Online Contract Management: What Is It, Types, Risks & Benefits

by Business Development 27 December 2022

Online Contract Management

Manual contracts have their limitations and frailties. Those who deal with it know all about the frustrations and the struggle. They are so complex at times that you are compelled to leave the other important areas and focus mainly on this particular work.

Thus, they hamper your ability to do your job properly. You also have issues like missing data and getting access to specific contracts. They soak all your time. Therefore, the businesses were searching for some automated system that would facilitate automated updation and functioning.

Online or Digital Contract management can be a great solution to your problems. Do you face similar issues with contract management? Then, the online version can help you out with solving your problems.

In this article, we are going to discuss online contract management, its different types, and its benefits.

What Is Online Contract Management?

What Is Online Contract Management

Online or digital contract management refers to following an automated pathway of storing and managing company details, mainly contract-related documents. The ultimate objective of the system is to monitor the different aspects of contract cycles, ranging from contract negotiations to electronic signatures. The system will be guided by Cloud computing. Data, once stored, can be retrieved at any time.

Once you add the contracts to the online systems, the users can navigate through them. Therefore, you can find efficiency along with transparency. Of course, data security is one of the core issues attached to a company. But with the advent of online contract management, things can improve drastically. Are you looking for an online contract management system?

You can use the Parley Pro team, a secure cloud-based platform to automate your systems. In addition, they have software that can streamline your contract management.

What Are The Different Types Of Online Contract Management

Types Of Online Contract Management

As mentioned above, the advent of cloud computing has completely changed the digitization ecosystem. With the help of cloud computing, a platform or software has multiple benefits.

They include:

  • Unlimited storage and backup of data.
  • Improved Collaboration and integration between and among the inter-departments.
  • Mobility.
  • Safety and security of data.
  • Free from human errors.
  • This has strengthened the data management system.

Therefore big companies are taking advantage of this automated ecosystem. However, even small businesses can benefit from the online cloud-backed ecosystem. For example, the most common online contracts management software is general business contracts, sales-related contracts, employment-related contracts, cost-plus contracts, and finally, time and material contracts.

1. General Business Contracts

The automated ecosystem protects the interests of the stakeholders directly and indirectly related to the business. For example, general business contracts come in different forms: franchise agreements, stock purchase agreements, licensing contracts, and advertising agency agreements.

2. Sales Contracts

The sales contract deals with the purchase of goods, property, and services to be bought and sold. It can be further broken down into purchases. They are legally binding, enabling owners to purchase things at the agreed prices. Agreement for the sale of goods also comes under the sales contract. With the completion of the sales, the agreement closes down automatically.

A great deal of transparency has come with the employment-related contract. Generally, the contracts were legally binding, and it is still today. But there has been an air of mistrust between the job givers and the takers. But now, with automation, things have thoroughly changed for the better.

There are various employment-related contracts, including reciprocal nondisclosure agreements, consulting agreements, confidential agreements, representative seller agreements, and distributor agreements. Therefore, you can say that a great deal of automation has crept into the system.

4. Cost Plus contacts

The cost-plus contracts take into account the actual cost and, at the same time, the purchase and any other expenses that are incurred from the construction work. Prior to the negotiations, both parties will negotiate the exact amount of expenses. The amount represents the percentage of material and labor costs.

5. Time And The Material Cost

This contract is designed where two major stakeholders, the buyer, and the seller, are involved. The contracts put in the materials and the cost required to finish the project. The discussion also puts in the time that is required to complete the entire project.

Here, the potential costs are added to the projects. But there are certain risks and uncertainties attached to this development. But notwithstanding it, time and contract management is an effective usage of contracts.

The Risks Involved With Contract Management

 Involved With Contract Management

Some people are so stubborn that they feel automation has its risks and uncertainties. They feel the fear that digitization of contract management can bring certain risks into the system. Therefore, they still have blind faith in manual contract management. But in the actual plane, the manually managed systems have their own risks and uncertainty. So let’s study the general risks associated with contract management.

1. Data Breaches

If data goes into the hands of some unauthorized people, they can put things at risk. Compliance issues are real issues and need to be worked on. Data breaches can be destructive to business and completely kill the bridge of faith between two entities. Therefore, data break remains a risk in contract management.

2. I Do Not Understand The Contract

It happens that the parties involved in business enter into a contract. But at the same time, it also happens that both parties are unable to understand the contract. Now under the circumstances, the trust deficit may evolve as the ultimate winner. Now that any one of the entities fails to understand the contracts, they might break it. Digital contracts have a lot to contribute to the following areas.

3. Breaking And Failing To Manage Contacts

It happens that some entities could not comply with the core requirements of the congrats. So ultimately, things ended in breaking contracts. It can be a huge loss to the stakeholders involved with the contract designs. Therefore you should understand that contract management can come under risk.

4. Expensive

The cost issue is also one of the core risks associated with contract management. For example, two parties entered into a contract. They enter into a consensus with the prices. But some circumstances completely toppled the expenditure. But the parties are already agreement-bound. Now the need of the hour would be managing the systems. Expense management also becomes a risk that digital smart contracts can contribute immensely.

5. Delayed Payment

This could happen if one party pays the money later on and causes unnecessary delays. Any delay in payment slows down the project.

For instance, A enters into a contract with B. They settle their contracts based on installment payments. But the payer could not comply with the terms of the installment payment. This not only delays the budget but adds additional costs to the budget. Both parties become dissatisfied. Therefore manual contract management definitely has its areas of failure.

And The Benefits?

Digital contract management services

Digital contract management services come with certain benefits for the facilities’ growth and development of business. They have their own benefits, which is why businesses are shifting towards digital or online contract management. Now let us try to understand the benefits of the contact management system.

1. Lesser Approval time

Online contract management software can completely automate things. As a result, the workflows expedite. Now with automation, you get the benefit in the form of increased efficiency.

There is software that can quickly scan the necessary documents and make things easy. With dynamic workflow, things can improve, and thus the approval process takes less time.

2. Contract Visibility

Contract visibility is definitely one of the core issues associated with manual or paper-based systems. Generally, a paper-based system there involves extensive reporting. As a result, even safeguarding the papers can be difficult sometimes.

But with the arrival of a digitized system, the stakeholders enter the data in some contract templates. They also involve the latest clauses.

Moreover, now with a cloud-based system, all the units (say, employees) have access to the system. Thus the digitized contract management system becomes much more transparent and visible.

3. Ensuring The Contract Compliance

The streamlined business process always brings seriousness and accountability. This is because every company has its compliance standards. Moreover, with automation, updating, and editing, the documents turn out to be much easier compared to the existing system.

This adds expertise and an updated system to the organization. Therefore, you could make the best use of digitized contract management through contract compliance. But, remember, every compliance brings in an added responsibility.

Related: Business Process Management v/s Workflow. How does BPM differ from workflow?

4. Document Management

With the existing paper or manual contract management system, the management of documents was much more difficult and exhaustive. Here the employees can scan paper documents.

Then, using an automatic image or optical character recognition, all the documents can be made available within a single system. Moreover, with automation, better tracking can be made possible.

Closing The Discussion

Manual contract management is steeped in complexities. But digital contract management has come with many advantages.

They have not only brought in speed, transparency, and accountability, but at the same time, they also increased the trust among the stakeholders within the industry. Therefore, in the coming time, Online or cloud-based contract management will be stronger.

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Arnab is a Passionate blogger. He loves to share sentient blogs on topics like current affairs, business, lifestyle, health, etc. If you want to read refulgent blogs so please follow RealWealthBusiness.

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