Many people have difficulties determining whether they require either a document management system or a contract management system. To answer that question, it’s essential to realize that there’s a crucial distinction between these two methods.
What’s the main difference between document and contract management software? The truth is that it all boils down to having a data-driven approach to managing contracts vs. the document-centric course. Document management systems use only one structure for folders (i.e., document-centric); however, an accurate contract management software like ContraSafe employs an organizational structure that is built around the basic data (i.e. data-centric) which describes your contracts and other documents. It may seem trivial, however it’s a crucial element in protecting yourself from contract risk and allowing the automation of your processes and a more efficient CLM strategy.
Contract Lifecycle Management (CLM) Systems
Contract lifecycle management systems were specifically created to accomplish just that – handle contracts throughout their entire life cycle. They are designed specifically for the purpose of managing contracts across the company. The main benefit for the dedicated CLM systems is that they serve as a central, reliable database for contracts renewals, amendments and renewals.
The majority of CLM systems have functions designed to control all of these contracting stages:
Request/Initiation: Users who have access to CLM system, whether it’s from departments like the legal department or procurement department or business units, are able to initiate the process of requesting a contract.
The drafting process: CLM systems facilitate the contract drafting by with templates that are customized and clauses that are typically approved by the department of law.
Negotiation: CLM Systems track negotiation including draft agreements to aid in audit and reference. It can monitor modifications and variations to contracts and identify any deviations from the standard conditions. CLM systems also allow for automation of the approval process by using pre-determined guidelines, and send notices to the appropriate parties.
Execution: CLM Systems document contract execution and monitor the execution of contracts.
Obligation Management: Many offer tools to monitor post-execution to keep track of the fulfillment of obligations. They also provide notices when the terms are fulfilled or on important dates. They are able to monitor legal agreements and obligations.
CLM systems can be combined with other systems, including customers’ relation management (CRM) systems, as well as ERP (ERP) software. This is why the majority of CLM systems are regarded as functionally advanced, “enterprise-grade” solutions, which can be utilized by teams within and outside of the legal function–e.g. Procurement, and Sales.
Document Management Systems (DMS)
It is not necessary for every company to have all the capabilities of a complete contracts management software. Document management systems simplify document creation, make use of existing work product, allow document collaboration, and serve as the central repository for documents. They are thus able to oversee certain stages of contract management within the department of law including the drafting process (including the tracking of changes in history) along with storage. However, they don’t provide functions for monitoring the negotiation and execution of agreements. Nor automate management of contracts for post-execution obligation management renewals, compliance, or post-execution obligations management (although they might give the necessary information needed to complete those tasks).
A DMS usually manages all of the document stages listed below:
- Create/Capture: The term “create/capture” refers to a DMS assists in document creation as well as storage in a variety of types (Microsoft Office, Adobe, etc.). They permit reuse of information that has been created because they are able to include “best of breed” documents and templates as well as other helpful information which can prove beneficial in contract drafting.
- Manage/Version Control: A DMS has mechanisms to control versions of documents, and to restrict access as well as security, monitoring physical files, or permitting the check-in and out of files that are electronic. Because they track transactions, they offer an audit trail of the versions. Document management systems utilize metadata from documents to build profile of documents, which include details like document type, date author, document type, and much more details that may later be used to manage obligations and compliance.
- Deliver: The DMS can be used as a collaborative space for team and publishing that can be utilized to ease the process of approval. They offer full-text indexing and allow remote access, offline.
- Archives and Retention: DMS can serve as an archive repository centrally located as well as being integrated with other enterprise applications such as record management for corporate systems.
In the end, CLM systems are specifically intended for the contract management for an organization. They assist in every phase of managing contracts by simplifying the process in many ways. Document management systems aren’t suitable for large-scale contract management; however they can be beneficial for certain aspects of managing contracts within the law department, in which case they could perform multiple roles. They can be connected to matters management systems and knowledge management systems to facilitate the creation of various law department documents in a cooperative environment.
Due to these wide-ranging functionality document management systems do not have specific features specific to contracts that can be included inside CLM systems, for instance, automated obligation management or approvals, or the associated automated notices. However, they can be customized to aid in managing contracts in the department of law. Particularly, they help with contract drafting with templates and previous examples as well as track revisions. They can also provide an open, collaborative space that facilitates approvals, and also collect details about profiles to be used for future contracts management.