What’s the Difference Between Contract and Document Management Software?
By Dave Gott
I have clients that come to me all the time trying to decide if they need a document management solution or a contract management solution. In order to answer that question, you have to first understand that there’s a foundational — and really important — distinction between the two approaches.
So, what’s the difference between contract and document management software? Well, it really all comes down to having a data-centric approach to managing your contracts vs. a document-centric one. Document management systems have a single folder structure (i.e. document-centric) whereas a true contract lifecycle management system uses a relational structure that’s based on the foundational information (i.e. data-centric) describing your contracts and documents. This may sound trivial but it’s actually a critical factor when it comes to mitigating contract risk while enabling automation and a more effective CLM strategy.
Let’s explore what I mean by that a little further.
Static Single-Plane Structure vs. a Dynamic Relationship-Based Structure
Document management solutions have tools on one static plane – managing documents, of course. You can only tag certain items and search for items contained within the document or a certain folder structure. There are many limitations with this singular plane of management abilities.
A real contract management solution (i.e. one that are truly built from the ground up to be a data-driven contract lifecycle management (CLM) product) is structured with multiple planes of relationships making it a dynamic structure. This allows you to look at your files by slicing the information in many different ways so that you can see what is important to you at any given moment.
All our contract-related information is stored in a central contract repository and can be managed on the document plane, just like a document centric platform as well as three other important planes or relationships. This makes information within a document that can be extremely helpful for sorting, finding, reporting, and ultimately managing the document easily accessible.
These multiple plane relationships are 1) the Organization the file may be related to, 2) the Contacts or people involved, and 3) the Contract record information which describes the document details, all in addition to the 4th relationship which is the document record.
Benefits of the Dynamic Relationship-Based Structure
Having your document information, which we focus on as data, automatically rolled up by the four pillars of a CLM system, allow a company to see the whole picture of what’s going on with an organization, including contracts and supporting documents. This allows for supporting documents to be managed such as COIs or licenses, with reminders on expiration dates. This sounds just like how a contract record is managed as well, but now these documents sit on an organizational level and can apply to all contracts under that organization. It’s a big difference between contract and document management software.
Automatic Alerts on Key Dates
With a true CLM solution, you can look at your agreements in a data- and contract-centric way. No longer do you have to sift through many folders of vendor or organizational records and pull out contracts of a certain type to see what’s expiring by contract type this quarter.
You can also do the same with your document records. For example, you may ask, “what COI’s are expiring this month?” Or, maybe you need to see who in your organization is working on approvals or new vendors? No problem, you can see exactly who is doing what and when! Now with a click of a mouse, you can roll up your information to see what you care about for the task at hand.
Searchability and Reporting
Another big benefit of being able to manage contracts by any relationship is you can view your contract repository information by Organization, Contact, Contract type, or Document when trying to find key information. And not only can you easily search this information, you have reports and dashboards to track and analyze it as well.
One person may need to see everything going on with one particular vendor. This user can easily click on an Organization record and see the entire picture with that Vendor. A second user may look at the repository, and see all contracts meeting certain criteria expiring soon. They simply click on the contract records to have a view this way.
No special reports are needed to do this; it’s simply inherent in the solution, with that multi-plane view of the repository structure. What used to be only visible in a specially built report is now part of your everyday view and visibility into your contracts and documents.
Takeaway
With a true contract lifecycle management system from Contract Logix, you have many more ways to view your information so daily CLM tasks become simple and fast. This multi-plane relational structure is a foundational difference between contract and document management software. It’s also a very important reason why you should use contract, not document, management software to manage your contracts. You’ll not only save time but also be able to mitigate risk.
Your CLM reports become more detailed and easier to create. Contract-related information is easy to search for and find. And key milestones and obligations can be automated and never missed. It’s a data-centric, rather than document centric, approach to managing your contracts. And the best part is that much of this is already done for you by simply loading in a new record in the system. The solution rolls up the information in the four pillars of Organization, Contact, Contract, and Document.
If you too are trying to figure out the best solution to meet your needs, please schedule a 1:1 discussion with one a member of our team.