Did you know? Microsoft Excel is used by approximately 70 million people worldwide and is one of the most important consumer products. But when it comes to catering to various users’ needs, the functionality and features of Excel may not be enough – especially when you’re using contract management template Excel.
Why is that? Let’s explore below in detail why Excel is not the best contract management tool for businesses.
History of Contracts and Their Management
Contracts were first established as a cuneiform script in the early ages. In fact, the first cuneiform script arose from the Mesopotamian man’s need to write contracts.
However, contracts have become significant and have been around for generations. These contracts were to be safely preserved in a safe after signing in the early days.
However, as technology improved and new contract management solutions became available, professionals preferred taking inventory of contracts utilizing spreadsheet tools and solutions such as contract management Excel template.
This approach assisted professionals in firms in noting expiration dates and critical information, decreasing the need to visit the locked file drawer regularly.
Eventually, as contract management software and tools improved, the great majority of professionals began to explore the ease and advancement of smart solutions capable of instantaneously saving data.
The Role of Using Excel for Contract Management in Businesses
A contract is crucial to any agreement between two parties. It is a written form of security regarding the terms and conditions finalized in a deal, which must be legally obeyed. Precisely speaking, contracts state the terms and conditions and are a crucial part of business and companies today.
A common tool that has made its place among professional firms for managing such legal documents is Excel, primarily for the contract management template Excel. By using Excel for contract management, professionals now manage different types of contracts, including the following:
Sales Contracts: An agreement between a firm (the seller) and a customer in which the company agrees to sell products and/or services, and the client agrees to pay for the products/services purchased.
- Partnership Agreements: A document that formalizes the conditions of a partnership between two legal organizations so that they see each other as “partners” in a commercial relationship.
- Purchasing Contracts: An agreement between a firm (the buyer) and a supplier to sell items and/or services under agreed-upon terms and conditions. In exchange, the corporation (buyer) is expected to acknowledge the goods/services and pay for the liability produced.
Why Do Companies Use Excel for Contracts and Agreements Management?
Today, there are better solutions for contract management than Excel and specific jobs requiring highly qualified users (for example, R, Python, SQL / Databases, and other specialized applications). Conversely, Excel appears to be the de facto tool of choice in big business. It could be because of the following:
- Business experts’ knowledge of how to manage contracts in Excel.
- Exclusion of licensing barriers for additional contract management-specific tools.
- Employees working in a corporation require little training to open a spreadsheet and edit cells.
- Accessing Excel in the special enterprise pricing with MS Office, including other Microsoft programs and tools, saves money.
- As an all-arounder for business professionals, the platform allows them to use Excel to manage and update extra data and documents.
- When firms are comfortable with managing contracts in Excel, they may avoid the learning curve and headaches associated with migrating to a different platform.
Overall, it is clear why businesses today prefer managing contracts in Excel, given the numerous usage benefits, familiarity, cost-efficiency, and common understanding that even many students today have.
Why Should You Not Consider Contract Management in Excel?
While many businesses and professionals still consider using MS Excel, whether, for basic needs of creating a spreadsheet, creating records, or managing contracts, many drawbacks come with using contract management template Excel. Let’s discuss the drawbacks below:
- Lack of Access and Version Control
Due to mandatory version updates and lack of user control, Excel is an ever-changing canvas. This constant change and lack of control can lead to costly business contract blunders.
Contract management template Excel also prevents contract lifetime overview. Now Excel wizards can create dashboards in hours. But contract management Excel templates require experts to add the same dashboard to every file and assume that everything else is the same.
As the business updates its legal terms, generating and updating a master dashboard with Excel using this approach becomes difficult.
- Prone to Errors Due to Manual Data Entry
Manual data entry is inherently inaccurate. Most manual data entry has an error rate above 1%, and correcting these mistakes takes time.
As a result, manual data entry is a waste of time. Not to mention how even a decimal point alteration or poor copy/paste can wreak chaos when manually entering data in a contract using the contract management template Excel.
- Lack of Features for Detailed Analytics and Reporting
Spreadsheets like Excel need the necessary functions for contract management, such as extensive analytics and reporting. Besides, the contract management lifecycle requires much attention to keep track of contracts and use them within the appropriate timetable.
Moreover, contract performance must also be monitored, and because it contains confidential information, it requires more efficient solutions than what you can acquire by managing contracts using Excel.
- No Automated Workflows
Regarding contract management, automation is a much-needed solution. Why? Firstly, contract clauses must be strictly coordinated to minimize contract risk and ensure adequate compliance with industry and business rules.
Secondly, automation removes the guesswork from providing contract milestone alerts like renewal dates, review deadlines, etc. Not to mention how automation enables you to execute contracts more quickly via e-Signature.
In contrast, contract management in Excel means that you have no access to these features.
- A Non-Standardized Process Leading to a Lack of Consistency in Contract Data
Another common issue professionals face while using a contract management Excel template is its non-standardized process. Usually, companies lose track of contracts because they have to go through many professional contracts and agreements consistently. Organizing spreadsheets with contract management template Excel sounds impractical for all of them.
It is also difficult because most Excel spreadsheets have duplicate files shared with multiple sources, increasing the count of documents. In such situations, managing contracts in Excel isn’t an advanced solution to finding the contracts quickly, especially if disagreements emerge. Thus, this non-standardized process makes way for increased complications resulting in inconsistent tracking of contract data.
- Wasting Time When Searching for Up-to-Date Information
In-depth research and current data are essential when creating and managing contracts, especially for corporate success. However, a contract management Excel template only holds static data.
Hence, for comprehensive analysis, Excel requires manual activities, including function entries. All in all, this manual approach slows down real-time analysis and decision-making.
- Risk of Violating Personal Data Protection Laws and Regulations
Business software security is crucial, especially for contract management. However, the contract management template Excel provides limited security.
Even though these spreadsheets do have passwords, they lack high-security encryption. So others can access confidential information with a little effort and knowledge.
To prevent this, if you consider using a restricted spreadsheet, it may not always be accessible when needed. Whereas storing confidential files like contracts and agreements in a shareable drive folder could lead to the possibility of data being leaked.
Summing Up: A Better Alternative to Managing Contracts Using Excel
Contract management is critical to updating, securing, and managing a business’s decisions and agreements with employees and other personnel. Managing contracts in Excel may be a commonly opted solution for such tasks, but it is rather lagging, inefficient, and more time-consuming.
In contrast, to avoid the common issues that come along with managing contracts using Excel, opting for a focused and more advanced tool designated for contracts and agreement management can be a smarter decision.
Besides, with tools like CounselLink contract lifecycle management (CLM) offering collaborative and intelligent contract management solutions to modern-day businesses, why waste your time and effort manually entering data and managing contracts on Excel? Such alternative and dedicated contract management tools add more efficiency to the task and make contracting easier for business teams and partners.
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.