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5 Reasons Your Manual Contract Workflow Causes Risks and Financial Loss

Everyone who has worked with contracts or even just signed one knows how much time and steps it takes to get from draft to signing. We have been helping legal and business people to work together more efficiently and minimize these steps and time windows.

Before we go into our study about what could be achieved with digital workflows and cloud-based contract lifecycle management, let’s dive into the terminology – what we mean by ‘contract workflow’ and by ‘contract lifecycle management’.

Digital contract workflow engine helps organisations create automated scenario-based templates, delegate, collaborate on drafting, manage and track contract approvals and e-signings.

Contract lifecycle management (CLM) includes more steps and processes in addition to contract workflow. It covers more organisation needs such as contract data processing, analytics and sharing with other M2M systems and/or platforms as well as post signing management – reminders, renewals, storage and search, audit/reporting/data rooms. The CLM is cloud-based when all these processes are managed via cloud computing model, giving to operations the scalability and access 24/7 everywhere in the globe.

Effective CLM eliminates manual processes and data silos, decentralised negotiations and inability to manage changes, the lack of visibility around contracts’ progress, inconsistency and slow approvals. As a result, legal and business people can manage risks better, proactively meet deadlines and maximise the value of your contract. 

In this article, we have compared both manual and automated digital workflows to demonstrate which stages of the contract lifecycle could be managed automatically to save time and costs for businesses.

10 Stages of Manual Contract Lifecycle Management

Contract Lifecycle Management is the process of streamlining creation, negotiation, approval, execution, oversight and management of contracts. If managed manually, the workflow usually includes these 10 stages:

Reasons why Manual Contract Lifecycle Management causes more risks

  • Incoherent starting point

There is no common baseline for the entire organisation and the legal team to follow when customers expect fast results. Business people need to put together all commercial terms for the contract, deliver accurate answers to customers based on real-time information whereas lawyers take time to ensure compliance and avoid risks. Documents drafting and data insertion is lawyer’s job and delegating, even if there are up-to-date Word templates available, do not guarantee that non-lawyers do not make changes and deletions which may totally break the contract.

  • Human errors

We are all humans, and we all make mistakes. However, mistakes in legal documents are not tolerated. Gaps in standardized language, missing data, or regular typos can introduce risk or confusion, disarray and potential loss of critical information. That’s why legal documents are not delegatable business tasks and have to be always double-checked by lawyers what takes business critical time. 

  • Distorted capture of the data input 

The data is scattered over different professional departments or clients whose data input might be imprecise, incomplete or simply inadequate. Business people’s goal is to get to the deals’ closure as fast as possible and they won’t allocate their time to find out potential risk areas. Working with the wrong or incorrect data results in penalties and profit losses.

  • Miscommunication 

Working under the time pressure causes communication gaps especially when contract negotiation, approval and signing happens all over the places – in an endless email thread and constant reminders over calls. Messy communication leads to lost deadlines, overlooked changes, additional negotiation and review rounds, repetitive approval requests. Money that is at the stake of the high-value contract could be easily lost due to time-consuming negotiations and closure.

  • Lack of transparency

If contracts depended only on lawyers and their speed it would have been much faster to get them signed. However, contract creation is just the initial stage of the contract lifecycle. The next stages include other parties who are supposed to leave comments, suggest changes, negotiate, approve and sign. At these stages, lawyers have no full control over activity logs, document statuses and emerged bottlenecks. If you can’t see it, you can’t control it. That’s why contracts remain stuck until they get business-critical. 

5 Stages of Automated Business-oriented Contract Lifecycle Management

Automated Contract Lifecycle Management is a must-have for legal teams whose work directly affects the performance of other business units and general business’ efficiency and profitability. The automated workflow follows the same logic as the manual one, however, it replaces half of the process with automated solutions:

How Avokaado reduces risks and increases efficiency

  • Faster kick-off

A centralized contract hub ensures everyone in the organisation uses the latest versions of document templates and has access to the shared clause library. No need to search for “that very” clause all around files and put together a document from scratch even though it has already been prepared for a similar case. Unifying the best knowledge and practices in the Avokaado template library helps to kick off with the first draft in a few minutes. 

  • Smart drafting

To kick off with the first draft even faster it’s possible to use pre-lawyered templates. Avokaado templates are made in a way to eliminate all possible routine and repetitive drafting parts. One-time data insertion, automated formatting and styles, default answers and tooltips make up for re-entering the same data, proofreading and error detection. 

  • Risk-free delegation

Delegating contracts to other business units or external clients to self-serve is easier when lawyers can guarantee compliance. Automated questionnaire-based templates ensure no business-critical data is lost or incomplete and no unnecessary changes are made. It allows lawyers not to get involved in low-value tasks such as data input collection or basic information entering and build a safety net for contract delegation. 

  • Controlled collaboration 

Collaboration is effective when it happens in a transparent and organised way. In Avokaado you can streamline your own contract workflow in one place: assign user roles with specific rights, open up a discussion for negotiation, set up a queue-based approval order and digital signing flow. Having all these tasks performed in a centralised place saves tons of time on communication, checking overloaded inbox, and sending reminders.

  • Visibility over progress

For getting contracts unstuck, Avokaado provides you with a dynamic dashboard with hot deadlines, documents’ statuses and unfinished tasks. Centralised data about the entire contract workflow gives visibility and therefore control over deals’ progress. The oversight over progress allows lawyers to meet deadlines proactively and address the upcoming issues instantly. 

  • Data management through API

Contracts are full of data, which could be managed and shared through organisation effectively. While filling in the contract data it could be already marked as shareable data points for posting or received from other databases (like CRM). The same goes for post-signing contract lifecycle management – for metadata search, analytics, data rooms, audits. This ensures that none of the contracts are lost, data is missing or wrong and all flows are working smoothly without human interaction.

Automated documents and workflow management helps to mitigate risks faster and ensure compliance at the same time. It eliminates manual processes such as data input collection, contract drafting from scratch and approval requests over emails. It also helps to own contract-related data and manage knowledge in one place, track critical deadlines and document statistics.  

Mapping out and understanding your current contract lifecycle is the first step towards the full cycle workflow automation. To start contract lifecycle improvements today 👉 book a demo with our experts here. 

👉 Set up your first document workflow: Get started for free now.

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15.07.2020

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