What Are The Differences Between a Document and Contract Management System?
A question that comes up often in the contract management field is, “What is the difference between a document management system and a contract management system?”
While the two are very similar, they have different purposes entirely. You cannot use a document management system to manage contracts effectively. And conversely, using a contract management system to manage document isn’t the best solution. Both systems have distinct functions that impact how these documents and contracts are handled.
What are the differences?
While document management systems and contract management systems share many of the same functions, a contract tracking system is a completely distinctive piece of software. Here are some of the main differences between the two:
- DMS is focused on your company's broader body of documents
- DMS does not include automated approvals or obligation tracking
- DMS can help with contract drafting templates, revision tracking, and approval facilitation
- DMS tracks less contract-specific details
- DMS includes correspondence, work-in-progress contracts, and final documents
- DMS can assist your legal department
- CMS tracks very specific contract documents
- CMS pulls contract analytics and contract lifecycle data
- CMS sorts contracts by name, milestones, and stage of the contract management lifecycle
- CMS can set notifications and automatically renew contracts
- CMS includes contract templates, contract negotiations, contract approvals, and executed contracts
- CMS are designed to solve problems for enterprise-grade organizations
What is a Document Management System?
A document management system (DMS) creates, stores, retrieves, and manages documents. A DMS is a centralized repository that allows for secure collaboration on documents. Collaborating on documents might look like editing, version tracking, setting up audit trails, and ownership of documents. The main objective of a document management system to create organization and efficiency, enabling employees to seamlessly collaborate and create document-based projects. In addition, a document management system allows employees to reduce the need to rely on email and other communication types due to the centralized and collaboration-friendly software offered by a DMS.
The majority of document management systems give users the ability to track all of the pertinent details of each document. For example, details such as the creation date, original author, most recent editor, what the document is related to or associated with, the quantity of people who have edited the document, document tags, document size, and more are easily accessible. A DMS simplifies the organization of these details, categorizing the information and enabling users to find it by sorting through all of the documents and document data stored within the repository. In this way, your employees can find exactly what they need quickly without having to manually filter through hundreds or thousands of stored documents.
A DMS is a great tool because it gives certified users complete control over documents. Set specific permissions so you can enable or disable what users can view, edit, and revert documents to previous versions. A DMS reduces the need for physical paper use and storage – an added bonus. With a DMS, sending and collaborating on documents with your colleagues is made simple by reducing the need to share documents through email or messaging systems. Collaborate effortlessly with business partners and clients outside of your organization with the help of a DMS.
What is a Contract Management System?
A contract management system is software that serves the purpose of managing contract lifecycles, allowing the user to edit, track, and review contracts instantly. A CMS is a central repository where all of your contracts, drafts, and templates are efficiently stored, allowing for simplified sorting, searching, and filtering. The main focus of a CMS is the creation, negotiation, amendment, signature, and analysis of all of your company's legal contracts. The ultimate goal of a contract management system is to automate workflows within the contract management process, thus creating more efficiency.
In most contract management systems, users in your legal department can build and store templates that can be referenced for later contracts. This prevents your team from having to build new, unique contracts for every occasion. Other legal team members with specified credentials can log in and access these templates or other active contracts for easy collaboration. In this way, users don't have to send contracts over email and risk them getting lost.
Today, many CMS solutions integrate e-signature technology to save time and resources. With an e-signature integration, all contractual parties can log in and provide signature instantly – reducing turnaround times and delays.
After a contract is signed, a quality CMS provides data analytics tracking and lifecycle tracking. The CMS automatically compiles data for you, providing you a dashboard to review the data. This gives you the ability to analyze issues that occur in real-time and then take proactive actions to adjust course. This applies to following all phases of tracking contract lifecycles. By having a user-friendly and detailed dashboard, you can see what step is next in the contract management lifecycle and ensure it occurs in a timely manner. The contract tracking system automatically tracks these items for you.
Which system should I use?
Choose either system based on your business’s unique needs and objectives. For example, if your company or your legal department consistently works with a high-volume of intensive contracts, you definitely need to adopt a contract management system to optimize your results and productivity. However, you might consider a document management system to assist with document storage and management that is both highly controllable and organized.
Conclusion
Ultimately, make the best decision and most well-formed decision based on the specific goals and needs of your business. By understanding the purposes, similarities, and differences between a document management system and contract management system, you can choose the one you believe is the right fit for your business.
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