There are two things that a contract can do: PROTECT OR KILL.
A contract can protect a company from lawsuits, but it can kill its operations. This “kill” usually happens as a result of innocent but careless and avoidable mistakes.
Take this example.
A Canadian company wiped out 10% of their annual profit ( $24 million) all because of a tiny copy-paste error. Somebody misaligned the rows of information in the spreadsheet when he was updating it manually.
They ended up winning a slew of contracts they didn’t need, overpaying transmission contracts, and buying more than they intended.
What does this mean?
The manual contract process flow that involves a spreadsheet just doesn’t work anymore. If you’d like to bypass manual contract approvals, you should automate this process as early as you can before it can get worse.
What is the contract approval process?
A contract approval process is a series of tasks involving multiple signing parties to submit, review, negotiate, approve, sign, and accept contracts.
It is a challenging stage in the contract workflow as bottlenecks, human errors, and simple carelessness could potentially risk compliance at the end.
The contract workflow includes these stages:
The approval process of the contract workflow, when done manually, is a slow-moving validation at each stage before moving onto the next. This leads to longer contract lifecycles, which could negatively impact business opportunities — especially when it involves time-sensitive pricing offers and special terms.
5 problems manual contract approvals introduce
Since manual contract approval workflows are being carried out by people, there are lots of inefficiencies along the way.
We highlighted 5 problems that are caused by manual contract approvals:
- They cost huge amounts of money.
A study conducted in Europe found that manual contract processing and poor contract management is costing companies as much as £10 million in inefficiencies every year.
This is a month of work that could have been spent on resolving real customer issues, growing the client base, and creating new opportunities.
- They carry a compliance risk.
Unless your company has in-house lawyers, there is no way that you produce complex contracts that are 100% compliant. You will need to counsel legal personnel every time you draft a legal-heavy contract. Doing it yourself can have serious legal implications in the future.
- They’re ineffective in managing high-volume contracts.
If you are dealing with hundreds of contracts constantly, then you know it’s going to be messy. Just tracking the approval status of each one of them is already a huge challenge.
It’s even more difficult to review tons of documents while drafting new ones. To top it off, you have to remind multiple stakeholders, vendors, and partners to sign the pending contracts.
- They take too much time and effort.
Back and forth slows down work. Hill International, a global construction management team, UAE Senior VP stated that most contracts include a specific due date for contractors.
This obligation, however, is not placed on the representative. The approval process of representatives can sometimes take weeks. As a result, not only the everyday work slows down, but the associated project gets delayed.
- They drive up the total cost of contracts.
When you do manual contract approvals, you almost always need to triple-check. That means triple the effort, triple the costs of time and resources. World Commerce & Contracting conducted a study that found that poor contract management can cost companies an additional 9% of their annual revenue.
Why should you start using CLM software for the contract approval process?
Manual contract approval is a pain. A Contract Lifecycle Management (CLM) software lets you end that pain by managing everything from drafting, negotiating, to executing contracts in one place.
There are several types of contract management software, but their goals for you are the same.
Here are the top reasons why you should start using one:
- They make it easy to get contracts ready for approval.
Drafting a contract is easy and fast with a CLM. The faster the first draft is ready the more chances you’ve got to get your deal rolling: automated templates let you generate complaint and error-free documents right after the consensus between parties has been reached.
With a freshly generated draft, it’s faster to move on to the negotiation and approval stages.
- They prove to give you a faster turnaround.
The automation in each stage of the contract lifecycle is efficient. Though, the approval stage of the contract workflow is the one that makes things move faster on the pipeline once automated. Do you need the stakeholder’s approvals? Easy!
CLMs send automatic reminders on your behalf, allow external parties to view or edit your contract, leave or request approvals and show you a definite status on what stage each contract is in.
- They support electronic signatures.
You don’t get stuck in the traditional process where parties need to fax or scan documents just to sign them. CLMs capture official e-signatures on your smart devices, including mobile.
Everybody signs on the latest version and there’s no need to repeat the entire process from scratch in case somebody printed the wrong version.
- They minimize the risk of non-compliance using audit trails.
Audit trails regulate what every party inputs. With these logs, you can gather information about every single transaction. See who initiated a change and whether the change is compliant. You then reduce the risk of data mismanagement and violations.
- They support collaboration among signing parties.
While the audit trail lets you see who requested approval and who approved it, CLMs also simplify the contract negotiations by collaboration. It is easy to add collaborators such as stakeholders and lawyers who can expedite the document approval workflow.
How to create a contract approval workflow with Avokaado?
A CLM like Avokaado makes contract signing seamless, faster, and cost-efficient. The contract lifecycle management tool has simplified and streamlined the document approval workflow to be far more convenient and efficient.
Take a look at our contract approval process:
- Draft Your Contract
The first step to automate the process is creating a new draft based on past contracts or on a template. This way, you expedite the process by avoiding starting from scratch. You can use a pre-lawyered template, duplicate an existing contract or use another contract as reference.
If you choose to use a template simply click on it. It will take you to the document’s pre-generated questionnaire. Answer the questions to begin drafting your document.
A preview will open next to the document so you see the changes and updates as they happen. If you are done with your questionnaire, you can name your document.
Uploading a document yourself?
You can do it in a matter of minutes. Under the documents page, click the “Upload document” in the top bar and you can now upload a file.
By the way, if you need to include contract clauses, you can search the central database to use common clauses or ones that you have already used before.
2. Share your draft with viewing or editing rights
You can now get input from others by sharing your draft. Let them check, comment, and add on what you first did.
You can invite new collaborators by pressing “+Add” on the sharing tab. If you add a user, choose whether to give them editor or viewer rights.
- Editors have editing rights. By going through the questions relevant to their role, they can make the changes at once.
- Viewers have no editing rights and can only open a discussion if there is something to change.
Pressing the “Finish editing or viewing” button triggers a notification to the document owner. You can proceed with the approval or signing.
3. Build Your Approval & Signing Workflow
Now that you have finished the draft, you can move to the next step: Assign approvers and signers to get going.
Simply click “+Add”. If you choose to invite new collaborators, then you can offer them the approval and/or signing roles.
- Approvers gives approval or rejection to your document. The approver needs to confirm the deal before you can proceed with the signing stage.
- Signer is the person whose signature is necessary for the document.
The document approval software automatically sends them invites to clarify details for the role. Don’t forget to set the order of approvers before you deliver the document.
Already added them? The CLM will now send them automated follow-ups so you can beat the deadline.
4. Check the Status for your Documents
After adding approvers, you can now check whether they have accepted or rejected the changes made by your collaborators.
You can also use Avokaado’s discussion section to leave notes and ask questions. The section enables you and your collaborators to comment on and decide specifics regarding the document.
For your reference, those who have been added as collaborators will only be able to see discussions from that point forward.
5. Track approvals with Activity log
If there’s anything you need to see about your document, check the activity log. You can view and track approvals using it.
See whether any of your collaborators have opened or modified the document. Is there a newer version? Know who and when initiated and approved the edit.
Here’s another added feature.
When you notice that a collaborator hasn’t opened the document yet, you can send them another notification to nudge them to take action.
6. Accept eSignatures
The final step in your contract approval process is collecting the signatures. Signing parties have no excuse to delay signing even when they are away. We now have electronic signatures so they can use any of their devices to sign.
Avokaado integrates with eIDAS compliant signature providers. You can even choose your signing method: SignNow e-signature or Dokobit signature.
- If you need a multinational digital signature that fully supports Estonian, Latvian, Lithuanian, Finnish, Polish, Icelandic, Belgian, Portuguese and Spanish eID providers, use Dokobit.
- If you are unsure if your collaborator can use an eIDAS compliant signature, we suggest using SignNow.
The contract approval process in a nutshell
The manual practice of the contract approval process will not only waste your company’s time and resources but could compromise your compliance and security.
Contract lifecycle management software like Avokaado can automate the entire workflow — from creation, approval or rejection, revision, and signing. This way, your team can process contracts easier, faster, and most importantly, risk-free.
If you want to stop processing your contracts manually, try the Avokaado CLM system (for FREE) and follow these steps. Fair warning, once you experience the seamless flow of contract approvals, there’s no going back!