Business is all about contracts. Vendors and clients need contracts to capture the agreements they both need to follow. Unfortunately, contract documents are not always visible once the negotiation is complete, and the electronic document or hard copy with wet signature is often filed away. A further issue is the use of legalese – the formal language of contract documents – which sometimes requires the company lawyer to clarify commitments.
For these reasons and more, many businesses are now beginning to use a contract management system (CMS) to handle contract information.
Mastery and security
The primary function of a CMS is to hold the contract artefacts. Normally this involves digitising any hard copy documents and securing any electronic documents. This explicitly defines the CMS as having the mastery of the documents, rather than a filing cabinet or a computer drive. The artefacts can now be effectively secured, for example in offsite backup, mitigating the risk of loss or damage.
The artefacts can also be version-controlled. If the contract terms are revised, the document will be in step and the new terms will be visible to management.
While the main purpose of the contract will be to record commercial details, there may be implications for different areas of the business. For a vendor, the agreement may also place obligations on Quality, HR, Sales and IT.
Visibility is a key issue in public finance. The Chartered Institute of Public Finance and Accountancy (CIPFA) briefing paper discusses Open Book Contract Management.
Searching for information
More advanced CMS functionality will allow end users to scan the artefacts. Procurement can search one contract for a specific contract term or scan across multiple contracts. The Project Manager can find the penalty clause.
Data security is paramount. It’s not just important that data is backed up or archived; it’s also essential to ensure that only authorised users can access or change data.
Contract dates can be tracked. The CMS can inform management – by automated email, for example – about an upcoming renewal date. Capturing and managing key dates, and notifying the people who need them is a key benefit of a CMS; you can see examples at sites like https://www.contractswise.com/.
A CMS helps with artefact management, but a forward-thinking business can derive many more benefits throughout the organisation.