Digital contract management – what are the benefits?
Digital contract management means that contract lifecycle management is more effective, contract risk management improves, and contract data is always up to date.
Companies often have several contracts between different parties, starting with employment contracts. Traditionally, purchase and sales contracts, subcontracts, and cooperation contracts are archived in binders and cabinets, but the time of dusty folders is well and truly over. eContract management brings contracts to the present day without compromising on data security.
However, simply saving a contract in a digital format is not sufficient. It is important for the company to really be able to manage their contracts and monitor their realisation. By choosing a reliable digital contract management service provider, an organisation can get the best benefit out of its new electronic contract management system. An expert partner recognises the needs of the company and provides digital contract management software and services accordingly.
Cloudia’s Director of Services Outi Tuohimetsä explains how the management of contracts is an important part of strategic business.
“Contract management can improve the quality and productivity of operations, as well as risk management. Who wouldn’t want to predict internal and external costs and ensure compliance with agreed terms during the contract period?”
Digital contract management benefits companies
Digital contract management covers the entire life cycle of the contract. Contract data is easily accessible and manageable, from creation of the contract to signing contracts online, plus throughout the entire validity period of the contract.
Electronic contract management boosts operations. Using a contract management system reduces the amount of the manual work required to create and handle contracts. Contracts and related data are found quickly, and it is possible to access contracts from your own workstation. Contract data can also be utilised better through the creation of various reminders and reports.
Contract risk management is made easier. Procedures during the contract’s validity period, approved suppliers and partner performance are easy to monitor. Important contract dates will not be forgotten as the system will provide automatic reminders. In addition, contract storage and access to the contracts meets data security requirements.
Contract life cycle management is easier when it’s digital
The entire life cycle of a contract encompasses the creation of the contract, negotiations between contractual parties and signing of the contract, plus monitoring of the contract’s validity period, complaints and cancellation, termination, and renewal of the contract. Click the header below to see more information on the benefits that a digital contract management system can offer at each stage in comparison to traditional contract management.
Traditional: In traditional contract management, preparation involves printing, scanning, version control and signing, etc. This process may be repeated many times before the final contract has been signed by all of the contractual parties.
Digital: All preparation-related processes can be carried out in real time online using a digital contract management system. The creation and negotiation phase of the contract, all the way until signing, takes place digitally, and each party can access the latest, updated version of the contract. Ready templates available on the system make it even quicker to create contracts. The use of templates, clause libraries and preapproved legal texts also reduces risk, because these make it less likely that a contract is poorly written. Electronic contract management also means that up-to-date information is available about who has already approved the contract.
Traditional: In traditional contract management, monitoring is difficult, because the contracts are often forgotten in archives once they’ve been signed. Utilisation of the contract data relies on workers’ memories and the tools they use. Workers may also change jobs mid-validity period, which means that some contract data leaves along with them.
Digital: An electronic contract management system provides an automatic alert when a contract ends, for example, or if the terms of a contract need to be changed. Automatic alerts make it easier to monitor contract realisation. All of the contract-related data is in the same location and easily accessible to all, which also means that it is easier to analyse and maintain contract data.
Traditional: In traditional contract management, responding to complaints takes time, and breaches are not necessarily detected in time. Proof is collected manually, which is a time-consuming process, and complaints are not necessarily submitted in time.
Digital: Digital contract management means that the reimbursement schedule for complaints is shortened, as the user can submit an immediate complaint via the system if they notice a breach. It is also easy to indicate damages caused and refer to the terms of the contract that relate to the complaint. Using the system, a clear and detailed list of the relevant sections of the contract can be drawn up easily and effortlessly. Discussions between the parties are automatically saved on the system. The system also enables the use of ready templates, which can be used to ensure that no important complaint-related matters are left out of the complaint, increasing the approval rate of requests for reimbursement.
Traditional: In traditional contract management, contract dates can sometimes be forgotten. In such cases, a company may accidentally pay for a contract that has already ended, or forget to renew a contract that has expired.
Digital: A digital contract management system can automatically remind people who are responsible for the contract of the contract’s renewal and termination dates, which allows users time to take action. A contract can be renewed, or a new contract can be created in an agile way.
A contract management system that suits the customer’s needs
Both small and large companies can benefit from digital contract management. Centralised and automated contract management benefits companies regardless of their line of business.
People are often concerned that deploying a new management system will take lots of time and that it will be difficult to import contracts to the system. In reality, it’s simple to digitise contracts with an expert partner. A deployment project provided as a cloud service is quick and easy, even if there is a large number of contracts to be archived.
The benefits of electronic contract management for smaller companies
In smaller companies, responsibility for knowing and remembering all of the contracts’ data can sometimes fall on a single person. As the number of contracts rises, it can become difficult to remember important contract dates.
It’s also typical for small companies to store contracts in cabinets or statically on a drive. This makes it difficult to access the contract data, and as a result, contract realisation cannot be monitored as effectively.
The transition to digital contract management makes it possible for even a small company to easily manage contract data, thereby strengthening its own business activities. More time can be spent on core activities.
The benefits of electronic contract management to large companies
In large companies, the number of contracts is so high that it is almost impossible to keep contract data up to date without centralised contract management. Keeping track of all the different contracts made can be difficult, and with only traditional contract management methods in place, contract compliance monitoring may prove a challenge.
Using digital contract management, different contract practices from different departments are standardised, which in turn makes management easier overall. Keeping contracts standardised even when a clause or appendix template is updated does not cause any issues when using a digital contract management system.
Thanks to the digital contract management system, personnel turnover has no impact on how easy it is to find contract data.
Contract data is secure when using electronic documents
It is vital to store contracts data securely. Contract data and user access rights should always be managed as outlined in data protection regulations and legislation
“One of the benefits of the cloud service is that you can access the data whenever and wherever. This must, however, be possible without compromising on data security. The data security of our cloud services is extremely important to us at Cloudia. Since the very beginning of our operations, we have paid attention to processing our customers’ personal data reliably and securely,” explains Tuohimetsä.
When selecting a partner for digitising your contract management, it’s good to ensure that the service provider has reliable protection features. The minimum requirements for features that increase data security are multifactor authentication, functionalities for processing confidential data, and restricted access to contract data. Restricted access means that it is possible to specify contracts or parts of contracts that are shown only to certain people; for example, personal data can be hidden.
Signing contracts online increases data security, because the signatory, time of signature and content of a digitally signed contract can all be verified. In addition, an electronically signed contract cannot be lost in the same way as a manually signed contract.
More effective contract risk management
Careful preparation of contracts, the contract itself, and active monitoring of the realisation of the contract are central when it comes to managing contract risks. An electronic contract management system provides an organisation with effective methods to manage contract risks.
What kinds of risks relate to contracts?
Risks that relate to contracts include non-agreement of a contract, failure to implement the contract, and failure to implement the contract on time. Other contract risks can relate to how the contract was created, the contractual partner, submitting an offer, general terms of contract, contractual penalties, or reimbursement of damages.
The parties to a contract may interpret the contract differently, or a party may deliberately breach the contract.
Mistakes arising from human error or carelessness can also pose a contract risk. Such mistakes include old terms, the wrong dates, or the wrong company’s details being left in the contract.
How does a digital contract management system help to manage contract risks?
A carefully prepared written contract plays a key role in managing contract risks.
Ready and up-to-date contract templates can be utilised to ensure that consideration is paid to details relating to contractual terms and other important matters when creating a contract. A digital contract management system reduces the manual work relating to contract management, which in turn reduces contract risks arising from human error and carelessness.
In addition, electronic signing means that the date on which the contract was created, as well as the signatories to the contract, can be indisputably verified.
Once an agreement has been signed, realisation of the contract and any changes in circumstances should be monitored to avoid contract risks. An organisation that uses a digital system always has up-to-date information about the obligations set by valid contracts. The system’s automatic functions, such as providing notification of contract expiration, help to prevent the company from accidentally finding itself in an illegal situation, or without a contract entirely.
Download our guide to a digital contract management system to learn more.