For most companies, contracts form the basis of their entire business. Until recently, however, the majority of organisations have been investing relatively limited resources into technology that manages contracts. Any gaps in the contract management process can create legal uncertainty and cause potential damage to your company. In this article, we’ll explore the latest innovative tools that in-house legal teams can use to assist the business with contract management.
What Are the Main Challenges With Contracts?
Despite growing discourse around the value of plain-language contracts, many contracts are still very complicated. In turn, they can take a significant amount of time, resources and money to create. There are some key challenges that businesses face when managing written contracts, including that they:
can be highly individual;
are time-consuming to review and cross-reference; and
must comply with specific regulatory requirements.
Research shows that a good contract management process could improve profitability by the equivalent of the business’ 9% of annual revenue.
What is Contract Management?
Finding harmony with a business partner is critical to the success of a commercial relationship. Well-drafted contracts play a vital role in this by minimising the risk of disputes between business partners.
Contract management is the administration of contracts between a company and its stakeholders. It is a vital tool in maintaining commercial harmony. When implementing a contract management plan, you can assist your managers to properly manage contracts through addressing:
performance monitoring; and
the process of ensuring that all parties fulfil their commitments.
At LegalVision, we believe that the future of law should bring legal technology and human legal experts together. In our experience, in-house teams can only implement an effective contract management process through a combination of:
a fundamental review of the workflow process; and
the active engagement of stakeholders.
What Technology Can Assist With Contract Management?
For the contract management process to be effective, it is essential to have a holistic approach. This approach should focus on developing technology that improves processes over the contract’s entire life cycle, from drafting to performance measurement.
Automating Legal Documents
Most lawyers use templates or precedents to draft contracts and manually populate them. If there is a high volume of documents, even a simple template can turn into hours (or days) of work.
With document automation, legal teams can link precedents to a database and generate hundreds of documents in a few minutes. In turn, time will be saved and the legal department is free to focus on situations where their expertise is required.
Pre-approved word choice and clause suggestions when drafting or reviewing a document can streamline negotiations. It can also reduce the business’ exposure to risk because the legal team has already approved specific words.
Organisations need to store their legal documentation safely. However, as these documents outline the company’s rights and obligations regarding specific relationships, they should also be easily accessible.
Cloud-based contract management solutions provide a centralised and secure platform for all pending and completed contracts. This platform can also include a system of tracking, tagging and alerts to maximise the visibility of the management process for the legal team. If your team stores all contracts in a single repository, the review process can be simplified, and it will be easier to prepare for any compliance audits.
Through technology, documents can be securely stored and protected depending on the level of access required.
For example, for certain stakeholders, you can:
disable access to certain documents;
restrict some contracts to ‘view only’; or
include watermarks on the contract.
For highly sensitive matters, a multi-factor authentication process can be implemented. Here, users might need a password and a physical token (like a mobile phone to receive SMS confirmation) to open documents. This protects the confidentiality of your agreements and reduces the risk of documents being altered without prior approval.
Electronic signing allows for the full digitalisation of the business process. It eliminates the time and costs of:
filing in paper formats.
The traditional way of signing documents presents many disadvantages, such as the:
risk of loss or destruction;
need for physical storage; and
time spent checking that the documents have been properly executed.
Combining electronic signatures with the cloud-based storage of the documents reinforces the security of the process while also saving time.
Monitoring Contract Performance
Artificial intelligence (AI) can enable your organisation to become more productive and make smarter decisions once the contract is in force. Computers can analyse a contract and inform you of potential opportunities and risks.
For example, AI might be able to identify any penalties for late payments and remind you of your ongoing contractual obligations.
When dealing with a complex long-term project, you can significantly reduce the burdens associated with contract management by having a platform that automatically tracks:
The system can also create alerts ahead of renewal dates to trigger performance analysis as part of the review.
LegalVision NewLaw White Paper
An essential read for any lawyer interested in the future of law, this white paper covers a breadth of NewLaw topics including legal tech trends, benefits of legal process design, the future of legal outsourcing, case studies on smart contracts and key developments for NewLaw players.
This report will help lawyers and law firms navigate the NewLaw landscape.
What Are the Main Benefits of Contract Management Technology?
The use of technology to create, track and provide analytical reports on contracts will transform a burdensome and costly process into an efficient and powerful tool. This will save your in-house team precious hours that can be instead be dedicated to higher-level tasks that bring long-term value to the business.
Investing in trustworthy contract management technology will undoubtedly be beneficial to your company, and will instil confidence in its business partners. By simplifying the negotiation process and promoting efficient collaboration, contracts can transform the process of doing business.
Furthermore, following an established contract management procedure provides more certainty for your business. It also limits the company’s risk of exposure when entering into a new agreement.
Contracts are at the heart of your business relationships and tracking their performance will have a high return on investment. Improving your contract management processes by leveraging the technological developments available to in-house legal teams will enable your team to focus on higher value tasks. If you have any questions about implementing a contract management process in your in-house team, contact LegalVision’s legal transformation lawyers on 1300 544 755 or fill out the form on this page.
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