These days, many business executives can hardly imagine progress without the digitization of business processes. The word “automation” has become a panacea for many workplace problems, and contract management is one of them.
However, most companies do not use automation to its full extent when it comes to contract management. Often, when we talk to lawyers and GCs about how document management software meets their professional needs and goals, we hear something like:
“We use a document management system (DMS), and, really, we don’t need anything else.”
Unfortunately, some organizations don’t realize they can facilitate and automate a large portion of their work by using a contract lifecycle platform (CLM). When it comes to legal workflow optimization, contract lifecycle management can help you eliminate business risks while saving you time and resources.
When it comes to legal workflow optimization, contract lifecycle management can help you eliminate business risks while saving you time and resources.
In this blog post, we will sort through the details and explain the differences between DMS and CLM. We will discuss the boundaries and benefits of each, as well, so companies can make a well-weighted decision when choosing between the two.
What is a document management system?
Simply put, a DMS is software that allows you to create, store, track and ultimately manage your documents. It helps you move your paperwork into a digital form and keep it organized and retrievable.
Here is what DMSs let you do:
- Keep all your documents in one place, so you can search for and access them from various locations
- Share documents and ensure only authorized users have access
- Retrieve all necessary information at any time
- Collaborate on document editing without overriding one another’s changes: comment or suggest changes, and audit document updates
- Roll back to previous document versions in case of unwanted updates or errors
- Secure your documents against data breaches by storing them in a protected cloud
- Keep track of linear document flows: see who is currently working on the document or who was working on it previously
Usually, DMSs allow working with any type of document within the business environment: from legal documents to sales and HR files. These systems usually store files in original or scanned formats (Word, Excel, etc.) and integrate with document-authoring apps.
What is contract lifecycle management?
Contract lifecycle management systems collect your contracts and take them through their entire lifecycle: drafting, editing, negotiating, signing, storing, and reporting its performance. The main goals of a CLM software are process automation, reducing the time legal experts spend on each stage (and most importantly, cutting the wait time in between), and empowering business teams to work error-free with legal documents.
The key abilities CLM software unlocks for the companies include:
- Requesting the document to be drafted by other business units
- Drafting the document from a template or singular clause, approved by legal teams, by filling in the corresponding data or creating a new template for a new contract scenario
- Collaborating on edits made to the document (commenting, suggesting,approving or discarding changes)
- Creating and assigning workflows for the documents (which can be unique for each contract), tracking their stages and changes
- Negotiating the contract with counterparties: following all versions with the option to roll back, compare the versions for audit, and send notifications whenever any updates are made
- Approving the document without bouncing it across emails among internal and external users
- E-signing the contract by team members and counterparties
- Managing obligations to ensure no deliverables or deadlines are missed while updating contract due dates
- Evaluating contract and team performance by various criteria (contract, geography, client, branch, department, etc.)
- Storing contracts in the database to be searched for and retrieved easily upon request
- Ensuring data security and accessing policies
As you can see, contract lifecycle management is a more sophisticated system with increased possibilities. Check out this table to better understand the differences between a DMS and CLM.
Document management vs. contract lifecycle management
|Document creation||From scratch or a saved template in document authoring apps||From pre-built automated questionnaire templates and clauses inside the platform OR in connected editors|
|Collaboration||Simultaneous editing; all changes saved parallelly not to override one another||Simultaneous editing; all changes saved parallelly not to override one another while offering in-depth role distribution.|
|Storage and search||Based on predefined document metadata only (name, author, date, etc.)||Based on document metadata that can be assigned for each document or project, as well as on the text inside the document; more complex folder structure for better navigation|
|Document approving and workflows||Linear; You only see the user who is working on the document, but you cannot see what they are doing; on most occasions, you can set up horizontal workflows with internal teams||Allows for linear and hierarchic flows with more flexibility and transparency; assign users to work on some parts of the document and distribute access rights in a more secure manner; invite clients to negotiate on the platform|
|Data security||Depends on the cloud service provider||Generally, bank-level security due to data sensitivity|
|Performance management||N/A||Reports performance tracking to ensure all contracts are managed properly|
|E-signing||N/A||Team members and counterparties can e-sign the contracts|
|Obligations management||N/A||Both sides can monitor and collaborate on obligations and compliance to ensure they meet their end of the agreement|
As you can see, CLM is a more complex document management software, as it offers more opportunities and can be easily integrated with DMS for a better result. AXDRAFT team will gladly assist you in choosing the best CLM for your needs, help you with onboarding, and covering both legal and non-legal documents. We can also adjust the workflows, templates, and features for your specific needs, so you will receive a fully customized solution for your business. Don’t hesitate to contact us and discuss the best contract automation options for your specific needs.