Contract management doesn't have to be complicated. In fact, the simpler your contract management solution is, the more effective it will be in supporting critical processes like spend analysis. An effective contract management system only needs to provide four things: 

1. Secure storage
2. Easy access
3. Important alerts
4. Simple summaries

The Importance of Simplicity in Contract Management

Secure storage and easy access make intuitive sense. Contracts should always be secured and, when needed, easy to access. Alerts, too, are crucial as they ensure you don't miss key dates and obligations. But when it comes to summarizing the contents of a contract, sometimes less is more. This can be a hard concept to grasp, especially in an era dominated by Big Data, where the presumption is that more data means better insights.

However, contracts aren't the Matrix. Running every word through an algorithm won't necessarily reveal some grand truth. Most of the words in a contract are there for context, with only a few actually holding significant meaning. Yet, many organizations waste time and money parsing through data they'll never actually use when they implement large, complicated software solutions to manage their contracts.

Why Keep It Simple?

While having all that information might seem useful, most organizations don't have the internal bandwidth or skill set to use it meaningfully. These systems require manual data entry, so the more you want out of them, the more you have to put in. This comes at a real cost, as it requires people to spend time reading contracts and manually inputting data. So, what are the key elements of a contract that would be useful to summarize without having to open it up and read it?

The Six Key Elements of a Contract

1. Contracting Parties

One of the most basic, yet often overlooked, pieces of information in a contract summary is who the contract is with. It's not just about the name of the other entity; the business address and contact information (if available) are equally important. This information helps identify the stakeholders and maintain clear communication channels.

2. Start and End Dates

Sometimes a simple, graphical representation of a contract's timeline is enough for a contracts manager to decide whether or not to read it in detail. Start and end dates also drive alerts, which should be the backbone of any good contract management system. These dates are critical for tracking the contract's lifecycle and ensuring timely renewals or terminations.

3. Renewal Terms

Knowing when a contract is due for renewal is crucial, but it's also important to know how it will renew. A simple indicator showing whether a contract auto-renews or requires action by the parties can save organizations tens of thousands of dollars. This prevents situations where organizations continue paying for services they no longer need or miss critical deadlines.

4. Warranties

If something goes wrong in a contractual relationship, the first thing either side will check is the warranty clause. Having the warranty details readily available in the summary can save hundreds of man-hours annually. This quick access allows for faster resolution of issues and ensures compliance with the terms.

5. Termination

Termination clauses are often the most sought-after pieces of information in a contract, second only to the end date. A simple yes/no indicator showing whether or not a contract allows termination for convenience can exponentially speed up contract reviews. This information is vital for assessing the risks and obligations associated with ending a contract.

6. Pricing

While this is a contract management tool and not a spend analytics tool, having a simple summary stating the Total Contract Value (TCV) at the time of execution should suffice. This provides a quick overview of the financial commitments without delving into detailed spend analytics.

Conclusion

While certain organizations may need specific information in their contract summaries, it's much easier and cost-effective to start with a simple summary and add the one or two pieces of information needed by your organization. This approach avoids overspending on complicated tools and then paying for customization to make them simpler to use. Remember, the goal is to streamline contract management, not complicate it.