Contracts with typos or innocent misrepresentation are a direct path to contracts’ rescission, which in turn leads to losing thousands of dollars due to non-legally binding business operations.
What else results in the loss of profits is poor contract management meaning that contracts don’t deliver expectations or forecast and, therefore, cause a potential impact on the bottom line of a business equivalent to 9% of annual revenue.
Yes, contracts have always been the lifeblood of any business and having a mistake in them or a delay of contract execution is usually a disaster for both sides.
But now what?
How do you make sure your contracts are not only free of mistakes but also done on time and approved by all the counterparties? How do you ensure that different departments are aligned to the same goals: HR, sales and business development, procurement and management?
To make contract workflow process riskless and efficient — and to protect your business from project delays or cost overruns — your company must establish and automate end to end contract lifecycle management.
👉 Here you’ll find everything you need to know about automated contract lifecycle management.
Here are the key contract lifecycle management best practices to start with:
- A central contract repository in the cloud
- Contract workflows delegated to business departments
- Automated document generation
- Task management and collaboration
- Document approval workflow and document tracking
- Integrated digital contract signing
- Secure document storage systems
- Contracts performance measurement and reassessment
But first things first. Let’s define what an automated contract lifecycle management is.
What is an automated contract lifecycle management?
Usually, contract lifecycle management stands for a process of managing contract creation, execution and analysis to enhance operational and financial performance and reduce risks associated with it.
The entire cycle, if handled manually, takes a while to complete and fails short pretty often.
Automated contract lifecycle management enables smarter ways to generate, process and execute documents giving the single source of truth for your contracts and their stages. For example, using pre-built templates you can fill in the data in a few clicks and be sure no business-critical data is lost or misplaced. And that’s only one of those best practices that automated contract lifecycle management can offer you.
Now let’s take a closer look at the contract lifecycle management best practices.
What are contract lifecycle management best practices?
Set up a central automated template repository in the cloud
Any contract starts rolling faster if its template is easily accessible 24/7 once the request to draft it drops in. Imagine how much time is wasted after your client confirms the purchase or the HR department agrees with the new hires before the contract gets out of the legal department. Getting to the deal’s closure fast is critical and there’s no time to search for an appropriate or latest agreement template among loads of different versions.
The best compliance method ensures that all editable clauses are aligned with company standards and accessible from one place anywhere, anytime.
Efficient teams collect all different versions used over time, analyze the patterns, red-line and ultimately opt-in to creating one automated contract template with all possible and acceptable scenarios into one template. Automated templates could be also placed in a bundle, ensuring one-time data insertion and reducing the risk of outdated content. Automated contracts may include all possible scenarios based on languages, countries and counterparty type.
Delegate high-volume low-value contracts to business units
Sometimes business transactions don’t necessarily require lawyers’ involvement and could be autonomously executed by HR or sales specialists. What we usually see instead is that lawyers are dealing with standard documentation that can be easily automated and scaled within the company. Contract types which are most often delegated are HR contracts, NDA-s, B2B sales contracts, marketing and influencer agreements, outsourcing agreements, MSA-s, service and sales of goods contracts.
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To scale your legal expertise you can capture all knowledge and best practices into one document template which is accessed and used across departments and within teams in a similar way. Latest updates and legal regulations changes are inserted into this template so there’s no need for updating all different resources and files. Scalable legal templates should also include legal guidelines and tooltips for different clauses so that any user can apply those tips while drafting a contract without googling irrelevant information or pinging a lawyer to confirm little details.
For company template management the best option is when the templates are clause-based, meaning the clauses with associated tips and variations are cross-usable in different templates. This practise ensures that the company standards are applied continuously e.g. the confidentiality clause in different templates is always the same and with the latest wording.
Once such a template is automated and adjusted for different scenarios you can be confident when delegating drafting to other parties. The drafting will happen under your control and only within the framework you set up.
Standardize document generation
A common practice in the manual world of contracting is to make the first draft from scratch even though the selfsame template has been already created and used a while ago. Nobody argues it’s critical to double-check every single detail such as applicable laws, dispute resolution and confidentiality clauses, termination of the contract and so on.
But who says contract drafting should be a manual job?
Remember the previous best practice about automated templates for contracts? Now you will need those templates to make your contract drafting smart and easy. Automated templates for contracts are made in a way to eliminate all possible routine and repetitive drafting parts by enabling:
- One-time data insertion
- Drafting simultaneously the document bundles
- Automated formatting and styles
- Default answers
- Multilingual drafting
- Country-based scenarios
- Clause libraries for fast insertion
Standardizing the document creation process helps you kick off with the first draft in a few clicks while making sure no wrong data is inserted or overlooked. Combining it with delegated workflows and company-wide view makes efficiency grow up to 80%.
Task management and document collaboration
According to the report published by McKinsey, high-skill knowledge workers, including managers and legal professionals spend an average of 14% of their workweek communicating and collaborating internally while the value-added time comes down to 3.5%.
Collecting missing data input from the counterparties, negotiating specific terms and conditions, reminding about the approaching deadlines — this type of scattered collaboration is done by shipping contracts back and forth and usually gets messy and time-consuming.
A central cloud-based repository and automated legal forms mentioned above are the keys to smooth and ‘getting to yes’ collaboration within one document:
- multiple parties can access contract files at the same time
- parties co-draft documents in a shared environment in real-time
- parties add attachments to the document container
- collaborative discussion happens in the same window
- automated reminders alert essential parties to review, approve or sign the document.
Document approval workflow and document tracking
Another way to speed up document collaboration is to automate the approval process. Automatic approvals collection helps you shorten the cycle from initial conversations to finalized agreement and therefore contributes toward a positive relationship by adding convenience on both sides.
By automating document approval workflow you can:
- enable all collaborators to leave their approvals in a specific order or simultaneously within one platform
- track changes and activities from the same place with the help of audit log
- set up reminders to notify collaborators automatically about contract milestones including escalation, renewal and expiry dates
Streamlining the contract approval workflow not only gives your company the advantage of receiving contracted goods and services sooner but also stimulates grasping business opportunities with relatively tight turnaround times.
Integrated digital contract signing
It’s not a know-how that documents can get signed digitally. What still creates a little friction towards contract execution is using different tools for document templates, drafting, signing and storing, especially if we talk about multiple parties and different jurisdictions. Sending a finalized agreement back and forth is the most annoying stage that holds business processes frozen.
To leverage the usage of digital contract signing make sure to have the possibility to sign the documents right where you drafted and collaborated them. It’ll make the final step really smooth as you don’t need to download the document and send it for signing over email, nor create an account with the digital or electronic signature provider, nor pay for additional contract signing software.
Avokaado integrates with Dokobit and SignNow, which means electronic signatures can be collected easily without having to change your systems. Whatever type of eID is needed, you can build it in from the start, with contracts downloadable in multiple formats.
Ready to create your first document and sign digitally with Avokaado? Get started for free now.
Ensure secure document storage systems and meta-data search
A lot of cloud-based legal software is meeting scepticism for not being secure enough. That’s totally fair considering the confidentiality of the documents being processed within such systems and business-critical data that can’t be compromised.
The best piece of advice here is to read contract lifecycle management vendors’ data security and privacy policies carefully and figure out their servers compliance, reliability and backups, and document security. For example, that’s how Avokaado ensures the security of legal documents.
You can also secure document storage yourself by using a system with robust verification of user identity. As a system administrator you can also create different levels of access, so users only see files they’re authorized to view. Keeping unauthorized users out protects confidential documents. It is an additional value if your contract lifecycle management software structures data for the meta-data search and automatically tracks important deadlines or enables the search for the specific clauses, contract types, parties etc.
Company-wide view, contracts performance measurement and reassessment
You can’t improve what you can‘t measure. Contract workflow as any other business asset or process has to be tracked, analyzed and optimized where possible. Anything from more informed negotiation, better overview of contract performance, and lower incidence of auto-renewal can save costs. And cost-saving is one of the top priorities businesses have for their contract management.
Customized dashboard on contracts performance and contract status helps you get visibility and control over deals’ progress. Centralised data about the entire document workflow allows you to understand how contract delivery can be improved.
Such a visual dashboard with finalized and ongoing contracts helps you evaluate and improve contract lifecycle management metrics and give an overview to the management on what’s happening with the contracts, which are closing and which are stuck. This enables other business units to align their operations accordingly.
Let’s wrap up
Hopefully, by now you’ve realized how beneficial setting and automating your contract workflow process can be to your business.
You don’t have to automate the entire contract lifecycle at once that’s why these contract lifecycle management best practices are all about helping you see what and how could be done. Now you are all set to decide what contracting stage is the most critical for your business and asks for improvement:
- Is it a central contract repository to help you manage contracts from one place?
- Is it an automated document generation to get the first drafts ready in a few clicks?
- Is it a digital document approval workflow with integrated digital contract signing to get the job done faster?
If you haven’t thought about automating your contract workflow process yet, today’s the day to get started.
Not sure where to start?
Book a demo with our team andwith confidence!
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