Business relationships have grown more complex in recent years, and thus contract management has had to evolve in order to keep up with the times. To understand how technology has affected contract management, you only have to notice how rare it is these days for contracts to be written on paper instead of electronically.
Larger technological developments will continue to change how contract management is practiced -- perhaps on a level as revolutionary as the paperless contract. Now that we're in a new year, it's a good time to reflect on what lies in store for contract management in the near future.
Artificial Intelligence and Machine Learning
One of the most exciting upcoming tech trends for contract management is artificial intelligence: using computers to become more efficient and productive and to make smarter decisions. AI can be applied to all stages of the contract management workflow, from authorship to searching and storage.
For example, many contracts make use of boilerplate, repetitive language that's used in multiple documents. Through the use of artificial intelligence in the form of algorithms and predictive analytics, certain stock phrases and clauses can be recommended based on the type of document or contract you’re creating. Even better, "machine learning" artificial intelligence techniques can incorporate your feedback on its recommendations to get smarter over time.
Once you've drafted the contract (with the help of AI, of course) and both parties have signed, automated contract lifecycle management software can take over from there. By leveraging automation throughout the contract lifecycle, your company can lower risk, decrease costs, and improve compliance.
By tracking contract milestone dates and important clauses automated CLM software can inform you of potential opportunities and risks, such as penalties for late payments, as well as your company's responsibilities under each active contract. By saving human employees from doing this manual contract monitoring, you can redirect their time and effort toward higher-level tasks that will bring long-term benefits to the business.
Many companies today do business internationally, whether it be sourcing and supplying of goods or services, or product sales. The increasing demands of today’s global market require businesses to turn contracts around at a faster rate in order to stay ahead of competition and to foster stronger business working relationships.
This pressure, along with the need for greater contracting efficiency, has led many companies to employ contract management software that offers built-in electronic signature. The use of digital signatures speeds up contract negotiations, reduces costs, and reduces work hours for many companies, eliminating the need to print, copy, fax, or travel to get a contract signed.
Sending a contract out for signature using secure contract management software with enhanced security is also a large benefit for businesses. The contract can be signed by the outside party and immediately filed into a secure contract repository. A much safer and efficient process than faxing, emailing or physically signing a document.
Agile Contract Management
Adaptability is key to remain competitive in a changing business landscape. Agile contract management is an approach that uses the agile methodology, which is most popular among software developers. Being "agile" means being flexible, fostering collaboration, and decomposing projects into smaller and easier tasks.
While all of these things are desirable goals on their own, of course, adhering to an established framework such as agile makes it more likely that you'll succeed in achieving them. The ultimate goal of agile contract management is creating a positive working relationship between all parties, treating each other as business partners instead of competitors.
Changes in Compliance
Laws and regulations are constantly being introduced and altered over time, and businesses need to stay on top of these changes in order to avoid financial and legal penalties. One of the most important changes in compliance is ASC 606, a new standard issued by the Financial Accounting Standards Board.
The deadlines for ASC 606 revenue recognition rules will come into effect this year for public companies and next year for private firms. Since Forbes calls ASC 606 "the most profound new compliance changes to come to corporate finance since Sarbanes-Oxley," companies would be wise to consider how the new standards will affect them.
Contract management will undoubtedly continue to evolve in the future as a response to technological and business developments. Companies who anticipate and take advantage of these trends for 2018 and the years beyond will be able to draft successful contracts that bring significant benefits to their business.