Practice shows that automated and fully controllable contract management is achievable only with the help of purpose-built contract management tools. There is a multitude of this kind of solutions on the market. Therefore, after taking a decision for change, one faces a dilemma on how to choose an appropriate contract management system. What expectations and requirements should be set for it?
Practice shows that an organisation won’t miss if it follows the below-listed basic principles for choosing a system.
Hence, our advice would be the following:
- Choose a reliable supplier.
- Make a detailed list of expectations in connection with a system.
- Project the interaction between the system and other business processes of the organisation (procurement, HR management, etc.).
- Request for references.
Clients say that the most difficult task is setting the right requirements for a planned system. In other words, in the absence of experience, it is difficult to know what system one should wish for. Hence, this article deals mostly with this issue.
Setting requirements for a contract management system
When choosing a contract management system and setting the expectations for it, you can follow one the two methods for choosing a system:
- Simplified: where you give only generic expectations that you have set for a contract management system.
- Consistent: where efforts are made to define how the system should operate in every stage of a contract lifecycle.
In this case, a supplier is provided with a standard/simplified list of requirements for a contract management system:
- Easy and quick search for a required document;
- Structured and safe completion of information;
- Full access to the information;
- Up-to-date versions of documents;
- Consistent contract management procedures;
- Remote access to contracts;
- Reports on contracts;
- Better compliance with contractual provisions;
- Higher efficiency of staff;
- Simplified cooperation;
- Transparent and quick electronic approval process;
- Instinctive use;
- Reduction of costs in connection of paper and archiving premises.
This list can be described as a list of generic requirements for a contract management system. Nonetheless, this method has some flaws because a high degree of abstraction leaves much room for interpretation and this means that the possibility of acquiring something other than you want increases. In order to prevent this, we advise you to follow the consistent method for setting system requirements.
The consistent setting of requirements for a contract management system takes more time and effort, requires a more in-depth needs analysis, but allows achieving better results. We call this method consistent because it is advisable to write down the functional system requirements on the basis of the targets at different stages of a contract lifecycle.
A template that you can adapt to the needs of your organisation has been provided below.
Initiation/Drafting of a contract:
- Library of customised contract templates;
- Card describing the contract adapted to the needs of an enterprise;
- Automatic completion of standard fields in a contract;
- Tasks related to the drafting of a contract;
- Contract management.
It is advisable to aim for the highest level of automation at the stage of drafting contracts. Modern systems certainly give you such options.
Contract negotiation process:
- Development of an automatic negotiation process (the process may be successive, parallel or mixed-type);
- Tasks related to negotiation;
- Adjustment of negotiation process, i.e. option to amend the process;
- Monitoring of the course of negotiation process;
- Reminders and notifications to participants;
- Recording any amendments to the contract;
- Submitting comments upon approval or rejection of a contract;
- Revision of a contract subject to comments and proposals;
- Contract version control.
The word PROCESSES reoccur in the mentioned requirements. When choosing a contract management system, pay attention not only to the degree of process automation. The matter of how/whether you can adjust the automated processes, should any changes occur at the organisation, is of equal importance. In what manner other contract-related processes (such as approval of invoices, etc.) shall be automated? Here it is important to make sure that the planned contract management system has a user friendly process automation driver. This implies that you would not be required to approach the developer every time any need for modifications arises. You must have an option of implementing modifications independently, and if you still need to approach them, the price of modifications should be reasonable.
- Parallel or successive approval of a contract;
- Signing by e-signature;
- Sending for signing to external counterparties;
- Making comments upon approval/signing/rejection;
- Report on stamping/approval/signing actions.
If you are managing large flows of contracts, deal with natural persons whom you conclude contracts with, you will certainly want the negotiation and signing of a contract to be completed within the shortest possible time. Bear in mind that there are contract management systems that allow you negotiating/signing a contract with external counterparts on an automatic basis.
Compliance with contractual provisions:
- Setting targets for contract compliance;
- Monitoring of the course of compliance;
- Automatic reminders in connection with contract compliance.
The option allowing to edit (i.e. to add and remove fields subject to the information required by the organisation) a card that identifies the contract is also desirable. Such function helps controlling exceptions to contracts and non-standard provisions. It is also worth knowing that a contract management system must send notifications/reminders in connection with the expiry of a contract. This will help renewing the contracts on time.
Audit of and reports on contracts
It is advisable that the system is capable of generating reports in connection with drafting and negotiation of contracts. This implies you would be able to view the following data, for instance: how long it takes to draft and negotiate a contract, whom it takes most time to approve contracts, how many and what type of contracts are drafted and signed within a certain time period, how many contracts are managed by every person or division in charge.
- Hard-copy archive moved to/replaced by an electronic archive;
- One-stop repository for contracts of the organisation;
If needed, request for a service of having hard-copies of documents already accumulated to be scanned and uploaded into the e-system.
For the purposes of high-quality contract management, all contracts must have a fast and convenient access to them. A convenient search in the contract management system must ensure that a required contract and the information in connection thereof (even correspondence once carried out in the course of negotiation) are found in an instant. This will save time and direct costs of archiving. Hence, make sure that the contract management system you are planning to acquire has a convenient search. Just check whether the system will have the following:
- Fast search;
- Detailed search by the contents of a contract;
- Grouped search results;
- Filtering of search results;
- Establishing links between contracts and other documents.
Other important characteristics of a modern contract management system
Remember that the benefits of a contract management system will not be maximised if it is isolated from other business processes and systems of the organisation. The system must have an option for determining links between contracts and projects, invoices and other documents (emails, correspondence). It must be integrated with other solutions used at the enterprise (ERP, NAV, SAP, MS Outlook, etc.). For instance, there must be an option of viewing not only all current contracts in connection with a specific client and the correspondence thereof, but also invoices raised in the course of implementation as well as how much revenue they have already generated for the enterprise and how much it is still planned to raise.
A safe and controlled access to information is vital. Despite the fact that a convenient access to the contract information is core to the centralised contract management, it does not mean that this information can be accessed by anyone. It is important to ensure a safe and controlled access to information. Request that users, subject to their position at the organisation, are granted access only to such information that they are authorised to see.
It is advisable that the system has a remote access and gives the option of accessing and managing contracts outside of the office. This is of particular importance to travelling managers. Hence, check that there is an option for carrying out at least basic actions on mobile devices:
- Review and approval of contracts;
- Assignment, completion and rejection of tasks;
- Reviewing report on actions;
- Downloading documents.
Last but not least, points on installation of a system and clouds…
The established practice on the market is that a developer gives you the freedom of choosing a method for the installation of the system. A client may choose whether to install the system on their servers or use the system as a service (Hosted or Cloud). Yet, there is no single universal rule for telling what method of installation an organisation should choose. The advice would be the following: speak with the supplier of your system. Tell them not only your current requirements, but development plans as well. A competent supplier will be able to provide advice on what installation method will work best for your organisation.