Contract Management in B2B eCommerce

The touch of crispy light paper and the smell of fresh ink from a signature is what comes to mind when one thinks of a good, old binding contract. The process used to be simple: two or more parties get together, agree on terms and conditions, and seal the pact by signing the paper. For thousands of years, contracts have formed the basis of commerce. While some things have remained relatively constant, however, other things have changed radically. Take the ever-increasing complexity of contractual obligations, for example, or the digitization of agreements – both pose real challenges to drafters and developers. When it comes to speed and efficiency, moving from an analog pen-and-paper approach to digital technology is transformative, yet it is also tremendously complex.

In this piece, we’ll talk about the challenges of contract management in B2B commerce and explore digital solutions for contract management in B2B.

Contract Management Terminology

Before we begin discussing relevant contract management solutions, it is important to brush up on some key jargon related to the subject matter.

Contract management

is the process of managing the contract creation, signature, storage, execution, and analysis to minimize key business risks and maximize a business’s financial and operational performance.

– Contract lifecycle

is the entire period of the contract validity. When the contract end date arrives, the contract is said to have reached the end of its lifecycle. Some contract management systems send notifications or alerts to help users identify expiring contracts and manage their obligations or renewals in a timely fashion. The typical contact lifecycle includes six stages: initiation of a relationship, negotiation of terms and conditions, contract generation, approval of contractual obligations, contract execution, and either its termination or renewal.

– Contract (lifecycle) management software

is the technology that helps a business self-serve, agree on terms, and manage contracts at scale from one unified workspace that typically includes the following features: contract tracking, a repository, templates and clause libraries, performance insights, and audit trails.

– eSignature

refers to data in electronic form that is logically associated with other data in electronic form and used by the signatory, a natural person, to sign.

– Obligation management

refers to the management of effectual contractual obligations at any point of the contract lifecycle.

– Templates

in contract management software refer to the examples of the most common documents with their most pertinent standard terms, which enable companies to use and reuse the basic documents and their structure without building them from scratch.

Versioning

refers to the ability to view previous versions of a contract before it was agreed on and signed.

– Contract repository

is a contract database or post-signature storage that houses all contracts for the business.

Contract Management Software

In the past, contract managers kept their documents in physical file cabinets and maintained a separate spreadsheet of different agreements with key terms and dates. The human paper-based approach to contract management led to all sorts of problems: from misfiling and misappropriating particular documents to paralyzing managers with tremendous workloads.

The heavy burden of contract management led many organizations to implement contract management systems. As discussed above, a contract (lifecycle) management system (CMS or CLM) handles everything from creation to collaboration on contracts through various stages of their lifecycle. Although there are numerous CMS solutions available, each having its distinguishing characteristics and features, the core functionality is prevalent in all software of its kind, which we will discuss below.

As an aside, it’s worth noting that CMS solutions extend to different business scenarios that account for the primary users of the software and will vary in their functionality and access control levels. For example, sales teams may integrate CMS with their customer relationship management (CRM) software to keep track of sales-specific contractual obligations; HR departments might integrate CMS with an HR Information System (HRIS) to automatically handle employment contracts and benefit agreements.

The core functionality, though, will typically revolve around the following features: storing contracts, keeping track of certain key provisions, searching for contracts based on specific criteria, and reporting on those contracts.

This way, nearly every CMS will have an extensive repository with copies of all contracts in virtual file cabinets, categorized and tagged for tracking and quick discovery. The aggregation of contracts also provides a bird’s-eye view of all the entity’s contracts. Besides the repository, contract management software typically offers such handy features as rich editing and formatting. More advanced solutions are often enriched by a polished UX with drag-and-drop functionality, action-based triggers, granular access control, and automatic logic to facilitate smarter workflows. The best software allows for multi-party collaboration, chatting, and commenting on different versions of the contract or its provisions.

The modern B2B sales process often resembles a patchwork of disconnected systems. A CMS, in this regard, offers a solution by connecting multiple processes in a single end-to-end platform that automates tasks and efficiently orchestrates complex workflows. To ensure even further merging of business processes, a CMS needs to integrate with other software packages through APIs.

Contract Management in B2B eCommerce

In a B2B context, contracts can range from a single-page purchase order for the sale of goods to an extremely complex one thousand-page arrangement between multinational businesses. Many of the terms and conditions in the contract will form part of a software requirement that will specify the behavior of a B2B system. For example, arrangements for invoicing and payments will determine what form electronic invoices should take and what logic a payment should follow.

For some businesses like insurance, banking, or cargo, coming up with the terms and conditions for each new transaction can prove to be unnecessarily costly and time-consuming. Businesses can achieve significant savings by investing in the standardization of contracts or their provisions. The standardized nature and the regular reuse of standard provisions mean those contractual components can be implemented as part of a B2B system.

The best in class B2B ecommerce solutions enable customer differentiation through contract and group-based pricing, specialized catalogs, and customizable products. Since the contract defines all the buyer-seller arrangements, it’s critical for a B2B ecommerce platform to have a robust subsystem that can deal with the complex contractual logic. We are not only talking about storing and retrieving contracts, but meeting the contractual obligations through the available digital channels. Contract rules need to be defined and managed by the users within the B2B ecommerce platform or imported from a third-party source, such as contract lifecycle management (CMS or CLM) or enterprise resource planning (ERP) systems.

Virto Commerce Solution for Contract Management

Virto Commerce doesn’t have a specific Contract Management module, however. Because it is API-based, extensible, and composable, the platform can integrate virtually any system into your B2B ecommerce platform and ensure all contracts and their provisions are fully accounted for. The reason for not having an “out-of-the-box” solution for contract management is simple: B2B contracts are so intricate and complex that what works for one customer might not work for another.

What Virto Commerce has in place of Contract Management is the sophisticated personalization of user groups.

A user group is an abstract entity that links a customer or a group of customers with personal products, prices, promotions, landing pages, and dynamic content. User groups can be created and managed within the Virto Commerce system and integrated with third-party business software for efficient customer segmentation through APIs. By connecting all the business systems, you can create your own ecosystem that meets your business’s specific needs and requirements.

The primary purpose for introducing user groups is the personalization of ecommerce data for each customer. Since a contract usually implies a certain range of products, personal prices, volumes, or quantities (from either supplier or buyer to buy a certain amount of goods within a specified time frame), the personalization mechanism allows for enabling access to products and prices that have been contractually agreed upon.

The user group segmentation is achieved through the application of relevant tags: by tagging products and price lists and assigning those tags to customers, you’ll ensure the customers can only access those products and prices that are relevant to their contracts.

You may want to watch our webinar on user groups for customer personalization in Virto Commerce to see the hands-on example of assigning different tags to customers and how this affects what your customers see when they log into their accounts on your ecommerce platform:

The tags can also be imported and exported from the external system (ERP, CMS) through APIs to work across the whole ecosystem and automatically apply to the correct entities with their respective contractual obligations.

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Marina Vorontsova
Technical author and eCommerce advocate