Guess what? Your business might be losing a major portion of its annual profit due to inefficient contract database management systems. Contracts are an essential part of any business, as they contain information about every dollar that enters and exits the business. Not being able to keep track of this information can cause serious financial and reputational harm to organizations.
With a functioning contract management database in place, businesses can streamline their contract management lifecycle, protect confidential information, and improve productivity. But, how exactly do you create a functioning contract management database? Read down below to find out.
What Is a Contract Database?
A contract database is a central repository used by organizations to store and organize all contracts in one place. The basic purpose of a contract database is to make it easier to locate, audit, and manage contract-related data, files, and attachments.
Purposes of Creating a Contract Management Database
There are many reasons for creating a contract database management for your business, the most important ones are:
Contracts contain confidential and sensitive information. It is important to store contracts securely to ensure they don’t get lost or breached. A contract database helps store all your contracts securely in one centralized location.
Searching for contracts, clauses, and associated data manually is time-consuming and can overburden your employees above their capability. With a contract management database, you can search for contracts and related information within minutes.
Contract Lifecycle Management (CLM)
A contract database helps you keep track of the contracts that need to be updated or renewed through alerts and notifications. This allows teams to track dates, edits, and original values conveniently.
Why Is a Contract Database Essential?
A contract database can benefit all organizations that deal with contracts. Some of the primary organizations that find the tool essential include:
- Healthcare industry – For storing and managing healthcare contracts and ensuring compliance with terms.
- Consulting firms – To ensure compliance with contractual commitments and maintain healthy relationships with clients.
- Technology – For the security of contracts that contain sensitive information about trade secrets, clients, and patents.
- HR and recruitment – For record keeping of employees and to make the onboarding process smooth and hassle-free.
How to Create a Contract Database?
There are three main ways to create a contract database. These include:
Creating a Contract Management Database Manually
A manual contract management database is most suitable for startups that don’t need to work with a lot of contracts. Contracts can either be stored manually in a physical location such as a record-keeping cupboard or integrated into a database-linked spreadsheet system.
- Cost-Effective – Since the contracts are stored and managed manually, the company bears no cost for the process.
- Less Secure – Contracts that are managed manually are not encrypted, which means everyone has access to the sensitive information they contain. Losing the information in the wrong hands can cause a lot of damage to your company’s reputation and may even result in legal proceedings.
- Time-consuming – Creating, organizing, and retrieving contracts from a manual database can be hectic and time-consuming.
- Error-prone – Manual contract management databases lack built-in risk controls to ensure compliance with the approved contracting process.
Creating a Contract Database in Excel
Many businesses use Excel to record and collect data from contracts. It is an easy-to-implement and simple solution to streamline contract handling for small businesses till they scale up.
- Easy to use – Storing and managing contracts in an Excel database requires basic Excel knowledge which makes it relatively easy to use for staff.
- Easily available – The availability of Excel should not be a problem since most computers come with Excel software already installed in the system. Also, it is free of cost.
Better flexibility – If used correctly, excel can be a very powerful tool for contract management. It can keep a record of the number and cost of contracts, and even track workflow.
- Limited functionality – Excel only allows you to manage contracts once they have been created. Hence, you need a separate solution to draft, create, and audit contracts.
- Not suitable for large organizations – Large companies usually deal with hundreds of contract-based operations daily, which makes Excel contract databases ineffective and prone to human errors.
- Product limitations – Excel lacks dedicated functionality for managing contracts and doesn’t provide an overview of the complete contract lifecycle.
Implementing a Contract Database Management Software
A contract database management software is an all-in-one platform designed to help enterprises streamline their contract management process. It helps save internal departments, such as the compliance, HR, and legal teams, the need to look up and review contracts manually.
Since contracts are stored in a central digital depository, it takes little to no time to extract contract-related information. With contract management software, it becomes easier to track and make changes in contract documents, send key alerts, and more.
- Quick contract execution – Most contact management database software comes with third-party integrations and e-signature solutions that speed up the contract execution process. Thanks to these features as now businesses don’t need to craft, print, sign, and email contracts separately.
- Increased efficiency – With contract management database software you can monitor critical milestones. You can also set live reminders and alerts that allow businesses to manage their obligations and agreements on time.
- Reduced error risk – Unlike manual contract management, dedicated contract database management software eliminates the potential for human error. The software also lets you extract information from relevant documents and integrate it into a template document automatically.
May require staff training- Implementing and developing new features may require training your staff, especially if you opt for endlessly customizable software.
Benefits of Having a Functioning Contract Management Database
A functioning contract management database offers numerous benefits. Some of them are:
- Increased Visibility: A contract management system lets organizations track payments, performance, obligations, and deadlines. It also reduces the chances of catching errors and problems at the last moment, saving time and cost for your business.
- Easy Access to Data: Easy access to contract data allows organizations to make quick and informed decisions. The increased efficiency typically results in fewer missed opportunities for your business.
- Risk Prevention: Thanks to increased visibility and regular alerts, businesses can manage and eliminate risk before it gains momentum.
- Improved Perception: Your business appears professional and responsive by providing timely and correct information to its clients and vendors.
Tips to Use a Contract Database Effectively
To use a contract database effectively, you must keep the following factors in mind:
- Train your employees – Train your staff on how to use a contract database to reduce the chances of error and increase productivity.
- Ensure data backup – All the data present in your contract management database should be backed up on a separate device or a cloud system. With a backup available, you can recover all lost data in case of mishaps.
- Prioritize data security – All data uploaded should be encrypted and protected to save it from unauthorized access, modification, and information theft.
- Perform regular audits – All information stored should be precise and up to date. To ensure this, you can either perform manual checks and audits or use an automated system for better efficiency.
A contract management database system is a crucial component for reducing risk factors, improving productivity, and having better relations with clients and vendors. Since traditional methods of record keeping are becoming outdated and ineffective in today’s world, it’s about time you invest in a functioning contract database management software for your business.
Olga Mack is VP at LexisNexis and CEO of CounselLink CLM.
Olga V. Mack is Vice President at LexisNexis® and CEO of CounselLink® CLM, a next-gen contract management company that has pioneered digital negotiation technology.
An award-winning general counsel and operations professional, Olga embraces legal innovation and has dedicated her career to improving and shaping the future of law. She shares her views in her columns at Above the Law, Forbes, Bloomberg Law, Association of Corporate Counsel (ACC) Docket, and more.