Checklist for Evaluating Contract Management Software
In an interview with the Center for Association Leadership, Joanne Duncan, CPA, CAE, and CFO of BIO and Jeffrey S. Tenenbaum, Esq., a partner in Venable LLP’s association practice group provide a useful checklist of best practices in contract management.
Their list stands the test of time and is applicable to the process of evaluating options for a contract management software. Before beginning discussions with potential vendors, determine your use cases and exactly what you expect from the software. This will allow you to be crystal clear about your expectations.
Here is what we can learn from these two business professionals when selecting a contract management system.
Editor’s Note: To learn more, download our whitepaper on the top 10 contract management best practices.
Importance of Contract Templates
Time is money and contract templates allow you to save lots of time. This is especially true if they allow you to work quickly and accurately directly within the contract management system. “For example, with one client we set up a short-form independent contractor agreement and a long-form agreement for the client to use depending on the complexity of the service being provided”, says Tenenbaum.
Not only will templates save you time but they will also cut down on the expense of legal reviews and the risk of entering into unfavorable agreements. Look for software that has robust content creation capabilities with a contract clause library allowing central storage and the ability to set authorized use of approved legal language. This clause library needs to be flexible enough to set alternative language clauses and enforce updates across all templates using those updated clauses.
Additionally, look for software with a contract template library that facilitates document creation through drag and drop of approved clauses into templates.
Management of Contract Renewal Dates
Nothing makes or break a fiscal year than foregoing a revenue opportunity. As your team is juggling several contracts at the same time, it is normal that staff gets too busy to pay attention to every single date relating to the contract. However, a renewal date is not one you want to miss.
Furthermore, missing renewal dates undermines the level of trust that your clients have in you. Billing and invoicing are areas that are key to excel at in order to maintain a harmonious client relationship. Consider the reliability and efficiency of an automated and digitized contract management system compared to a system that still depends largely on paper and manual processes. With contract management software, contracts are never stuffed into file cabinets and forgotten. They are active in the system throughout their lifecycle, including post-execution.
Look for a system that allows you to set email alerts for any of your contract milestone dates. These alarms need to be configurable through default or custom settings (e.g. days in advance, recurrence, etc.). It is also useful to have a library of pre-approved email templates for both clients and staff members.
Ability for Electronic Signatures
Provide your customers and stakeholders with an easier and more convenient way to sign and execute agreements. Look for a contract management system that helps you eliminate the time-consuming print, ship, sign, copy, return, and scan cycle and reduce contract execution from days to minutes.
Another advantage of electronic signatures is that they are more secure and tamper-proof compared to paper. Contract management software with electronic signing capability can detect even minor altering, and it can record more data points than paper. Also, the automated processes of electronic signing can reduce the financial impact of human error, which can cause costly problems if initially undetected. For example, Duncan describes a situation in which she discovered a poorly written contract signed by someone who was no longer with the organization. While the contract tied her organization to a low dollar amount, it did so in perpetuity. There was no clause to end the contract. Contract management software with e-signature would have detected the lack of a clause to end the contract.
Contract management software is more affordable than ever and will make your contract processes faster and more cost-efficient. When evaluating a system, make sure to check its ability to create and manage contract clauses and templates, manage reminders about key contract dates, and handle e-signatures. If you’re not yet taking advantage of digital contract management, you’re missing a golden opportunity to improve productivity and lower cost.