Do you know where all your contracts are? If you don't, you're not alone. According to a report in the Journal of Contract Management, 71 percent of companies couldn't find at least 10 percent of their contracts.
Misplaced contracts mean you can't say with much accuracy what your company is obligated to or what you owe in money or services. You could be violating contract terms you're not even aware of, leading to at least a damaged business reputation--and worse, legal damages and court costs. An easy and cost-effective way to avoid this is to use contract management software to store, manage and even draft contracts.
There are many contract software programs available, ranging in complexity and price. A contract management system should provide at least these basics:
- Stores copies of executed contracts
- Allows access to stored contracts only to those you identify
- Allows you to search for contracts based upon attributes important to your company
- Automatically sends e-mail notification when key dates in the contract occur
Storing electronic versions of contracts is a good backup for your hard copies. Any employees who need to work with the contract can access it from their computers. This makes it less likely that the written copy will be lost as it's being used or copied during the time the contract is in effect. Most contract management software allows the system to be set up to allow access to each contract by a defined set of users or only those with passwords set up by an administrator, providing both ease of use and security.
Searchable fields within contract software can prove invaluable in standardizing pricing, delivery and other business terms. Searchable fields can also be a time saver for identifying all your company's obligations, payments due in a specific time span, customers in a certain area, etc. In the most basic contract software, such as Contract Advantage by Great Minds Software and Contract Assistant by Blueridge Software, you can search stored contracts for dates (all contracts expiring in June for instance), names (such as all contracts with a certain company), dollar amounts (all contracts over $10,000), and certain clauses (all contracts with insurance requirements). More complex software allows keyword searches and lets you customize search fields.
The most valuable attribute of these programs may well be their ability to send e-mail notification of a contract's key dates. Often the most important of these dates is the contract's impending termination or automatic renewal. Your company may have a contract with favorable terms that you wish to renew but that requires the renewal to be activated a certain number of days before the contract's termination date. Miss that date, and you will be stuck renegotiating and unlikely to obtain similar favorable terms.
Beyond The Basics
More complex contract software programs, such as Realyst Contract Management by RealContract or Contract Performance Management, can track completion dates; provide approval monitoring; print barcodes for tracking purposes; track each time a contract is e-mailed, printed and accessed; assist in contract drafting by storing standardized terms that can be linked together; store contracts in different currencies and languages; and allow multiple parties to draft and review contracts from remote locations. Some contract management programs are industry-specific, such as providing safeguards to meet HIPAA for the health-care field, or Sarbanes-Oxley for publicly traded companies.
What's Right For You?
Enter "contract management systems" in a search engine, and it will return a lengthy list of software systems to review. There's a very useful contract management software directory at capterra.com that allows you to search for systems that meet your specific requirements. Most provide a free trial period in which you can test the software. Any company with more than 10 contracts will benefit from a basic contract software program. It's one of the cheapest forms of insurance you can buy!
Laura Plimpton has 26 years of experience as a corporate lawyer, business owner and management consultant. She has reviewed and drafted more than 12,000 contracts. She is the author of Entrepreneur magazine's Legal Guide, Business Contracts: Turn Any Business Contract to Your Advantage from Entrepreneur Press.