Key Contract Management Functions: Explained

Contracts are crucial in modern organisations as they legally bind agreements between parties. Contract Management involves overseeing the entire process, from initiation to execution. Various software solutions offer Contract Management Functions that assist companies in drafting, negotiating, and managing contracts. 

The global sales of contract management software are projected to be worth £3,017.7 million in 2024. This value is expected to grow significantly, reaching £7,475.71 million by 2034.

This rapidly growing market has made Contract Management a prevalent domain, and more and more people want to learn about the different functions Contract Management software provides. This blog will help you understand all you need to know about the key Contract Management Functions.

Table of Contents 

1) A Brief Introduction to Contract Management 

2) Key Contract Management Functions 

   a) Contract Repository 

   b) Contract Templates 

   c) Clause Library 

   d) Workflow Automation 

   e) Negotiation Tools 

   f) Approvals and Signatures 

   g) Reporting 

   h) Integration 

3) Conclusion 

A Brief Introduction to Contract Management 

Contract Management involves overseeing contracts from their creation through execution and completion, up to their eventual termination. Contract Management Functions include examining Key Performance Indicators (KPIs) against contract terms to ensure the maximum operational, financial and supply chain performance.   

Contract Management features help organisations create, negotiate and manage contractual agreements. When used efficiently, Contract Management can prevent risk during the contract process, ensure compliance, increase productivity and improve end-to-end visibility so all parties involved are informed.  

Many contracting processes involve two or more parties, vendors and buyers in Contract Lifecycle Management. Some Contract Management functions such as contract repository, contract templates, clause library, workplace automation, negotiation tools, approvals and signatures, reporting and integration help organisations streamline the process of Contract Management.  

Contract Management demands that Contract Managers and legal teams determine ways to simplify complex and time-consuming Contract Management processes. This streamlining helps prevent procurement risks and mitigate any risks that arise in the procurement lifecycle stages.
 

Key Contract Management Functions

This section of the blog will focus on key Contract Management Functions, all of which will be discussed in detail below: 

Contract Repository 

Contract Management software can be a central contract repository throughout the Contract Management Lifecycle. The most efficient Contract Repository features let one add metadata such as the customer’s name, the content’s date of creation, and when the parties signed the agreement.   

The feature of adding meta tags helps people locate contracts more conveniently. The full-text feature offers additional functionality, allowing employees to search for contracts by keywords, clauses and other elements in a contract.   

Role-based security features offer access to authorised individuals while restricting others from accessing sensitive data or documents in the repository. Storing contracts in the cloud decreases the need for excessive e-mails and paper documents.   

Contract Templates 

Many organisations use the same types of contracts in repeated intervals. Contract Management software that allows one to create and manage pre-approved templates streamlines the contract authoring process. This assists organisations in enforcing their standardised language across organisations.   

Clause Library 

Clause Libraries assist legal teams in developing pre-approved language that makes contract creation and negotiation processes more efficient. For example, when legal teams create contract templates, they typically select clauses from the Clause Library and arrange them as needed.

Another example is when an outside party rejects the terms of a specific clause. The clause library offers alternative language tailored for such recurring situations, readily available for use.

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Workflow Automation 

Contracts often go through several revisions before all parties agree on a final version. The more complex the contract, the more time internal and external teams spend reviewing it.

Contract management software with workflow automation simplifies the process by tracking progress and automating parts of contract creation. At each stage of negotiation, automated workflows improve efficiency, eliminate bottlenecks, and keep everyone informed with the latest updates.

Negotiation Tools 

High-value and complex contracts often require multiple rounds of negotiation, bringing parties closer to an agreement with each stage. However, the more intricate a contract, the longer it takes for parties to review terms, consult legal teams, and assess its future impact.

Contract management software tracks every change made to the document, allowing parties to focus on recent revisions rather than re-reading the entire contract. The software stores all contract versions, enabling individuals and organisations to review previous iterations as needed. A central repository of the document’s history keeps everyone updated on changes, facilitating quicker agreements.

Approvals and Signatures 

Every organisation has its own approach to approving and signing contracts. In some cases, finalising an agreement requires multiple signatures, adding complexity to the process.

A good contract management software adapts to an organisation’s existing practices while streamlining the process. It moves the contract through each stage efficiently, keeping it in the negotiation phase if a change is rejected.

When progress resumes, the software tracks updates and notifies authorised parties of changes. Alerts ensure everyone stays informed, preventing delays and misunderstandings.

Once negotiations are complete, the contract is stored in a secure cloud repository for electronic signatures. This eliminates the need for multiple emails, scans, and uploads, saving time and reducing paper and ink usage.

Reporting 

Contract Management software provides an organisation with important insights into its contract process. When one uses paper contracts, finding discrepancies that prevent the organisation from improving its processes is tougher. However, with the right software, an organisation can access a report that includes objective data. This can optimise the contract process, improve partner relationships and potentially increase revenue.  

The reports may include data points such as the number of times a contract was revised, whether the contractual obligations were met, and which vendors prefer non-standard clauses. This information makes it possible for an organisation to detect patterns that will inform future negotiations better.   

Integration 

Modern-day organisations rely on several software applications to run their daily operations. Customer Relationship Management (CRM), Enterprise Resource Planning (ERP), electronic signature and supply chain solutions are common instances. By integrating these modern technologies with its Contract Management system, an organisation gets deeper insights, saves money, increases efficiency and enables smarter decision-making. 

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Conclusion 

All in all, Contract Management software is important for most businesses. Given the benefits we have listed of the key Contract Management Functions in this blog, you should also know that the world of Contract Management software is an ever-evolving blend of technology, trends and best practices. If your organisation counts on contracts to function, you are advised to consider getting Contract Management Software in place to stay updated with the latest digital trends. 

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