separate from external mark-up automatically, with no need to delete or edit the history before sending. That frees you to focus on other strategic matters.

4. Automatic booking and processing of order data

As soon as an agreement is in force, you can immediately process orders and contract data elsewhere. Some advanced systems can even initiate the invoicing process.

Through this automation, the system extracts the payment terms from the contract. The number of invoices posted is easy to track, and incorrect transactions are prevented in good time.

5. Evaluation and contract analysis

This is often a decisive function: it lets you assess whether existing contracts should be renewed on the current terms, or whether your company has already agreed better conditions with similar customers. Advanced contract management gives you insights into the agreed services across your entire contract portfolio. This delivers valuable help even with just a few contracts. With many thousands of contracts, contract analysis can make a significant difference to the bottom line.