Discover 9 Easy Ways to Automate the Contract Lifecycle and Measure its Success
Table of Contents
- What is Contract Automation?
- Benefits of Contract Automation
- 9 Ways to Automate The Contract Lifecycle
- Measuring Contract Automation Improvements and Success
- Workflow Automation Examples by Roles and Industries
What is Contract Automation?
Contract automation is the use of software to simplify the creation and management of contracts entered into with your customers, vendors, partners, or employees. This often involves creating automated workflows for every phase of the contract management lifecycle including your contract request, authoring, negotiation, review & approval, execution, obligation management, expiration and renewal, and amendment processes.Below, we discuss how contract automation works, its benefits, specific examples of how contract automation software can be used to automate the contract lifecycle as well as applications for job roles and industries.
Benefits of Contract Automation
Time Savings:
Contract automation significantly saves time by replacing manual, time-consuming tasks with streamlined, efficient processes. By utilizing contract management software, businesses can leverage standardized contract templates to create contracts quickly, eliminating the need to start from scratch each time. Automated alerts and notifications keep all relevant parties informed of key contract milestones, deadlines, and changes, reducing the need for constant follow-ups and reminders. Furthermore, approval thresholds automate the approval process, triggering requests for approval when specific conditions are met, thereby expediting contract execution. Contract automation also simplifies reporting by generating scheduled or ad hoc reports and outlining contract performance and status detailswhich previously required manual compilation. Lastly, leveraging the use of electronic signature applications that are integrated into leading contract management software systems can greatly expedite the signing of contracts. With Adobe Sign and DocuSign integration, users can sign forms anywhere, on any device, while also ensuring compliance and security. Overall, contract automation optimizes workflow, freeing up valuable time for employees and legal teams to focus on more strategic tasks, improving productivity, and enhancing overall efficiency. A study by the World Commerce and Contracting (WorldCC) found that contract automation can save up to 75% of the time spent on contract-related tasks.
Cost Savings:
Contract automation offers significant cost-saving benefits by streamlining contract management processes and reducing manual labor. By using standardized contract templates and automated workflows, organizations save time spent on repetitive tasks, allowing employees to focus on higher-value responsibilities. Automated alerts and notifications ensure timely responses to contract milestones, preventing potential delays or penalties that may result from missed deadlines. Additionally, contract automation enhances compliance, reducing the risk of costly fines and legal disputes due to outdated or non-compliant contract language. The efficient generation of reports and easy access to contract data enable better analysis and decision-making, further optimizing resource allocation. Overall, contract automation leads to increased operational efficiency, reduced administrative costs, and improved risk management. Deloitte reports that businesses lower their contract management costs by 60% when they adopt intelligent contract management tools.
Improved Compliance:
Contract automation significantly improves compliance by ensuring contracts adhere to legal requirements, industry standards, and internal policies. With automated contract templates, businesses can incorporate pre-approved, up-to-date clauses that comply with the latest regulations. Automated alerts and notifications keep all stakeholders informed of important contract dates and obligations, reducing the likelihood of missed deadlines or overlooked tasks. Additionally, contract automation provides a centralized and easily accessible repository for all contract-related documents, facilitating efficient audits and reviews. By systematically tracking contract milestones and obligations, businesses can promptly identify and address any potential compliance issues. Overall, contract automation establishes a robust framework for maintaining compliance throughout the contract lifecycle, minimizing risks, and promoting a culture of accountability within the organization.
Enhanced Visibility:
Contract automation offers enhanced visibility by centralizing all contract-related information in one accessible platform. Businesses can easily track the status and progress of contracts, from creation to execution and renewal, ensuring transparency throughout the entire contract lifecycle. Automated alerts and notifications keep stakeholders informed of important milestones, deadlines, and changes in real-time, eliminating the risk of overlooking critical events. With customizable reporting features, contract managers and executive management gain valuable insights into contract performance, key metrics, and potential bottlenecks, enabling data-driven decision-making. Additionally, contract automation provides an audit trail of all activities, simplifying compliance and risk management efforts. The comprehensive and centralized nature of contract automation empowers organizations with a clear and holistic view of their contract portfolio, facilitating better control, collaboration, and informed strategic planning.
Risk Mitigation:
Contract automation plays a crucial role in mitigating risk by standardizing processes, improving compliance, and enhancing oversight. With automated contract templates that include pre-approved language reflecting industry best practices and legal requirements, businesses reduce the risk of errors and ambiguous clauses. Approval thresholds ensure that contracts undergo appropriate reviews, preventing unauthorized agreements and potential breaches. Automated alerts and notifications keep stakeholders informed of critical contract dates and obligations, minimizing the chances of missed deadlines or overlooked responsibilities. Centralized contract repositories enable easy access to all relevant documents, facilitating efficient audits and risk assessments. Moreover, contract automation enables timely tracking of contract performance, ensuring that any deviations from agreed-upon terms are promptly identified and addressed. The WorldCC study mentioned earlier also reported that organizations using contract management automation experience a 50% reduction in compliance and contractual risk.
Improved Vendor Management:
Contract automation significantly improves vendor management by streamlining processes and enhancing collaboration. Automated contract templates with pre-approved language ensure consistency and compliance across vendor agreements, reducing the risk of errors and disputes. With automated approval workflows, contract managers can efficiently track and expedite the review and approval process, ensuring timely execution of vendor contracts. Automated alerts and notifications keep all stakeholders informed of important milestones, renewal dates, and performance metrics, facilitating proactive vendor engagement and mitigating any potential issues. Centralized contract repositories provide easy access to vendor contracts and related documents, enabling quick reference and efficient audits.
According to the 2020 Deloitte Global Chief Procurement Officer (CPO) Survey, 70% of procurement leaders said they were implementing or considering implementing automated contract management systems for better vendor management.
9 Simple Ways to Automate the Contract Lifecycle
1. Easily Create Standardized Contracts with Automated Contract Templates
Simplify the process of creating standardized contracts using pre-approved contract templates and language aligned with your business objectives. By utilizing these templates, you can ensure that all necessary clauses are included, safeguarding the interests of all parties involved. In addition, you can accelerate contract completion as employees can efficiently draft contracts that require only approval and signature, freeing up your legal team's time for more critical responsibilities. With quicker contract implementation, businesses can focus on other essential priorities.
2. Accelerate Contract Execution with Automated Alerts and Notifications
Optimize your contract management process by setting up automated alerts and notifications tailored to contract types, users, or roles. Stay informed about the progress of deals and promptly review status changes and key document updates. Stay ahead of deadlines with notifications for upcoming or missed milestones and schedule changes. The convenience of automated emails notifying stakeholders of completed actions saves time on oversight tasks, empowering teams to focus on more strategic and valuable endeavors.
3. Enhance Contract Approval and Review with Automated Document Routing
With automation, contract documents at the heart of negotiations can be instantly transmitted for approval to stakeholders regardless of location or time. Avoid unnecessary delays caused by documents sitting idle on desks for prolonged periods. By leveraging contract management software, you can effortlessly automate this process. When a clause is modified, a timely notification prompts the concerned party to review it within a specific timeframe, ensuring efficient progress in the negotiation process.
4. Quickly Review Contract Performance with Automated Reporting
Contract management software offers the convenience of generating and sending reports on a daily, weekly, or monthly basis. These reports provide valuable insights into contract status (requested, approved, executed) and can include additional data like time to signature, spend under contract, or closed sales. To enhance this feature, two valuable additions are available:
- Automatic Emailing: Reports can be automatically sent to relevant parties, making it ideal for organizations with proactive executive teams or governing boards that regularly review contract information during meetings.
- Distributed Reporting: This feature tailors reports to individuals by sending only the relevant portions. For instance, contract owners receive reports specific to their responsibilities, saving time and ensuring the necessary information reaches the right recipients. This streamlined approach fosters trust and encourages managers to thoroughly review the reports, knowing they contain precisely what pertains to them.
5. Enforce Contract Approval Policies with Approval Thresholds
Approval thresholds offer a dynamic and automated approach to upholding your contract approval policies, even as contract terms evolve during negotiations. These systems automatically trigger approval requests from the appropriate parties when predefined limits are surpassed. Examples of closely monitored thresholds include discount levels, net terms, total contract value, and overall spend value. With advanced contract management software, no agreement can proceed without the necessary approvals you've set in place. Moreover, the technology can also incorporate additional protective clauses into a contract when specific thresholds are exceeded, ensuring your business interests remain safeguarded.
6. Monitor Contract Milestones to Ensure Fulfillment of Obligations
Every contract involves various obligations, often organized as milestones representing key steps toward completion. Regardless of whether an obligation lies with your counterparty or your own team, it's crucial to track it with essential details like tasks, owners, due dates, and alerts—especially when other tasks or larger projects depend on its completion.
Automated milestone alerts offer a simple setup and effectively prioritize work for contract managers or busy business users with multiple responsibilities. These alerts serve as reminders, ensuring that obligation-related tasks are not overlooked or delayed. The same reminder and escalation system used for contract review helps keep all parties focused on meeting their contractual obligations, while also aiding department managers in identifying and resolving bottlenecks.
For ongoing obligations, such as regular maintenance checks or regulatory assessments, contract management automation proves invaluable. The system can automatically generate tasks throughout the contract's duration, eliminating the risk of missing obligations and ensuring seamless reminders for future requirements.
7. Ensure Compliance with Automated Contract Language Alerts
Compliance with industry standards and regulations is vital to protect your business and partners from unintentional violations of state and federal laws. For example, in recent years, California has made dozens of changes to construction laws that make it challenging to stay current in this ever-changing legal landscape.
Contract automation offers a solution to this problem. Advanced contract management software enables legal teams to review and update contract language swiftly, ensuring it remains compliant with the latest legal requirements. By automating this process, the downtime associated with adapting to law changes is minimized, allowing your company to maintain profitability.
Remaining compliant not only safeguards your business from potential government fines and sanctions, but it also mitigates the risk of long-term operational issues. With automated contract language alerts, you can proactively stay on top of regulatory changes, keeping your contracts up to date and your business in good standing.
8. Expedite Contract Signatures With Flexible Routing Options (wet or electronic)
After reaching a preliminary agreement on contract terms, the relief of concluding complex negotiations is undeniable. However, legal teams understand that their work is far from over; a new phase begins. Once the parties have reached an agreement, contract management software comes into play, allowing the contract to be routed for wet or electronic signature. This efficient process accelerates the finalization of the contract, enabling swift implementation, monitoring, and management activities to commence.
9. Streamline Contract Renewals and Expirations with Automated Reminders and Alerts
Efficiently manage your contract portfolio by leveraging automated reminders and alerts to keep track of upcoming contract renewals and expirations. These powerful tools ensure that your team receives timely notifications well in advance, providing ample lead time for thorough review and preparation. By proactively setting up reminders and alerts, you can avoid last-minute rushes and potential contract lapses, fostering a smooth and organized renewal process. Stay on top of crucial contract dates and engage with your customers seamlessly to negotiate and finalize renewals with ease. With this streamlined approach, you can ensure a proactive and customer-centric approach to contract management.
How to Measure the Success of Contract Automation Improvements
It is important to measure your success to demonstrate the benefits of your contract management software. Here are three ways to know that your contract management process is improving: a reduction in contract cycle time, workflow processing time, and risk.
Reduction in Contract Cycle Time
Reducing the time from contract request to execution is a common goal.
Contract automation improvements can be measured by reducing the contract cycle time, from request to execution. The process begins with the electronic routing of draft contracts to internal approvers, followed by alerts to prompt review and changes. Negotiation and redlining are managed electronically, streamlining the collaboration with the counterparty. Version control ensures prompt decision-making during negotiations. Integration of e-signatures eliminates printing and delivery time. Success can be measured by tracking metadata like contract request and execution dates, enabling insights into total in-process time for each contract. Reports can display average cycle times based on contract type and owner, identifying areas for time savings. Customizable contract management software reporting is vital for assessing success, allowing the creation of fields to show total time and calculate sums and averages across contracts while filtering by relevant contract metadata.
Workflow Processing Time
Measuring contract automation improvements involves tracking time reductions in various workflow steps, including contract creation, review, negotiation, execution, and processing. Contract templates and approved language expedite contract creation and minimize legal review time. Electronic systems accelerate negotiation and redlining processes. E-signatures and automated reminders streamline contract execution. Contract management software records the time for each step, enabling analysis through average time per step and per user. Identifying bottlenecks, comparing user performance, and tracking obligation on-time completion rates provide valuable insights. The ability to filter and segment reports by contract type, user, and time period ensures consistent and contextual data, aiding in identifying successes and areas for enhancement in the contract management process.
Material Changes Made to Your Standard Contract Language Around Risk
Advanced contract management software can assign risk scores to boilerplate clauses, helping identify changes that may increase risk during negotiation. Fallback clauses can also be assigned increasing risk scores, signaling potential concessions with higher risk. Success can be measured through reports, such as identifying clauses most frequently changed in negotiation, frequency of fallback clause deployment, risk by clause type, and risk by the negotiator. Contract management software with a clause library and configurable reporting can facilitate risk analysis and highlight contract managers' efforts in reducing organizational risk. These systems help quantify and recognize achievements in preventing mishaps and mitigating potential harm.
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Examples of Contract Management Automation by Department and Industry
Contract automation can revolutionize various departments and industries by enabling organizations to streamline their contract processes, enhance efficiency, and mitigate risks. Below are some easy examples of how different industries and departments can uniquely benefit from adopting contract automation.
Contract Automation for Legal Teams and General Counsels
NDAs are commonly used in business transactions to protect sensitive information shared between parties. With contract automation, legal teams can create standardized NDA templates that include pre-approved language and clauses tailored to their organization's specific needs and regulatory requirements.
When a new NDA request comes in, the legal team can quickly generate the agreement using the automated template, saving time and reducing the chances of errors. Automated workflows can then route the NDA through internal approvals, such as legal and management, with timely alerts and notifications to keep the process on track.
Contract automation also ensures consistent compliance by incorporating up-to-date legal language into the NDAs. This reduces the need for manual legal review, freeing up the legal team's resources for more strategic tasks. Additionally, contract automation provides a centralized repository for all NDAs, making it easy to track and manage the status of each agreement.
Contract Automation for Contract Managers
Contract automation offers significant benefits for contract managers, especially in vendor contract management. Contract managers often handle a large volume of vendor agreements, ranging from procurement contracts to service agreements. With contract automation, they can create standardized contract templates containing pre-approved clauses and terms relevant to various vendor contracts. When a new vendor contract is needed, contract managers can effortlessly use the automated template, inputting specific details for the vendor and the scope of the agreement. Automated workflows then route the contract through internal approvals, such as legal and finance, with alerts and notifications informing all stakeholders of the contract's progress. Additionally, contract automation streamlines contract tracking, aiding in monitoring key contract milestones like renewal dates and performance reviews through automated reminders and escalations. With powerful reporting capabilities, contract managers can generate insightful reports on vendor contract performance metrics and average cycle times, enabling them to optimize vendor relationships and identify areas for improvement. This efficiency in the contract process empowers contract managers to focus on strategic vendor management and negotiation, leading to better vendor performance and cost savings for the organization.
Contract Automation for Sales Teams
Contract automation can improve the management of sales agreements and proposals. Sales teams often deal with a high volume of contracts during the sales process, including sales agreements, quotes, and proposals. With contract automation, sales teams can streamline the creation of standardized sales agreement templates, ensuring consistency in contract terms and language. When working on a new sales agreement or proposal, sales representatives can quickly generate the necessary documents using automated templates, tailoring them to specific customer needs. Automated workflows can then route the contract through internal approvals and legal review, expediting the contract approval process. Additionally, contract automation enables electronic signature integration, allowing customers to sign and return agreements swiftly, reducing the time required for contract finalization. By utilizing contract automation, sales teams can accelerate the contract process, close deals faster, and improve customer experiences.
In addition to departments within an organization, contract automation has unique benefits specific to each industry.
Contract Automation for Healthcare
Healthcare organizations often have numerous agreements with healthcare providers, suppliers, and service vendors. Contract automation streamlines this process by creating standardized templates for provider agreements and medical service contracts. When a new agreement is needed, the contract automation system allows healthcare administrators to quickly generate the necessary documents, inputting specific details for each provider or vendor. Automated workflows then route the contracts through internal approvals and legal review, ensuring compliance and timely execution.
Contract automation also aids in tracking contract expiration dates, renewal terms, and compliance requirements, sending automated reminders to healthcare administrators and providers to stay up-to-date with contract obligations. This efficient approach saves time, reduces administrative burden, and ensures that healthcare providers can focus on delivering quality care to patients without getting bogged down by contract management tasks.
Contract Automation for Real Estate
Real estate professionals often deal with a large number of lease contracts for residential or commercial properties. Contract automation streamlines this process by creating standardized lease agreement templates with pre-approved clauses and terms. When a new lease agreement is required, real estate agents can easily generate the necessary documents using automated templates, customizing them based on specific property details and tenant information. Automated workflows then route the lease contracts through internal approvals and legal review, ensuring compliance and accuracy.
Contract automation also facilitates tracking key lease dates, such as lease expiration and renewal periods, through automated alerts and reminders. This proactive approach helps real estate professionals stay on top of crucial lease milestones and aids in maintaining positive landlord-tenant relationships. By leveraging contract automation, real estate professionals can enhance efficiency, reduce paperwork, and expedite lease processes, ultimately contributing to improved customer service and more successful real estate transactions.
Simply put, contract automation has become an indispensable tool for modern businesses looking to streamline and optimize their contract management processes.
At Contracts 365, the leading contract management software for Microsoft 365 customers, we offer a robust and user-friendly solution for businesses seeking to optimize their contract management practices. To learn more about Contracts 365, explore our features and read our case studies. If you are ready to make your processes as efficient as they can be, let us show you a demo of how this could work for your organization.
