Contracts are often the beginning of business relationships. They control how parties will interact with each other, how money is generated and what happens if something goes wrong. However, many businesses still manage contracts using an intricate web of emails and paper documents only accessible to those who are directly involved with the process.

Contract management software, however, has changed the game completely, unifying all contracts into one system that's easily accessible.

Using a contract management system drops the average contract approval time by about 82%.

Source: Aberdeen

Investment in the transformation of contract management can save companies 30-50% on contractor spend.

Source: McKinsey

Poor contract management costs businesses around 9% of their revenue each year.

Source: International Association for Contract and Commercial Management

Contract Management Software Buyer's Guide

What is Contract Management Software?

Contract management software stores legal agreements in one place to be accessed by all parties. These agreements can be leases, contracts with vendors, or even licensing agreements.

A contract management software solution can help your business organize contracts, eliminating the need for paper documents and email attachments.

Common Contract Management Software Features

Centralized storage of contracts

Centralized storage of contracts

A centralized storage location for all contracts is essential and is the mainstay of contract management software. This feature ensures contracts are all in one spot and easy to find when a contract needs to be referenced, modified or amended. Individual access permissions, like a "read-only" setting, can be created based on employees' roles within the company, safeguarding your data.

E-signatures

E-signatures

Contract management systems usually have e-signature capabilities. E-signatures are now considered the legal equivalent to a traditional pen-to-paper signature. With a built-in e-signature feature, companies using the software no longer have to rely on uploading documents to external programs.

Drafting contracts

Drafting contracts

Writing a contract is time-consuming because of how precise the language needs to be. The drafting feature of a contract management system allows the manager or contract author to complete and edit a draft in one system without the need to send several draft versions via email. Many solutions include the ability to create templates with approved legalese, saving time and reducing errors.

Compliance monitoring

Compliance monitoring

Since contract management software stores contracts, its artificial intelligence feature can help monitor for changes in the law in order to maintain contract compliance. Typically, a contract manager would need to monitor contracts internally review whether external actions have been performed, such as payments made or goods delivered. A contract management solution can automate this auditing process.

Negotiation of contracts

Negotiation of contracts

The contract negotiation feature of contract management software eliminates the need for back-and-forth email chains. Legal counsels, clients, contract managers and other relevant parties can all communicate virtually in one place to go over the terms of a contract. This saves time by cutting out the need to send various versions of contracts around for approvals.

Top Benefits of Contract Management Software

Automated Workflow

Automated workflow

The ability to draft, negotiate, store and sign all contracts in one system frees up time for busy contract administrators, giving them time to work on other necessary tasks. Each party automatically receives notifications when it's time to review contract language, so various drafts don't have to be sent through email – which could be confusing if any party needs to reference the contract in the future. Auditing and security services are also automated, alerting managers if changes take place or something needs their attention.

Security

Improved security

Contracts contain private, sensitive information about all parties involved. Keeping this information safe is a top priority. A contract management solution offers protections for your data including two-factor authorization, individual access settings for users and data encryption.

Records

Organized records

Staying organized is essential for companies who rely on contracts to do business. Businesses may find that most of their contract issues are due to disorganization that leads to poor visibility of contracts – meaning that the important details of contracts may be overlooked once it's signed. Contract management software will help keep everything organized, easily accessible and centralized.

Compliance

Improved compliance

Having a comprehensive contract strategy in place is very important for companies that deal with government agencies or have demanding contractual obligations. But, staying in compliance is the challenge. A contract management software solution automatically looks for updates to the law to be sure that businesses are always on top of changes in rules, regulations and policies.

How to Choose a Contract Management Software Solution

There are many contract management software solutions available, all with different features, purposes and levels of customization. Before you purchase, it's important to research what's out there to see which option is best for your business. We've outlined a few important steps below.

1

Know your company's needs

Before you start shopping for contract management software, consider what your company wants to fix by implementing this solution. Audit your current contract management process to see where it could be improved, and create goals you'd like to achieve based on your findings. From there, you can create a list of contract management software features that are "must-haves" and features that are "nice-to-haves."

You'll also want to make sure your IT department and top executives are on board with implementing your solution.

2

Create a Shortlist

Once you've established your goals and objectives, create a shortlist of vendors that best fit your needs. We recommend using your must-have features as well as your nice-to-have ones to help you select the vendors with solutions that best match what you need.

In addition to features, you'll need to consider the vendor's deployment options (e.g., on-premise, cloud), implementation processes and customer support.

3

Contact vendors

Once you've established your shortlist of vendors, it's time to reach out to them. Explain what your objectives are and what features you require in a solution. You'll also want to request a demo of the software with real-life scenarios if possible. Vendors may offer virtual demonstrations, but ask if a vendor is willing to meet with you at your office. Another way to test the software is to participate in a free trial if there is one. Most vendors offer a 14-day or 30-day free trial.

You'll also want to compare different price quotes you receive. We explain more on pricing in our section below.

4

Conduct due diligence

Once you've selected your top two or three vendors, ask for references from their current or previous clients. While the vendor will give you the clients with the most glowing recommendations or experiences, ask to speak to clients that are in the same industry or are the same size as your company. You'll want to get not just the positives of the solution or vendor, but any issues the client has experienced, as well.

Contract Management Pricing

One of the most important factors in selecting a contract management software solution is pricing. Prices can vary depending on company size, customization and implementation and deployment.

Here are a few questions you should consider about pricing.

  • Is there a clear plan to judge return on investment?
  • What is our budget for implementing/hosting/purchasing this solution?
  • How many contracts will we need to support with our contract management software?
  • How many features do we really need?
  • How many users will need to access the software?
  • What compliance and security features are included?

Contract management software vendors use two popular pricing models: perpetual licensing (on-premise) or subscription hosting plans (cloud).

perpetual

Perpetual licensing:

Businesses that prefer to host their own data can purchase licenses that last for the life of the software. On-premise deployment requires the business to purchase hardware, servers and other infrastructure, as well as use IT resources to host and maintain the solution.

Perpetual licenses are attractive to larger businesses that can afford the up-front cost. However, even though the license is perpetual, that doesn't mean it includes upgrades and maintenance. Be sure to check with the vendor about costs of upgrades and IT support.

One example of a that offers licenses in perpetuity, but not lifetime tech support is FossLook. Their pricing structure is based on the number of users who will need access to the software, but only the first six months of technical support are included. Prices for most one-time license software are available from the vendor.

subscription

Subscription hosting (cloud):

Businesses that don't have the time or resources to host their own solution can consider deploying contract management software in the cloud. They will only need to pay a monthly or annual subscription cost. Subscription costs can include the number of features the company needs, as well as any support and maintenance.

Subscription hosting is attractive for smaller businesses that need contract management software, but don't have the investment capital upfront. Often, subscription-based solutions are priced per user and include tech support and help for implementation.

A subscription hosting contract management software service that is priced per user is Agiloft. This service is offered at $65 per month, per user and would be an attractive price for a small business that only needs a few users. For larger businesses that need many more users, ContractWorks is $600 per month and includes unlimited users.

Challenges of Contract Management Software

Scope Creep

Scope creep is a big problem when implementing any new software. This problem often begins when companies are figuring out the software requirements. Many businesses will underestimate the features they need or the goals they intend to achieve. They may also underestimate the time it takes to get their resources ready for each phase of implementation. It's important to set dates for the start, middle and end of your implementation. Ask whether you've really left enough time for your staff to prepare, and adjust with your vendor or implementation specialist accordingly.

Getting buy-in

Adoption of your new contract management software is crucial to its success – a solution is only effective if the people use it. Concerns from top execs and IT might include the cost compared to the return on investment, and security concerns if the software is hosted by a vendor.

Only needing a few features

After figuring out its goals, a company may decide it doesn't need an all-encompassing solution. Perhaps it only needs centralized document storage or e-signature features. Or, it may find that its ERP or helpdesk software already has a contracts feature that can be used.