When it comes to contract data management, most businesses find themselves in one of two camps: some understand the importance of good data management and take the necessary precautions to protect their data, while others fail to recognize its importance (or don’t have the resources to implement it properly).
What Is Contract Data Management?
Contract data management is storing, organizing, and managing the data associated with a contract. This includes the contract itself, any supporting documents or files (which can be stored in physical or electronic form) or a combination of both.
For businesses, the benefits of contract data management are numerous. Effective data management can help businesses save time and money, avoid legal issues, and make more informed decisions.
Why Is Contract Data Management Important?
Several reasons make contract data management such a crucial tool. Here’s a look at some of its most essential functions:
1. Ensuring compliance with regulations
In many industries, strict regulations surround the storage and management of contract data. For example, the healthcare industry’s Health Insurance Portability and Accountability Act (HIPAA) requires that all contract data is stored securely and confidentially. Failing to comply with these regulations can result in heavy fines and penalties.
Even if your business is not currently subject to any regulations, it’s always possible that this could change in the future, so it helps to establish data management practices.
2. Avoiding legal problems
If a contract is not managed correctly, legal problems could ensue. For example, suppose a business changes owners, and the new owner does not have access to the contract data. In that case, they may not be able to enforce the terms of the contract, potentially resulting in costly litigation.
Alternatively, if a business is acquired by another company, contract data may need to be transferred to the new owners. This can be complicated if the contract data is not managed correctly.
3. Protecting confidential information
Contracts often contain confidential information, such as trade secrets or customer data. If this information is not adequately protected, it could be leaked or stolen, resulting in potentially irreparable damage to a company’s reputation and financial losses.
Confidential information is another area that has an array of legal implications. For example, if a company discloses trade secrets to a competitor — intentionally or unintentionally — it could be sued for breach of contract.
4. Improving efficiency
Contract data management can also help businesses run more efficiently. For example, storing all contract data in one central location will make it easier for employees to find the information they need saving time and increasing productivity.
5. Creating a competitive advantage
In today’s business world, data is more critical than ever before. Therefore, businesses that can effectively manage their contract data will have a significant competitive advantage.
Businesses with good contract data management can make better decisions faster. They are also able to identify opportunities and threats more quickly. This speed and flexibility enable them to respond to changes in the market more effectively.
As you can see, there are many reasons why contract data management is essential to the success of your business, even if it seems like a lot of work.
How To Implement Contract Data Management
Now that we’ve gone over why contract data management is essential, let’s look at how it is achieved.
There are four main steps to effective contract data management. Let’s take a closer look at each of these steps.
1. Collecting data
The first step in contract data management is collecting all relevant data. This can be challenging, as contracts are often spread across different departments and locations. Fortunately, having a system for tracking and storing contracts makes this task more manageable. This system could involve a simple spreadsheet or a more sophisticated software solution. Whichever method you choose, it’s vital to ensure all the necessary contracts are included.
2. Organizing data
Once all the relevant data has been collected, the next step is to organize it so that it is easier to find and use when needed. There are a few different ways to organize contract data. One option is to create a central digital repository to store all the data. Another option is to use contract management software to help organize and track contracts.
3. Storing data
Once the data has been collected and organized, it needs to be stored safely and securely. This could be a physical storage location, such as a filing cabinet, or a digital storage solution, such as a cloud-based system. It’s essential to choose a storage method that is reliable and secure. This ensures that the data is protected and can be accessed when needed.
4. Analyzing data
The final step in contract data management is to analyze the data, which allows you to identify trends and patterns that can be used to improve the contract process. There are a few different ways to analyze contract data. One option is to use manual methods, reviewing the contracts yourself. Another option is to use contract management software, which can provide insights and analytics.
Contract data management is vital to running a successful business, helping to improve decision-making, increase efficiency, and create a competitive advantage.
Olga V. Mack is the VP at LexisNexis and CEO of Parley Pro, a next-generation contract management company that has pioneered online negotiation technology. Olga embraces legal innovation and had dedicated her career to improving and shaping the future of law. She is convinced that the legal profession will emerge even stronger, more resilient, and more inclusive than before by embracing technology. Olga is also an award-winning general counsel, operations professional, startup advisor, public speaker, adjunct professor, and entrepreneur. She founded the Women Serve on Boards movement that advocates for women to participate on corporate boards of Fortune 500 companies. She authored Get on Board: Earning Your Ticket to a Corporate Board Seat, Fundamentals of Smart Contract Security, and Blockchain Value: Transforming Business Models, Society, and Communities. She is working on Visual IQ for Lawyers, her next book (ABA 2023). You can follow Olga on Twitter @olgavmack.