Think about your business. What is it, really?
Yes you may have a business number, some solid clients, useful prospects and a handful of staff. But what is it, really?
Some people say that companies are nothing more than the sum total of all of the contracts they’ve ever entered into – with suppliers, purchasers, the government, with staff and indeed, with the founders and shareholders.
VCs or potential acquirers running the ruler over your business will certainly look at it this way — and want ensure to check off that everything is in order as part of their ‘due diligence’ process.
What is a contract management system and why does my company need one?
A contract management system (CMS) is nothing more than a central place to store all of your most important company documents, allowing you to prove the value of your business.
However, a CMS is more than just an electronic filing cabinet.
Capturing and centralising this information can also be a really useful repository of knowledge to help manage your business – knowing when to start renegotiations with your key customers or suppliers, and being able to find that contract when you need it most.
It also provides consistency throughout your business, improves operational efficiency, tracks expenditure, shares company knowledge and reduces low value, repetitive and administrative tasks. From a high level perspective, it provides senior managers and VC’s with a picture of how the company is doing, helps identify risks and through data analysis provides enhanced insights and smarter decision making.
A CMS will at the very least have these basic features:
- Create a list of all the documents you want stored.
- Storage of documents in a virtual repository.
- Search function of the database to locate and sort specific documents.
Free, freemium or paid – do I need to pay for a CMS?
Like most software products available, there are some pretty good ‘freemium’ CMS software available as a starting point. Or you can choose a paid CMS services for a more sophisticated system which allows you to select the features and functions of your personalised CMS.
At the outset, you don’t need to get too caught up with all the bells and whistles that some of the CMS offer. Some features are just too complicated for what you will typically need. We tend to go with the less is more approach, which is more time and cost effective.
If your business is in start-up phase or relatively small, then you might want to think about implementing a basic CMS system, and one you do not have to pay for, like Google Drive or Dropbox.
For basic CMS systems, you can form a spreadsheet of the stored documents and save the documents to a centralised repository, usually on a cloud-based platform. This allows access to the documents anywhere, anytime using any connected computer.
You can still use these free, basic options even if you decide to upgrade and migrate to a paid CMS in the future. In fact, when you upgrade you’ll save thousands of dollars by already having the document data in a spreadsheet format.
If there is a budget for a paid CMS, then there are many options to choose from. The market is saturated with good options and the choice can be overwhelming. Most paid CMS systems will include the following additional features:
- Standard Contract Drafting: You can create a template for standard contracts, tailored with clauses specific to your company. This saves time, money and reduces risks as the same approved contracts are being used company-wide.. Some systems will also allow you to link any ‘smart contracts’ you might be using. Smart contracts is a really exciting development for businesses to reduce legal expenditure, and will be discussed in a separate article.
- Contract Monitoring: The more advanced CMS systems will allow you to set reminders for all timeframes during the contract lifecycle, including payment reminders, milestones, performance dates and contract expiry.
- Approval Systems: Some CMS systems allow multiple levels of approvals to monitor if contract performance is on track to comply with the agreed budget, objectives and milestones. For example, you can track the approved budget with the actual expenditure incurred to monitor early exhaustion of the budget and timely payment.
- Data Information: CMS allows you to extract important business data and generate reports that provide enhanced insights on the company, including how the company has been performing in the past and provide predictive insights into the future. For example, using data generated from CMS reports, you can determine how quickly contract time frames are being met and set up monitoring to determine the most beneficial time to renegotiate contracts due for expiry. The possibilities are endless.
In Part 2 of this article we look at the ‘must haves’ versus ‘nice to have’ features you need in a contract management system, and offer guidance around what sort of documents you should look to store in your CMS to simplify your workflows.
Biztech Lawyers can assist your business in selecting, setting up and operationalising a CMS for your business or in house team. It is possible to go from chaos to order! Get in touch to find out how we can help get you up and running as painlessly as possible.