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What is contract management software?

Richard Mabey, 1 July 2019

This page explains the purpose of contract management software, its main features, the types of organizations and people that use it, and the benefits of contract collaboration. Use the links below to navigate around this resource.

What is contract management software?

Contract management software is used to manage the creation, negotiation, signature, renewal and data analysis of legal contracts. It enables business teams to self-serve, agree and manage routine contracts at scale from one unified workspace.

This page addresses and explains the most common questions we encounter about contract management. Use the links below to navigate around this resource.

Introduction | Terminology | Get a demo

The contract management process | Create | Collaborate | Sign | Track | Renew

Users | The business case for contract management | Benefits | Integrations

Legal case studies | Sales case studies | HR case studies | Find out more

Introduction

Contracts are pretty simple. Two or more parties get together to assign some rights and obligations. They agree, and then they have to abide by that agreement. If something goes wrong later on, everyone can look back at the contract to find out what they promised.

The process used to be that simple too: two or more people, with a piece of paper to sign. In the thousands of years that contracts have formed the basis of all commerce, and all business, some things have hardly changed at all, but some have changed radically. The complexity of contracts has increased - digital licensing agreements across multiple streaming platforms, for example, or complex financial derivatives contracts, present a real challenge to drafters.

But more significantly, the volume and frequency of contracts is unrecognizable. A business like Deliveroo might manage thousands of contracts a month. Like almost every other business process, making the move to digital technology, rather than an analogue, hard copy, paper-and-pen approach is transformative when it comes to efficiency, speed and cost.

However, a huge number of businesses have yet to take contracts digital. If you’re reading this, the chances are you’ve had to scan and sign something in the last few months, whether it was a lease agreement for an apartment, or a mobile phone contract. Doing things this way is neither necessary nor efficient, but it’s still the rule rather than the exception. However, more and more companies are embracing digital solutions to manage their contracts, as we'll see below.

First, it's important to demystify the key jargon around contract management.

Terminology

Contract lifecycle: the entire period for which a contract is relevant. For example, if a subscription agreement runs for 2 years, then when this date arrives and the contract is no longer in force, it has reached the end of its lifecycle. Some contract management systems use alerts and updates to help users manage obligations and renewals.

eSignature: the ability to sign a contract digitally, on a computer, tablet or smartphone.

Integration: a feature of contract management software whereby other common software packages work in conjunction with the contract platform. For example, a Salesforce user can use an integration to create a contract directly in Salesforce, without having to move to another system.

Negotiation: the different parties to a contract making changes to the document in real time. If contract management software isn’t used, parties might do this orally and then make written changes to the document.

Obligation management: once a contract is signed, the obligations it contains are in effect, each with deadlines arising at any point throughout the contract's lifecycle. The management of these obligations is a key task for the contract's stakeholders.

Redlines: proofreaders used to mark up hard-copy documents with red pencils; this convention made it to word processing, where red lines typically highlight copy that's been changing during the editing process. In contract management software, redlining is the process through which changes are made to the document, in a way that's visible to subsequent users.

Template: users of contract management software often create templates for the most common documents on their standard terms. For example, if an organisation employs all new starters on the same terms, with only changes to salary, name, start date and so on, they can use a template to create the basic document very quickly, rather than building from scratch each time.

Versioning: the ability to look at previous versions of a contract before it was agreed.

What is the contract management process?

The typical workflow for contract management is create - collaborate - negotiate - sign - track - renew. This covers every stage for which a legal document is relevant to a business. Increasingly these stages are managed using software.

What is CLM software?

Contract lifecycle management software systems can handle not only the creation, editing and collaboration on contracts, but also post-signature management, like tracking key dates and renewal deadlines - the entire lifecycle of the document.

Create

Although handwritten contracts are mostly gone, many people - possibly most people - still use word processing software, like Microsoft Word, to create contracts. They can find an old Word document that’s broadly the same, copy and paste, and change a few details to get a new contract. The problem here is the risk of errors - it’s easy for a user (especially if they’re not a lawyer) to copy across a detail like a date, address, or a VAT ID, that needs to be changed for the current contract.

With contract management software, users create templates for the most common contracts that their business requires, whether that's an employment contract, an NDA, a sales contract, and so on. The template is effectively a set of rules that the software follows when instructed to create a new document.

Collaborate

There are any number of reasons why a contract might need lots of people to work on it. It might be a complicated set of terms and conditions, and while a junior lawyer can handle the basic stuff, a more experienced lawyer is needed to craft the wording of a high-value clause. 

A contract might actually affect several parts of a business: a technology supplier agreement, for example, could touch IT, legal, procurement and compliance. And those teams and individuals might be in different offices, or different countries, making it difficult to get them all in the same room.

Modern contract management software allows organisations to work on the same document, as you would in a Google Doc or with Word online, but obviously with bespoke features designed specifically for contracts. They can easily send links to work in progress to teams in different locations by email. Approval workflows allow users to specify the people that need to sign off on a document before it can be used.

Negotiation is key here. The first draft of a contract, unless it’s rudimentary, is rarely where it ends up - think of any job you landed and had to change the start date. And more contentious terms like purchase price, or the wording of an exclusivity or non-disclosure agreement, are likely to be modified many times before everyone agrees.

Versions and timeline in Juro

You can use Juro's timeline to explore previous versions of contracts.

Contract management software lets you do this in real time, online, with change tracking, rather than editing documents, printing, scanning, and couriering them around town ad nauseam. Getting everyone around a table to thrash out an agreement - however acrimoniously - is no longer necessary.

Sign

Putting pen to paper is still the default way to agree contracts, but thanks to a whole bunch of innovators - including Apple and the advent of the ubiquitous touchscreen - actually picking up a pen and scratching on an old tree is not really necessary to do business anymore. Digital platforms offer technology that can replicate the binary, permanent character of a physical signature. Some want you to paste a scanned version of a written signature; some want you to type your name; some will let you draw it with a mouse. 

The majority of providers integrate with third-party e-signing tools, but some solutions allow native e-signature, even facilitating mobile-responsive e-signing on handheld devices. E-signature is potentially game-changing for the actual real people who sit at the end of most contracts. Signing your contract for a new job with your finger on a phone, or agreeing a sale contract from home instead of an oppressive lawyers' office, can be transformative when it comes to user satisfaction with the legal process. The authorities have given their blessing to e-signatures as legally robust in dozens of jurisdictions, including the US, the UK and the EU, Australia and Japan. Find out more here.

Track

If your contract lives in a filing cabinet on paper, it’s pretty difficult to know how long it took to negotiate, which clauses were changed, how many people read it, and how many people use it as the basis of other contracts, the key enforcement dates and who's seen it. 

If your contract was created and managed as structured data, then all of this information is available. You can use it to make smarter decisions about which clauses to stand firm on, and which to let slide; when to renew, how much to charge, which notice period to define - all of these decisions can be improved with some data to lean on. The potential to mitigate risk is also huge.

Monitoring data in legal is in line with the modernization of legal departments, particularly in-house, in the field of legal operations. The most innovative organisations are building data dashboards to which they can log in each day, monitoring the performance of legal in many different areas - including contracts. Find out more in our eBook on legal operations.

Renew

An additional feature of contract management software is its ability to take an holistic view of contracts, enabled by contracts data. Signature doesn't represent the end of the contracting process, but rather the beginning; a multitude of obligations and milestones will follow for the people involved. This means a system needs to be in place to monitor contracts as they progress through their lifecycle, with alerts being delivered to key stakeholders to keep them updated. At the end of the lifecycle, users can jump back to contract creation and begin all over again. They may also need to feed amendments into the contract, and again, contract management software can help.

Who uses contract management software?

Legal, sales, human resources, procurement and finance teams are the main users of contract management solutions, although each business will have its own particular needs.

Legal teams

Contracts and lawyers are the best of friends. Law firms and in-house legal teams use contract management software to manage their templates and generate documents on a daily basis.

HR teams

The human resources departments of large companies usually produce a high volume of contracts, as they hire new employees on an ongoing basis. As non-lawyers, HR often rely on a contract management tool to generate lawyer-approved contracts for new hires. Some solutions have integrations with the tools that HR use every day, like Greenhouse and Workday.

Sales teams

Sales hate anything that gets in the way of closing deals, so they'll often use a contract management solution to generate contracts quickly, rather than need to ask legal to create contracts for them. Sales users will typically look for solutions that integrate with the software they work in every day, like Salesforce.

Procurement teams

Any large organisation likely has a dedicated team that focuses on procuring goods and services from vendors. This obviously involves processing of supplier terms, and - once documents are signed - keeping tracking of their renewal dates. Procurement teams also often have as a requirement of their contract management software the ability to seek approval from other stakeholders elsewhere in the business.

Finance teams

Finance teams typically need visibility into contracts, for various reasons. They need to reconcile contracts and billing, as well as generate accurate revenue expectations for their business. Contract management software facilitates this kind of transparency.

Do I need a contract management system?

Legal and business teams typically invest in contract collaboration when contract volumes increase to a point where managing them in Word and shared drives is impractical. If you are signing more than 20 contracts a month, you may benefit from trying contract collaboration software.

If you are considering making a business case to your stakeholders to invest in better legal processes, use this free business case template to make your case.

Make your business case for contract management software.

Why is contract management important?

Poorly managed contract processes can result in exposure to serious legal risk: 80% of B2B revenue is governed by contracts. Similarly, huge amounts of time is wasted due to inefficient manual contracting - the IACCM found that 92% of time on contracts goes on process.

Poor contract management causes friction between teams, and a lack of velocity can harm a company’s ability to close deals. Poor management of the lifecycle can result in key dates being missed, which can lead to expensive renewal costs. A key aim of contract management is to establish a system of record to mitigate this risk.

What are the benefits of contract management software?

Companies often invest in contract management when they reach a sufficient size, or stage of growth, that means contract volumes are growing out of control. Risk increases rapidly here so it’s a good time to take control of the process.

Below are some of the key benefits of implementing a contract management system.

  • Faster: Spinning up a document based on a template in a few clicks is faster than writing one from scratch. Similarly, spinning up 5,000 documents - let's say new employment terms after an acquisition, or leases for flats in a new apartment block - is much faster if it can be done at scale, digitally, rather than manually each time. Collaboration, negotiation and signature can all happen faster without the manual processes that physical contracting involves.
  • Collaborative: Your new employer sends you a contract. You want to accept but they have the wrong start date. You have to call them; they make the change in the Word doc, export it to PDF, print it, send it in the post, and a few days later it arrives. But they've misspelt your address. Around we go again. With contract management software, parties can make changes immediately to the live document.
  • Shareable: Once a document is ready, email a link to it to the relevant parties - whether that's a colleague who needs to review, or the counterparty who needs to sign.
  • Searchable: Storing and managing contracts in a digital system means a level of searchability that saves huge amounts of time in comparison to manual processes. Finding concrete results digitally in milliseconds is obviously preferable to wading through filing cabinets looking for clues.
  • Secure: A sensitive contract used to only be as secure as the filing cabinet it was locked inside. Contract management software usually uses encryption and sophisticated cyber security to keep any and all contracts locked safely behind multi-layer passwords. The best solutions have extremely robust defences to keep data safe.
  • Backed up: Physical contracts are also vulnerable to loss or destruction, due to unforeseen events like fire and flood, which could leave parties unsure of their rights and obligations. Contract management software solutions store documents indefinitely, backing them up regularly, to nullify the risk of loss.
  • Scalable: If your need for 10 sales agreements a month suddenly becomes a need for 500, the last thing you need is a bottleneck in legal. Users rely on contract management software because they can quickly increase the volume of contracts they create, without needing extra headcount or budget. Solutions need to be easy to adopt in order to scale successfully. Check out our case studies below to see some examples of robust, scaleable contract processes.
  • Global: Couriering an agreement around town, or even across the world, is a business cost that companies no longer have to bear. Getting a services supplier agreement to a client on the other side of the world can be instant now, with users sharing and collaborating on legal documents regardless of their location, using contract management software.
  • Limitless: A company might have tens of thousands of contracts it needs to retain, a number that only grows as time goes on. Contract management software means this storage issue is one cloud storage, not warehouse acquisition. Finding contracts is also much easier without having to unearth a physical copy from a basement.

Integrations

Asking employees to adopt new software of any kind is always a challenge. To make it more likely that contract management software is actually adopted and used, ensuring that the company gets some return on its investment, solutions will often integrate with other common software packages or via API. This helps users build the new way of working into their existing routines, and keeps data in sync.

Common types of integration include productivity tools like Slack, G-Drive and Box, as well as more role-specific tools like Workday, Greenhouse and Salesforce. Integrating with Companies House is another way to speed up contract users' workflow.

Can I read some contract management case studies?

Legal case studies

Masabi: how to create a single source of truth 🎟️ 

Eton Shirts: managing the unmanageable 👔 

Shieldpay: how legal empowered the commercial team to close deals faster 🛡️

Luno: simple, faster, unified - contract management that scales 💲

RVU: business-wide contract collaboration 💡

Appear Here: empowering commercial teams 👜

Sales case studies

Unbabel: how to close sales contracts 30% faster 💬

Wolt: how a scaleable solution took half the time and pain out of contracts 🍔

Farmdrop: how to make legal tech work for farmers 🚜

HR case studies

Deliveroo: how to scale documents at lightning speed ⚡

Tempo: how to delight candidates with a frictionless solution 🏁

Cleo: contracts that scale with the business 🍼

Curve: reinventing the candidate experience 💳

If you'd like to find out more about how Juro's contract management software can help make your legal processes faster, smarter and more human, hit the big green button in the top right ↗️

Where can I find out more about contract management?

Various global bodies, publishers, vendors and consultants can help you to learn more about contract management. Explore any of the below resources for more information.

The International Association for Contract & Commercial Management (IACCM)| Artificial Lawyer | International Legal Technology Association (ILTA) | Corporate Legal Operations Consortium (CLOC) | Capterra | Radiant Law | Juro's specialist contracts blog

Topics: Contract magic

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