How companies can replace the contract binder with digital contract management

Saving all the contracts you sign with different contracting parties is important and many companies save printed paper contracts in contract binders sorted by the year in which the contract was entered into. — Many companies have lots of contracts saved in folders or contract binders

The modern contract binder is digital, smart and helps you understand what information is in the company's contract. What questions does your company have to ask and what survey should be done in order to start using modern, digital contract management?

Here we go through how you can map out which requirements your company has and what you need to think through in order to be able to replace the contract binder with a digital alternative.

Map which contracts your company has today

Which contracts does your company have today? Start from your business and map all your company's contracts by dividing the "elephant" into smaller - more manageable - parts.

• Categorize the types of contracts you have in the business. Customer contracts, supplier contracts, employment contracts, formal contracts, central supplier contracts are some examples of contracts that can be found in your company and they can be a suitable starting point.

• Depending on your business, you may need a more detailed breakdown. If you offer complete products or services, it is also likely that there are guarantees or so-called service-level agreements. Both to the customer and from the supplier.

• Gradually, the situation arises that your company has several and sometimes competing rights and obligations. Do you recognize this situation? Then make a finer division based on what affects your contracts (product, service, time cycle, etc.).

A good contract system helps you to answer questions such as "how many agreements regarding product A expire during the current year". But in order to be able to answer such questions, it is first and foremost necessary that the contracts have been categorized in a uniform way

Find out how contracts are entered into today

Swedish contract law allows, with some exceptions, agreements to be entered into informally. If you and your contracting party agree and express this to each other, an agreement can be considered entered into. Formless means that there are no requirements for how this is communicated. Orally, on paper, via chat, social media etc.

• Contract law is dispositive, which means that you as contracting parties can decide that certain formal requirements shall apply. "Agreed writing form" means that you agree that the agreement must be written and signed. Be aware that negotiations before an agreement and communication after acceptance can be weighed into what is considered agreed.

• An example could be a negotiation before an agreement, where commitments are made in an email. The resulting agreement is unclear on that very point and a dispute arises. Swedish contract law then looks at the intention of the agreement and here the conclusion can be that the agreement includes more than what is stated in the agreement document. It depends of course on who communicated what and in what context.

• You can avoid this by making it clear in the agreement that it is the contract document, and only the contract document, that constitutes the agreement. Consult a lawyer to work out a standard clause that suits your business.

• If, after entering into an agreement, for example, there is an email exchange that “hits” the agreement, it can change what is considered to be the applicable agreement. An example, you or your supplier has in a written contract regulated that something must be done every Tuesday. At a later stage, one party asks via email if Thursday works in the future and the other party confirms.

When you categorize the contracts, also note if there are negotiated contracts and where / how that documentation is saved.

List how and where contracts are handled today

The contracts a company enters into can be saved in digital format or in paper form and there are often several different people within the company who handle different types of contracts. — Mapping where and how contracts are saved is an important point in order to be able to move to digital contract management

Where are your company's contract and agreements stored today? How, ie in what form, are the contracts saved?

• Paper contracts in the contract binders. It is still common for contracts to be saved in paper form. If you have such binders in your company, you should identify which of the binders contain contracts that are relevant to digitize and manage in a modern contract management system.

• Email contracts. It is not uncommon for certain agreements to be made via email. The agreement, ie the email contract, is then saved in a certain person's e-mail box and it is very difficult as a person responsible for all contracts within a company to even find out that such agreements are made. Even if you should strongly advise against such agreements, in a modern system you should also be able to handle email contracts.

• Contracts saved as files in a common storage area. For example, these may be scanned paper contracts that are always saved in a specific storage area. Important to consider is whether it is possible to build scripts that can automate the loading of these agreements and how easy it is to send files to a contract management system.

• Historical contracts. Historical contracts can exist in large volumes and an upload of contracts in bulk should be possible to a system for contract management.

• Oral agreements then? Today, there are systems for recording oral agreements and saving the conversation as a file. This audio file must be able to be handled in the same way as all other contracts.

What information should be saved together with the contract documents?

Information that is saved together with the contract document itself is sometimes called metadata or supplementary contract information. An analogy is the post-it note on the paper contract.

Metadata is linked to the contract but is not part of the agreement between the contract parties. Metadata can come from many different sources in your business. From individuals who have supplementary information in emails, to information that is saved in index files from a scanning provider.

You do not need to enter or identify metadata before you start managing your contracts in a contract archive. A modern system should allow you to do this afterwards, which gives flexibility around the rules of procedure for implementation. Some examples of metadata:

• Contract information: Type of contract, related contracts, contract description

• Information about contracting parties: Description of contracting parties, information about contact persons, other information about contracting parties

• Discounts: Discount terms with supplier, detailed article list of discounts with this supplier

• Approved buyers: a detailed list of names, social security numbers, etc. for persons who have the right to make purchases on a specific contract

• Purchasing: Purchasing policy for purchasing from a supplier, references to central purchasing policy, detailed list of rules for purchasing from this supplier

• Classifications of which services a customer has purchased in a specific customer contract

• Key values (CPI) that show a summary of how a supplier performs.

• Memoranda for future renegotiation of a contract. Maybe your customer should be compensated for something. Maybe you have a supplier where it pays to keep track of history.

Each company has its own requirements for which metadata you want to be able to save and follow up. Make your own list of your company's metadata and ensure that all information can be saved in a contract management system. Different contract types probably have different requirements for metadata.

Understand how contracts should be managed

The modern contract binder must be able to handle your company's contract both before, during and after the validity period. An alternative description is that the contract can be managed throughout the life cycle.

Managing contracts means being able to change contract owners, change metadata, control what status the contract is currently in and follow up on which transactions have been completed for a contract. Equally important is that contract content and metadata are available to the right people in your company.

We break this down into a few points:

• Access rights. As a contract manager, you must have access to all the company's contracts. This is no different from how a contract binder works. But in the digital contract binder, many more people can be given access to contracts. The whole idea of digital contract management is that contract information is stored in one place - in the contract database - and users are given access as needed. What happens if an employee who is a contract owner becomes ill and another person needs to take over ownership? This is a situation that must be manageable by you as the contract manager.

• Status changes and tracking. Contracts need to be able to be handled according to different digital workflows. The workflow for an employment contract differs from a supplier contract. Regardless of the workflow, it is important that status changes are logged in the system in a so-called audit log. The log helps you to see what happened when. Maybe your company also has legal requirements for traceability.

• Access to contract information. A digital contract binder must handle changes in real-time so that everyone has an updated view. Support for mobility and different platforms is today a necessity. A web-based interface is preferable as it does not impose any requirements on software installation on clients.

• Metadata management. To make it easier for users, you as the contract manager should be able to control which metadata can be added per contract type. This preferably done through the ability to create templates for metadata, templates that can be linked to different types of contracts

• Backup and data protection. The digital contract binder does not need to be protected in a fireproof vault. However, it is important that backup is done and that data is kept secure.

To add new contracts

Contracts come in many different forms, but regardless of form, it should of course be possible to add all of them into the contract system. The paper-based contract binder may contain a system for cataloguing contracts. It can be by name, type of agreement or perhaps sorted in chronological order. To ensure that the categorization is kept intact, there may be restrictions on who can add new agreements.

In the digital contract binder, there are many more possibilities and below are listed some questions you should ask yourself to understand the requirements.

• Should anyone in the company be able to add a new contract? In many situations, it is an advantage that individual users can create their own agreements, which they become owners of. Of course, as a contract manager, you always have access to all new contracts that are added.

Is it possible to add contracts in bulk? Contracts in bulk mean that you can add many contracts at the same time. This is a great advantage if your company has a large volume of contracts that contain similar information. An example is standardized customer contracts where a template has been used.

• How to add large contracts with many attachments? For example, framework agreements that consist of many different documents must be able to be saved together, where the main agreement is listed together with appendices. Also, think about whether you have a call-off contract that should be able to refer to a framework agreement. How is this done?

• Can you add and keep together a contract that consists of many, individually stored, scanned pages? It is not uncommon in older contract archives to only get one file per page or from a scan unit to only get one page at a time. Of course, in a modern contract system, you should be able to add a contract that lists all associated pages.

• How long does it take to add a contract before it is available to users? It makes a difference for users to be able to directly see and use the results when a new contract is added.

The above list may not be relevant in your business. Regardless, it is functionality that you may sooner or later need.

Watch a video of how contracts are added to Avtalsbanken's web service for contract management.Show me more

Search and contract monitoring

Digital contract management systems with support for free text search and monitoring have different possibilities in searching and finding contract information and it is important to understand what differences there are and what requirements your company has. — A system for digital contract management that enables free text search and monitoring simplifies

Your digital archive can provide a number of advantages over the paper binder. One of the big differences lies in how you can search for information and set up monitoring.

• Free text search in a modern contract system makes it easy to find the contract document itself. The search can be about searching for contract parties, validity periods and type of contract.

• Today, many companies are content to save scanned images that cannot be searched in. It is of course a big job when you as a contract manager have to compile the information in several contracts because it requires manually reading the agreement text on the screen. In a modern contract system, text interpretation (OCR) can be done of the contract document so that text search can be performed. Text search of contract information allows you to get a much more detailed picture of all the agreements your company has. Equally important is being able to do text searches in metadata.

• Contracts and associated metadata contain a lot of information in the form of both text, numbers and dates. A good contract system offers more advanced search functions, in addition to free text. An advanced search includes the ability to set up rules for what is to be searched for. Examples can be to find all contracts that have a contract value that exceeds SEK 50,000 or to find all supplier contracts whose last validity date is passed within 3 months from today. This is very labour-intensive to implement without the support of advanced search.

• Monitoring is used to remind of important contractual events. Some contract systems allow you to set up monitoring rules (with alarms) based on contract data. It can be an alarm on an individual contract - send a reminder to these people 1 month before the contract expires. It can also be ongoing monitoring - I want to be informed every time cost centre X signs a new contract for service Y.

There are contract systems that, with the help of artificial intelligence, give you additional functions to process the content of your contracts. Read more about AI-assisted text interpretation in this articleShow me more

Chart which reports are needed

Generating a report means that you can compile information from contract documents and saved metadata that is to be used for a specific purpose or by a specific organizational part of your company. A simple example is to be able to get a list of all project activities from a project contract.

In order to be able to generate good reports, data is needed. Often from several different IT systems. There are very few companies where all IT systems are integrated with each other and data flows without human intervention. Even if integration is something you strive for, reality is often a compromise. Then it is essential that the systems concerned can export data in a good way - and for contract systems, this of course means both contract content and any metadata.

• Map which systems and processes "own" data and what the flow looks like. Maybe it is your case management system that documents what the customer wants to have fixed, the contract system handles the customer's acceptance on general terms and delivery approval and the financial system must of course follow up with invoicing on time and materials.

• The right contract solution gives you opportunities to produce customized reports based on process and contract types. For example, data for delivery, invoicing or market analysis. What reports does your company benefit from?

• New reports must be able to be designed in a simple way so that they suit your company. At the same time, there should be a basic set of standard reports.

• Different contracts require different reports. It should therefore be possible to control which reports can be linked to each type of agreement.

It is an advantage if reports can be generated in a structured file format if the report content is to be loaded into an IT system.

A well-informed decision

Many companies and organizations want to replace their paper-based contract binder with a digital alternative. With the right preparation, you will be able to formulate requirements and evaluate contract solutions based on what your company needs.

A modern contract management system not only replaces the contract binder but gives you much greater opportunities to benefit from contract information in your company's various activities. It also gives you the opportunity to develop your business and create innovative solutions when the paper disappears.

Would you like to contact us for more information? Email questions to sales@avtalsbanken.se or fill in your details in the contact form and we will get in touch.Show me more

Avtalsbanken's web service for contract management is a modern alternative to the contract binder. Follow the link to view an introduction to contract management in Avtalsbanken.Show me more