Effective contract management is critical for organizational success because a contract stipulates business relationships between a firm and its suppliers, clients, and partners. In this regard, therefore, a reliable system of contract management — one that allows easy access and transparency, compliance, and risk management — is crucial.
With the growth of digital transformation, the importance of online contract management has increased. Be it your team in a remote working environment, or dispersed across different continents, access and collaboration would surely be seamless through online contract management. And that is what you would expect from this guide: everything you must know about storing and managing your contracts online, its benefits, challenges, the right practices and its implementation.
What is Online Contract Management?
For a business to be successful, you must have tools and procedures that allow your legal, finance, and business teams to efficiently meet their goals while helping you to adapt to unforeseen circumstances.
In particular, contract management requires greater flexibility. Organizations require systems that can provide access to contracts at any time and from any place. For this reason, online contract management allows businesses to safely store, access, and manage contracts digitally. This ensures that contracts are at all times available to anyone who has the right to access them, even when business operations are disrupted.
Online contract management is the process of managing a contract’s lifecycle-from drafting and approval to storage, performance tracking, and even renewal, without the use of manual processes and paper. Here, the cloud is used by online systems to store contracts, and people can access them at any time, at any place. The main elements of online contract management are:
- Contract drafting: Drafting templates or creating contracts from scratch.
- Collaboration: Team collaboration and negotiation with external parties on terms within the platform.
- Approval Workflows: Automated approval workflows that route contracts through the right approval channels.
- E-Signature: Facilitates digital signing of the contract to close an agreement.
- Storage and Accessibility: Storing every executed contract in a central, secure repository that can be accessed remotely.
- Reporting and Compliance: Tracking of all contracts for ready reference to ensure compliance with the appropriate regulations and internal requirements.
- Renewals and Alerts: Automating reminder/ alerts for renewal dates so that no contract lapses/misses deadlines.
Benefits of Online Contract Management
Transitioning to an online contract management system offers several advantages that enhance the organization’s ability to mitigate risk as well as foster cooperation. Some of the advantages are the following:
Ease of Access
One of the most important benefits of managing contracts online is that they are accessible from any place, at any time. This becomes extraordinarily important in today’s business environment. where teams often work from home or across time zones. Authorized users can get contracts immediately, whether they’re in the office or traveling.
Enhanced Collaboration
Online contract management platforms allow various stakeholders to collaborate in real time. Teams from different departments—legal, procurement, finance, or operations—can collaborate on the same contract, track changes, and leave comments. This encourages faster contract creation, negotiation, and approval processes.
Automation of Workflows
Automated workflows optimize the process of contract creation, approval, and renewal. Online systems help set up custom workflows that ensure contracts are routed to the appropriate stakeholders, with automated reminders for pending approvals or upcoming renewal deadlines.
More Efficient and Less Error Prone
Contract management processes are human-centric, which means there will be errors, delayed completion, and lost opportunities. The use of online contract management minimizes the probability of human errors because most repetitive tasks are automated, and tools can be used to confirm accuracy when preparing draft contracts, tracking, and reporting.
Ensures Compliance and Risk Avoidance
By storing and managing contracts online, compliance with regulatory requirements becomes easier. Many online programs provide modules on compliance which monitor obligations and expirations and notify the organization of potential risks. This helps to avoid risks such as non-compliance, financial penalties and missed renewals.
Centralized Repository of All Contracts
A centralized repository of contracts ensures that all agreements are stored in one accessible location. Using powerful search functionality, teams can find contracts, track their status, and review historical versions. Consequently, audits and compliance checks are made much easier and more efficient.
Cost Savings
Online contract management can lead to great cost savings for reasons such as reduction in consumption of paper, filing systems, and labor. Besides that, automated contract renewal and tracking will prevent businesses from missing opportunities, revenues, and even penalties associated with losses.
Key Features of an Online Contract Management System
Here are the features of an online contract management system offered to the user.
Document Management
A good document management feature ensures safe storage of contracts and management for easy extraction. Using tagging, metadata, as well as advanced search capabilities enable finding a contract in no time.
Workflow Automation
Workflow automation is crucial in contract approvals and renewals. Always look for a system that makes it easy to customize approval workflows with automated notifications for tasks and deadlines.
Version Control
During negotiations, it is critical to make contract revisions. A good online system should have version control that can track the changes, allow comparing different versions, and remind users of their differences versions, and ensure that everyone uses the updated draft.
E-Signature
Integration E-signature capabilities enable speedy and secure execution of contracts. Most contract management platforms make integration with third-party e-signature tools like DocuSign or Adobe Sign possible, allowing full digitalization of the process.
Compliance Monitoring
Compliance features ensure that the contracts adhere to internal policies set up by the company and external regulations. Try to find a system which performs automation checks for compliance, includes audit trails, reporting tools to track compliance activities over time.
Reporting and Analytics
Good contract management softwares should enable reporting and analytics to drive performance insights. Dashboards should notify upcoming renewals, contract values, and vendor performance, indicating the actual contract health.
Steps to Implementing Online Contract Management
To implement an online contract management system, you require careful planning and execution. Here are the steps that ensure a successful transition:
Assess Your Current Contract Management Process
Assess your current contract management process. Identify the pain points, inefficiencies, and those processes which you feel are just a bit too slow in relation to the amount of manual work involved. This will help you assess the workflow which you are currently on, so you can eventually choose the most suitable solution.
Select the Right Contract Management Platform
Select the correct platform for your organization considering features such as workflow automation, storage of documents, compliance management, and reporting tools. Consider the scalability of the platform too as it should be flexible enough to support future growth.
Migrating Existing Contracts to the System
After selecting the appropriate platform, you should migrate your existing contracts to the system. Make sure you classify contracts properly and tag them appropriately with the necessary metadata to enable easy retrieval.
Set Up Approval Workflows
Create customized approval workflows to streamline contract creation and approvals. Ensure that each department’s responsibilities are clearly defined and that the system notifies stakeholders when approvals are needed.
Train Your Teams
Provide comprehensive training to your teams on how to use the online contract management platform effectively. Training should cover document storage, workflow automation, reporting, and collaboration features.
Monitor Performance and Continuously Improve
Once your system is up and running, monitor contract performance regularly. Use built-in reporting tools to track key performance indicators (KPIs) and continuously refine your processes for improved efficiency.
Challenges of Online Contract Management
While online contract management offers numerous benefits, there are potential challenges to be aware of:
Security Concerns
With sensitive contracts stored online, ensuring robust cybersecurity measures is crucial. Look for platforms that offer encryption, multi-factor authentication, and role-based access controls.
Change Management
Transitioning from manual processes to an online system can be challenging for teams that are resistant to change. Implementing a clear change management strategy, including training and communication, is key to adoption.
Data Migration
Migrating contracts from legacy systems or paper-based archives can be time-consuming and complex. Ensure you have a detailed migration plan and consider working with experts if necessary.
Integration with Other Systems
For maximum efficiency, your online contract management system should integrate seamlessly with other business tools, such as procurement, ERP, or CRM systems. Ensure compatibility and plan for any required integration work.
Best Practices for Storing and Managing Contracts Online
Practice bests to maximize benefits available from online contract management are as follows:
Simplify Organizing Contracts
Apply metadata and tags contract types, department, or status. This way, the contracts are readily available and retrieved when needed.
Schedule Regular Audits
Conduct regular audits to ensure that contracts remain compliant with internal policies and external regulations. Audits should include a review of contract performance, renewal status, and risk exposure.
Automate Reminders and Alerts
Designate automated reminders for contract renewal dates, payment deadlines, and performance milestones. Automated alerts ensure nothing slips between the cracks.
Role-Based Access Controls
Limit access to sensitive contracts by creating role-based access controls. This ensures only the authenticated personnel can view, edit, or approve contracts.
Monitor Contract Performance Regularly
Use reporting tools to track contract performance and measure success against KPIs. Regular monitoring will identify problems at an early stage and make necessary adjustments.
How to Choose the Right Contract Management Software
While selecting the right software for managing online contracts consider the following:
Scalability
The system must be able to scale up with your business. It must be able to align increasing volumes of contracts and extra functionalities with the growth of the business.
User-friendliness
The system must be intuitive and simple to use for all stakeholders, from legal teams to procurement and finance departments.
Customization Options
Choose a system that allows customizations—including tailored approval workflows, reports, and compliance settings according to your business.
Integration Capabilities
Ensure the software can integrate with your existing business systems such as ERP system, CRM platform, and procurement tools.
Customer Support and Training
Choose a vendor that offers valuable customer support and also provides the necessary training material and resources to enable easy onboarding.
Future of Online Contract Management
With digital transformation accelerating, online contract management will be impacted by technologies such as AI and blockchain. Thus, AI will play a significant role in automating the process of contract analysis, identifying high-risk clauses, and providing data-driven insights on contract performance. Additionally, blockchain can discover new ways of securing contracts, making them immutable, and enhancing transparency throughout the contract lifecycle.
Conclusion
Online contract management is not a trend, but it is a must-have in modern business operations. By switching to an online contract management system, organizations can streamline processes, improve collaboration, reduce risk, and increase efficiency.
With the onset of remote work and digital transformation, online contract management will be an essential tool in managing agreements and succeeding in a complex business environment. Equipped with the right tools, strategies, and best practices, online contract management can transform how your organization handles your most important agreements — giving you that edge in today’s fast world.
Rahul Asthana has a PhD in Operations Management from the Anderson School at UCLA. He has 25 years of experience in supply chain management, starting his career in IBM working in supply chain operations. He then moved into product management and product marketing of supply chain software while at SAP and Oracle. He manages product strategy and product management at Gainfront. In terms of hobbies outside of work, he really enjoys tennis. Follow Rahul Asthana on Linkedin!
