Contracts are an essential part of any legal office. If your law practice drafts contracts, conducts due diligence or does compliance work on behalf of your clients, you likely process hundreds, if not thousands, of contracts per year.
If they lack contract management software, many legal offices will instead store their contracts on secured shared drives like Google or Sharepoint. Using a secured shared drive is a step up from storing contracts in filing cabinets, but it’s inefficient. Contracts remain hard to access by multiple people, and it’s cumbersome to assign management and authorship duties.
With inefficiencies and management issues come errors. The International Association for Contract and Commercial Management estimates that the average company loses more than 9 percent of its revenue annually due to contract-related issues. Further, firms can lose up to 40 percent of the value of a given deal due to inefficient contracting, according to an estimate by the professional services firm KPMG.
Contract management software helps eliminate value leaks and inefficiencies by providing centralized, organized access to all your firm’s contracts. The software can give your group the tools it needs to share contracts among coworkers securely, assign and manage assignments, analyze key terms, review contracts quickly and accurately, streamline and process results and keep track of important deadlines. It also frees up time for attorneys to do more strategic, high-value work and allows them to update contracts more regularly.
How to Choose Contract Management Software
Contract management software is an efficient, cost-effective way to streamline contract management and deliver value to your office. But with so many contract management software companies, how can you know you’re choosing the right one? Here are some of the key traits to look for when choosing a contract management program for your office.
Ease of use
Lawyers are busy people who usually don’t have an IT background. If the software is hard to learn, your team may not use it. Contract management software should be intuitive, clean and simple to use from the start. Ideally, you should choose software that won’t require hours of training. Of course, even with the easiest system, you may need expert help. Look for a company that provides easy-to-access technological support and training.
Contract management software is only as good as the information it contains. Manually inputting thousands of contracts would take significant time and money. Look for software that makes it easy to transfer contracts into the platform. For instance, you may want to opt for a program that allows users to upload or drag in batches of documents in commonly used formats, such as Microsoft Word, Excel, and PDF. Also, make sure the software recognizes multiple languages if your firm needs this feature.
Once the contracts are uploaded, the content should be fully searchable and easy to access and share among coworkers. It should be visually obvious which contracts have been assigned for review, which contracts are completed and which contracts are still in progress. On-screen editing and search functions should make it easy to find a contract or term. Results should be easy to export, clean and clear, allowing users to spot and manage trends and issues quickly.
Efficient search tools
One of the major potential time savers of contract management software is the ability to search within a contract and across multiple contracts. However, the searching capabilities of the software must be top-notch.
Contract management software that makes use of artificial intelligence (AI) is particularly useful. AI software learns as it searches, meaning it uses past data to improve over time. In addition, AI software can use context to understand search terms. Thus, even if users make typos or enter keywords that don’t capture the full context and concept of the search, AI programs can fill in the blanks and produce better search results.
Ability to customize
Every practice is unique, and your contract management software should reflect this fact. Users should be able to customize data fields for the current needs of your office. AI shines in this area as well. You can teach an AI contract management program to learn new fields, identify provisions and refine results. For instance, if your practice commonly uses contracts that require specialized non-disclosure language, you can teach the program to recognize this provision across all contracts to make sure they conform with each other and with the law. Then you can extract that data into a user-friendly format.
You should also be able to customize how the software presents contract information. Look for a system that allows you to customize data so you see what’s most important to you and your clients. Your report should reflect what you want to see, whether it’s the number of reviewed documents, documents containing a certain term, the type of documents, the language the contracts are in or all of the above.
While the ability to customize is important, your software should also include a robust set of built-in contract language and provisions on topics from license grants to automatic renewals. Access to high-quality, time-tested template language will save your organization time and guarantee you use up-to-date, accurate language.
Collaboration and sharing capabilities
When multiple collaborators work on a single document, collaborators too often end up wasting time or losing past versions of documents. In a survey of 1,000 U.S. full-time employees, 39 percent observed broken document management or sales processes within their organization. A third (33 percent) complained of issues with document versioning, 44 percent complained of difficulties sharing documents, and 49 percent struggled to find documents at all.
When choosing a contract management software program, look for software that facilitates secure communications among team members and controls for conflicting edits to the same document. You should also be able to assign documents to specific reviewers to avoid conflicting edits altogether.
Also, look for a system that allows team members to monitor their progress and the progress of teammates. Your software should be able to track changes, compare versions and share and export data to make it clear what’s completed and what still needs to be accomplished. Streamlining your process will help you avoid errors and save time. For instance, you may be able to forgo daily check-in meetings.
Risk management ability
Because of the highly detailed but repetitive nature of contract work, the potential for error and oversight is high. Variations in the definition of a contractual term across multiple documents can cause legal headaches for a company. Beverly Rich gives an example in the Harvard Business Review: “If a company wants to define the term ‘confidential information’ in a specific way in its non-disclosure agreements (NDAs), it must make sure that all of its divisions are on board with this definition, and that changes to the definition get incorporated quickly and accurately, because variation could prove damaging to the company.”
Contract management software can reduce risk by spotting deviations in contract language, flagging language that doesn’t conform with industry standards or your clients’ practice, and making suggestions or edits. AI contract management software is particularly adept at performing this type of oversight.
In addition, look for contract management software that responds quickly to changes in accounting standards. As accounting standards change, so does the required language in your clients’ financial statements and other internal reports. Without contract management software, legal staff need to hand-sift through thousands of pages of documents in client contracts to make updates. Because of the time-consuming nature of this work, clients may choose to forego it, which exposes them to risk. With contract management software, attorneys can sift through thousands of documents nearly instantaneously and easily sort and export relevant contractual provisions to help keep clients in compliance.
Real-time alerts for important deadlines
Part of risk management is staying on top of deadlines. It can take a legal team hundreds of hours to review and track deadlines in a large volume of contracts to ensure a client doesn’t miss renewal and other opportunities.
With contract management software, particularly with AI software, you can easily extract the needed data and organize it, so you know when a contract is up for renewal and on what terms. Look for software that pulls and tracks this information and also creates real-time alerts, so you can help your clients prepare for impending deadlines.
Contract management software saves law firms and clients time and money and helps contractual parties avoid risk. Follow the guidance above to find the software that works best for your office.