A modern contract repository is software used to organize an organization’s legal agreements with third parties. It acts as a single source of truth about contracts the company has with suppliers and other third parties.
Traditionally, such agreements would be held in a file cabinet and, more recently, in such things as spreadsheets. However, these previous methods complicate contract life cycle management.
- First, manual management of documents tends to come with human errors in writing figures, late filings, and lost documents. It creates a compliance risk.
- With manual contract management, it is almost impossible to see risks such as poor supplier performance quickly.
- Should terms of contracts be changed, then version control becomes a problem when relying on spreadsheets of physical files.
- Previous methods of contract management had no automated notifications for crucial dates, including contract expiry.
How Contract Repositories Work
A modern contract repository is much more than a way of filing documents related to contracts. Instead, it is sophisticated software that can integrate with other tools in the contract management process. For instance, when integrated with DocuSign, actions executed on DocuSign automatically update in the repository. This makes a contract repository much more than a cloud-based storage solution such as Dropbox.
With a predetermined workflow, a contract repository helps move the contract through the stages of execution. Normally, there will be a dashboard showing the contract status alongside other important metadata. A contract repository is connected to an e-signature tool to make sure documents are signed and countersigned by authorized parties in the contract terms.
Today, contract repositories come with integration with contract creation and analytics tools. By analyzing past agreements and performance, it becomes possible to make improvements for better outcomes in future contracts. This is done using AI, where all documents in the repository can be analyzed for better insights.
Contract repositories minimize the risk of non-compliance, especially with big contracts involving subcontracting and multiple laws and regulators. It is possible to require suppliers to deposit various permits and certifications they need and indicate their expiry dates. Whenever due dates for renewal fall close, notifications can be sent out to relevant parties.
Handling Complexity Through Contract Repositories
Contract lifecycle management is easy for small companies with few suppliers and short supply chains. However, it’s important to appreciate the complexity of contracts involving multinationals. They are subject to varying laws in the various jurisdictions they operate in and so are their suppliers. Relying on spreadsheets would be too much to ask of staff. Alternatively, the company would have to rely on a lot more labor and a lot more time would be spent. Business would be much slower than it is today.
Contract repositories solve the problem of complexity that comes with business scaling. By avoiding fragmentation of documents that would otherwise come with spreadsheets, all documents are held safely with proper version control. Businesses can then integrate analytics to enrich their decision-making. Marginal improvements in contract handling can result in significant savings for the company as well as goodwill with suppliers. As indicated, it’s easier to track supplier performance easily because non-fulfillments can be automatically flagged.
Introducing a Contract Repository to Replace Legacy Contracts
The process of scanning physical records to create digital records of contract data can often discourage companies from moving away from traditional contract management methods. However, with AI-powered solutions such as Gateway, it is possible to extract important contract information from scanned pdf documents. Contracts figures and important handwritten clauses can be extracted and fixed into your new digital contracts. This ensures continuity after migration.
When creating a repository, it is important to have a clear understanding of the workflow. Simplifying otherwise complex contract management processes is important here. Do not forget any touchpoint when customizing the software so that it fulfills its intended purpose.
Once you start using the repository, your management can benefit by being able to classify contracts with their priority level, risk, urgency, or other suitable methods. They can carry out quick searches on clauses, terms, figures, dates, and so on. In the long run, a company that relies on a contract repository is able to reduce the cost and risk associated with contracts documents management.
If you would like to discuss procurement software with a consultant or to schedule a demo of our solutions contact us today.