Best Optimization Tools And Practices For Contract Management 

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Streamlining contract management: Best tools and practices

In business, agreements aren’t necessarily sealed with a handshake. Business owners need contracts to validate formal discussions for protection and guidance. These documents, whether done on paper or electronically, govern several aspects that affect operations in different ways. 

Because contracts play a key role in business decisions, an effective contract management system is just as crucial. However, relying on manual methods proves inefficient and exposes you and your clients to risk. Implementing the right tools and best practices can save you significant time and effort while mitigating risks and enabling strategic planning

This article provides a comprehensive view of streamlining contract management, allowing businesses to get more value from this essential business task.

Finding the best contract management tools

Transitioning from traditional to automated contract management involves a toolkit that digitizes document storage while controlling the specific document’s lifecycle. While applications may vary from business to business, core tools must include: 

1. E-signature platforms

As most agreements come in portable document format (PDF), it’s necessary to have a tool to create and edit PDF seamlessly. Secure digital signature tools let you affix your signature conveniently without physically printing and scanning documents.

digital signature

This enables faster execution, especially for businesses with distributed teams. These legally enforceable e-signed copies have credible timestamps, making document audits possible. Top solutions integrate with complementary systems to allow review, approval, and other workflows after signing.  

2. Centralized contract repository

Poor document management practices can lead to productivity losses. Instead of focusing on their core tasks, staff members must spend hours searching through document folders and drawers to locate important business contracts. 

With an automated and role-restricted repository, staff can instead search these documents and view, print, or edit them, depending on their access levels. Some applications have native tools that allow for the extraction and analysis of document sections for easier processing.

In most cases, they’re integrated with other systems unique to specific departments—for instance, procurement, sales, and accounting, to name a few.   

3. Workflow management system

Automated workflow systems provide structure through actionable checklists and sign-offs. This creates a document trail and assigns accountability to any revisions made. These applications can be customized to adapt to your preferred sequences and ensure timely actions—sending notifications to prevent lapsed due dates.    

4. Analytics software

More than sending reminders and reporting figures, some tools provide advanced analysis to help executives make better-informed decisions. You have artificial intelligence (AI) to primarily thank for that. AI has been a game-changer with various business applications, including staff productivity boosts

When integrated into a contract management tool, AI can be programmed to evaluate provisions that run against the policies, standards, and norms to determine an agreement’s effectiveness. At the same time, it has a summary analysis feature that condenses complexities and serves them into more digestible components—including risk scoring. 

business growth

Understanding, processing, and analyzing business data is necessary to arrive at well-informed decisions. These data-driven decisions can make or break an enterprise. According to the article ‘The Advantages of Data-Driven Decision-Making,’ published by the Harvard Business School Online in 2019, data-driven companies are three times more likely to improve their decision-making processes than those who aren’t.     

Picking the ideal system for your business

Choosing the right solutions can streamline your efforts significantly while reducing bottlenecks and risks. Before contacting providers, ensure you know what your business needs and set clear goals you wish to achieve. Examine your current workflows and identify pain points and must-haves by looking at the following: 

  • Accessibility of stored contracts

  • Standardization of templates 

  • Collaboration practices and challenges between involved teams

  • Your ability to cull valuable data from contracts  

Study how the contract management applications above can help you achieve the desired outcomes. To arrive at an informed decision, businesses must answer the following questions in assessing the ideal tools:  

  • Does it help increase productivity?

  • Are the features like accessibility levels customizable? 

  • Does it optimize my business workflows? 

  • Is it user-friendly? 

  • Is it accurate, fast, and secure? 

  • Can this tool be integrated with my existing business systems?

  • Does it provide the insights that I need? 

  • Is it scalable?

Picking a cloud-based application is your best option if you’re a small business. These software products don’t need extensive information technology infrastructure and offer mobile device accessibility. A recent Forbes article claimed that up to 94% of businesses worldwide use cloud software.     

Whether you need an all-in-on-solution or specific tools like e-signature and for creating or editing PDFs—a contract management tool is a worthwhile solution.   

Contract management best practices

While these tools may come with advanced features and functionalities, they’re only as good as their users—who play a key role in optimizing any automated tool. That’s why we’ve curated a list of the best practices below: 

1. Embrace technology

Despite the availability of contract management tools, most businesses still use paper and automated systems in handling documents, according to a 2020 Forrester survey. The good news is that an increasing number of these enterprises are expanding their implementation or are planning to adopt the technology. 

There are several reasons why businesses remain on the fence about automating their document and contract management processes. However, it might be useful to change your mindset when using business software in general.

Dedicated software is way more efficient than makeshift methods involving scouring through filing cabinets or spreadsheets. And you don’t have to be a technology wizard to use them. 

2. Streamline contract creation

Most contracts need back-and-forth communications and revisions. But you can save time by creating templates in standard language—formatted to highlight key provisions. Many systems allow you to import terms automatically from integrated repositories. Additionally, some let users draft common phrases when unique sections may be required. 

Collaboration is also at the heart of drafting contracts. Rather than relying on your email inboxes and their attachments, look for tools that allow internal and external parties to comment and mark documents in real time.

Doing so accommodates necessary input while maintaining the original version of the contract. Final contracts auto-populate or integrate the revisions automatically to prevent errors in recreating repetitive information. 

3. Centralize contract storage but manage access thoughtfully  

Some contracts are still kept in siloed systems—and this can pose challenges, especially for contracts involving different departments. What you can do is put the documents in centralized repositories to boost visibility. However, place some access restrictions.

Improve business writing skills

Ensure that only the persons involved can view and print them while allowing the other team members to view the title or a less sensitive portion of the document as necessary. Digital viewing also presents the most updated version of the agreement, making it more reliable than keeping paper copies that may be outdated.  

For example, you can allow integrations between your contract database systems with procurement, accounts payable, sales, and enterprise planning tools. These connections can be helpful when making reports, analyzing revenue and expenditure streams, and ensuring compliance with policies and pricing as stated in the contract. 

4. Automate workflows to stay organized

Besides storage challenges, contract management can suffer when users lack accountability or don’t have real-time status information. This common problem can easily be solved by automating workflows.

In doing so, anyone involved can see whether the agreement is being drafted, reviewed, approved, or revised. The tool automatically tracks deadlines and other handoff processes that apply to your preferred structure.

Making these stages visible to concerned parties fosters better collaboration—keeping your efforts aligned. A dashboard that shows real-time information lets managers identify delays, while notifications encourage prompt responses. Additionally, pre-set alarms can remind you when a contract is about to expire or can remind you of obligations to ensure compliance.

5. Extract and analyze contract data

Contracts can be a source of insightful business details—if you know how to use them properly. This is where automated contract management systems prove really helpful. These tools can process volumes of data quickly using optical character recognition and machine learning algorithms. As such, they can extract unstructured data into useful business information. 

Contract management software may have different functionalities, but more recent releases can perform the following: 

Contract scoring      

This assesses key elements of the contract, including termination rights, intellectual property restrictions, and liability allocation—depending on the nature and type of contract being studied. 

Summary analysis  

This highlights the extensive rights granted to external parties that may expose your organization to excessive risk. Conversely, it can cite favorable terms that can be replicated in future agreements. 

Standardization and compliance

Besides citing advantageous contract terms, some tools can determine applicable standards, ensure compliance, and pinpoint potential legal hurdles when creating or revising contracts.      

Regulatory Compliance

In short, advanced systems can reveal hidden risks, promote cost savings, and identify opportunities and compliance violations with just a few clicks.

Contracts to prioritize

While every agreement contributes to business operations, some documents deserve more attention than others. Focus your efforts on deals that have the most valuable business impact. These include revenue-generating contracts with customers and expense-incurring agreements with suppliers. 

Beyond these, you must update and keep the latest copies of the following documents:

Joint venture and partnership agreements

These contracts contain the terms and conditions dictating strategic business alliances. Properly managing these documents ensures that each party’s expectations and obligations are met and aligned.

Intellectual property license agreements

This document safeguards your core business assets, whether granting rights to external usage or preventing unauthorized adoption. Careful management ensures these contracts are appropriately executed, monitored, and enforced.     

Regulatory compliance documents

Healthcare, finance, and defense are sensitive sectors that require heightened diligence. Procurement agreements for these industries often require flow-down clauses that mandate subcontractors to have the same obligations as the prime contractor. 

Real estate contracts

How to Avoid Common Contract Management Mistakes

Leases and other real estate contracts have long-term effects on business costs and flexibility. Efficient management provides good oversight on negotiations, commitments, and contract expirations.  

Staff contracts

Employment contracts also need proper management to prevent disputes from ambiguities and misclassifications. 

The meaning of ‘valuable contracts’ can change according to the nature of your business. Your priorities can shift because of the unique risks and challenges involved. Analyzing which agreements bring value to your organization paves the way for identifying the best tools and practices. 

Concluding thoughts

Streamlining contract management is vital for supporting business relationships and operations. It also helps control costs and manage risks. Transitioning from manual methods to purpose-built software with standardized workflows and advanced analytics provides a strategic advantage to any enterprise. 

Using technology for enhanced contract visibility and control transforms this often-reactive administrative function into a proactive business intelligence tool—enabling data-driven decision-making. Leveraging these tools and best practices lets your organization optimize the insights business contracts provide to drive your operations forward.    

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