Companies and private individuals conclude contracts to fix specific negotiated facts and conditions legally. In companies, contracts are regularly concluded in various areas, e.g., human resources, the legal department, or sales. After the conclusion of a contract, the focus lies on contract management. Simply filing them on paper or the computer is no longer sufficient. A secure and efficient solution is offered by digital contract management, which structures such administrative processes and standardizes across departments - but how exactly does it work?
What does digital contract management mean?
Depending on how long a company has existed, employees have been responsible for various forms of contract management. In many companies, however, it is still impossible to speak of natural contract management instead of a collection of contracts in files or folders.
Contract management is a complex process that spans different departments, such as purchasing, legal, administration, or even sales. Using appropriate document management systems and database solutions in your company is the first step toward effective digital contract management.
Digital contract management provides for digitalizing all existing contracts unless they have been stored digitally due to electronic signatures. Digital contract management also automates the processes in the entire contract cycle - paperless, location-independent, and at any time. This accelerates and simplifies operations and, at the same time, reduces error rates compared to manual processes.
Problems of paper-based contract processes
Traditional workflows, such as contract filing and administration, are usually systematically regulated in established companies. And yet they are more prone to errors: contracts are sometimes of poor quality due to frequent copying or faxing and are also very time-consuming and labor-intensive. Paper-based processes require enormous personnel capacities, which costs companies a lot of time and money.
Manual workflows tie up individual capacities and cost money and impact a company's overall efficiency and output. For traditional businesses with many paper-based processes in a digitalized world, this means that they can easily be left behind by the competition - simply because digital ways of working allow them to be faster and presumably, therefore, cheaper.
Advantages of digital contract management
Even though the changeover from paper-based to digital and automated processes may cause difficulties under certain circumstances, digital contract management has numerous advantages:
Transparency
Contract-relevant information is available to the respective employees with a corresponding software solution in a central digital storage location.
Minimize error rate
Digital contract management automates processes and stores digital templates, reducing error rates when reusing and reprocessing.
Keeping an overview
The digital and partially automated processes guarantee that you get all contract dates and deadlines.
Cost saving
With digital contract management, you free up personnel capacities from tedious, paper-based processes. In addition to personnel costs, you can also reduce paper and printing costs enormously.
Document security
The secure and central storage and archiving of relevant contract documents and associated version statuses increase the contract life cycle.
How digital contract management works
Digital contract management requires a unique database solution or corresponding software. Even before implementing electronic signatures, automatic deadline reminders, resubmissions, and the sending of documents can be set.
After the signature, digital contract management involves electronically storing all documents, preferably in a cloud format. This digital storage space provides all parties involved with quick and easy access from anywhere.
Depending on the contract's content, digital contract management networks all departments involved in a company and reminds them of delivery dates and invoicing.
Industries that benefit from digital contract management
Although it is worthwhile for almost every company to rethink paper-based contract processes, some industries, in particular, benefit from the advantages of digital contract management.
Real estate industry
In the real estate industry, digital contract management helps to bundle relevant documents. In addition, rental contracts can be signed and concluded more quickly. Other components of such contracts, such as service charge statements or notices of termination, can also be processed and managed faster, more efficiently, and cost-effectively.
Insurance industry
Insurance companies can also significantly increase their productivity with digital contract processes. In addition, customer management benefits from this. Paper-based insurance policies, in particular, save a lot of time and money when they are created, signed, and managed digitally.
Banking
The same applies to banking. The digitalization of contract processes increases competitiveness enormously. Digital approval and contract processes offer customers a modern and interactive experience that positively impacts the customer journey and increases the conversion rate of financial institutions.
Functions of a contract management software
A good contract management software will provide you and your company with various contract-specific modules and functions. These include a specific storage solution, communication tools, and individual configuration options.
Entire contract process covered
Contract management software covers the entire process from initiation, negotiations, and tasks to signing and administration.
Individual configuration
Ideally, user interfaces can be individually configured and adapted to the individual needs of the IT, legal, or purchasing departments. This guarantees intuitive and practical work.
Professional document management
Digital contract management software allows you to store all the documents necessary for drawing up contracts or defining deadlines.
Typical contract functions
In addition, the software should enable necessary functions such as distributing information in tables or communicating with contractual partners.
Automatic deadline reminder
A significant advantage of digital contract management is the automatic reminder of dates and deadlines. A good overview should be able to display the graphic representation of terms and deadlines in a timeline.
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