In this article you will learn:
How many contract documents does your company keep? No matter what number you give: In a few years, it will be twice as many. This is because corporate relationships are becoming increasingly complex in our closely networked, agile business world.
There are more and more...
In addition, there are still the classic contracts: Rental contract, purchase contract, financing contract, insurance policies, etc.
Conventional paper filing systems can no longer cope with this rapidly swelling flood of documents. File folders are bursting at the seams and file shelves are sagging menacingly.
In addition, traditional filing systems are poorly suited to the efficient handling of modern contract management:
The filing structure is much, inflexible and the content cannot be retrieved efficiently.
A digital filing system is a modern filing system that acts as a central document management system (DMS). It enables the electronic filing of documents that no longer need to be searched for in paper folders or filing cabinets. Instead, digitized documents are stored and organized in a software system - often in the cloud, such as Microsoft OneDrive or SharePoint. These systems not only create order, but also allow documents to be searched specifically, keywords or categories to be added and individual filing structures to be created. This allows companies to organize documents according to relevant criteria such as project, department or contract type and find them quickly at any time.
The advantages of digital filing go beyond mere storage: changes to documents are saved in a traceable manner through versioning, whereby older versions can be retrieved at any time if necessary. Documents can be easily shared online instead of being physically sent, and automated backups and long-term archiving protect against data loss. Access regulations via user roles ensure precise authorizations. While small companies often rely on local storage or Excel lists and large organizations use ERP systems such as SAP, intelligent solutions such as ContractHero offer an efficient alternative. They automate processes, optimize archiving and facilitate collaboration while saving time and ensuring compliance.
Why do millions of companies go through the hassle of keeping contract documents in paper form? The answer certainly does not lie in the practical benefits of ring binders, but rather in the psychology of paper: paper gives us a sense of security.
We hold something concrete in our hands. We have a (literally) "tangible" contract with the signature of the contracting party visibly written in by hand. However, this security is deceptive.
A contract can be printed on spotless white 100-gram paper with fine embossing, come with beautiful ornamental lettering and a noble, shiny paper clip - and still have highly questionable content that can ruin the company.
If a contract were safe only because it existed in paper form, then many lawyers would be out of a job. Ultimately, it is the content of the contract that matters, not its physical form.
Signatures on a scanned contract document are also recognised as valid in court. Even contracts by e-mail text are legally valid, provided they are formulated clearly enough. So why stick to paper? Wouldn't it be better to switch to digital filing as soon as possible?
Digital filing systems bring a lot of tangible benefits:
[1] A Leitz folder holds about 600 sheets of paper. A PDF page filled with text is on average 1 MB in size.
Many a company may be hesitant to replace its cherished file folders with a digital filing system. "Better the paper in the hand than the PDF in the cloud" some may say to themselves (in variation of the proverb "Better the bird in the hand than the pigeon on the rooftop"). People have been keeping paper files for decades and are familiar with the filing structure. So why introduce something new? Admittedly: It is uncomfortable to discard old habits and learn something new. It takes work to scan contracts and file them into a digital folder structure. But at some point you have to start your journey into digitalisation. We say, "Even a journey of a thousand miles begins with one step." (Lao Tzu). And contract documents are an extremely important first step! The advantages for digital filing are therefore obvious.
We asked medium-sized German companies how they file their contracts digitally. What surprised us: Almost only the large companies use special software systems such as SAP or other ERP software. The majority of SMEs take a much more pragmatic approach. Below we present the three most common digital filing systems.
Strictly speaking, Excel lists are not real digital files. This is because the contracts still exist in paper form. Only their contents are transferred to Excel lists. Usually, only the agreed amounts and the deadlines are recorded.
You don't get far with this system, because it is very labour-intensive and error-prone.
With this system, all contract documents are scanned and stored on the PC or local server. The ring binders are replaced by a digital folder structure that organises the PDF documents in a - more or less - clear manner.
The main problem is the mostly missing searchability of the scanned documents. This is because not all companies have the necessary software to read the text in the scanned pages.
If information is required in a contract, you simply click through the folders and files. If it is not known from the outset which contract contains the required information, many documents have to be clicked on, opened and read individually. Simply storing files is not enough to manage contracts efficiently.
In sectors where the majority of contracts are exchanged via email, it often happens that the contracts are simply left in the email system: The email client (Outlook, Gmail, etc.) becomes the database. Admittedly: Folder structures can also be realised here; and e-mails are also searchable.
But an overview? No way. Flexible customization of the folder structure: tricky. Many a mail server has caused problems when trying to change the folder structure of the email archive. Mails can get lost when changing mail provider or mail client. And if you have to hand over contract management to a colleague or another department, the email filing system becomes a complete nightmare.
The latest generation of digital contract management comes with built-in intelligence. You store the digitized contracts in the cloud, where they are safe from loss and can be easily managed by distributed teams. It is no longer people who record the content of these contracts, but artificial intelligence: this reads out all the key data - subject matter of the contract, contractual partners, agreed amounts, deadlines - and makes it available in clearly structured databases and dashboards. A utopia? No. This digital contract management with built-in intelligence already exists. And it has a name: ContractHero. More information about the contract management software can be found here.
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