What is Contract Automation and how does it work?
Table of Contents:
- What is contract automation?
- How does contract automation work?
- Advantages of contract automation
- Contract automation features
- How do you automate contracts?
- Frequently asked questions about Contract Automation
- Contractbook and contract automation
Imagine running any type of business without contract automation. You have to draft contracts for all your clients and partners, all with different contract specifics.
Maybe that would not be a problem if you have just one or two customers, but that is far from ideal. Right? Every business wants to grow and acquire more clients in the process.
And that means spending more time drafting contracts than you spend on other things. Again, far from the ideal.
Okay, you run a huge corporation and have multiple personnel to make the process faster. But what if those employees could do something else that eases the business process? What about the bottlenecks of passing a contract through multiple employees? And oops! An error!
Many businesses make the mistake of ignoring contract management automation and it comes back to haunt them in a way.
According to studies by the International Association for Contract and Commercial Management (IACCM), the lack of automated contract management is responsible for 9% of companies’ losses.
What if you knew just how to improve your profits by a whopping 9%? Well, that is what you're about to find out in the sections below. In this guide, we go in-depth into what automating a contract is, the benefits, features, and how you can pull it off easily.
What is Contract Automation?
Contract automation is a method of generating a contract automatically using data saved on a business’ system as well as other key inputs necessary for a specific contract. It is a great way to simplify and streamline generating contracts - particularly ones that are repetitive and almost carbon copies of previous ones.
By using contract automation tools, businesses can set up a legal contract automation strategy to relieve the team and get more productive in the process. It ensures prompt and efficient contract creation, contract storage, and contract management.
However, automating contract management by using a contract management software does not completely dismiss the services of company lawyers. Instead, they can leverage automation to make their work and that of those who depend on them faster. Optimizing contract workflows can be achieved in a number of ways, for instance through smart contracts.
How does Contract Automation work?
Contract automation may be initiated by an employee who ‘asks’ the software to generate a contract based on a few key factors.
So, for example, an automation software may trigger a contract to be generated if a date is reached or a certain number of sales are hit by a sales team. This means it is an excellent upgrade to traditional contract management in that it enhances collaboration and tracking within the organization, and negotiation with external bodies.
Some of the departments and teams that could use automated contract management include legal, operations, sales, finance, human resources, and procurement. Many of these teams could use the benefits of business process automation to improve how goals are met. Multiple departments may also require collaboration on specific contracts, which can only be made efficient through automation.
Advantages of Contract Automation
The advantages are endless. If you've considered how slow and tiring manual contract management is, the benefits of automating your contract should really be a no-brainer. But for the benefit of the uninitiated, below are some of the top advantages of automated contract management.
1. Save time creating and managing contracts
First and foremost, it saves you or your business time. That time can then be better spent elsewhere. Manual contract creation can have personnel tied up in never-ending, repetitive, menial tasks that some aspects of contract creation can require.
Meanwhile, automation helps you automate those repetitive aspects. For instance, contract bulk actions makes it possible to sign contracts at scale. As a result, you add efficiency to your workflow. And, by saving time, you also reduce costs - increasing profitability too.
2. Streamlined and smarter work processes
It is also excellent for helping your business work smarter and harder. Contracts are full of useful pieces of information and data. Yet, when contracts are completed in a paper or PDF format, they are trapped there.
They cannot be extracted easily to help generate future contracts when certain events are triggered. Additionally, that information cannot be used to help inform business decisions in a way that our automated contracts allow.
3. Better customer experience
Take a look at the findings below from a Salesforce survey. Four out of every five customers value the experience they get from any business as much as the services. If you invest in aspects of your business and ignore contract management, there is a good chance you will end up with dissatisfied customers.
However, an automated process tells your customers how much you value doing things the right way. It tells them you value their partnership and hence, the reason they can receive products and services faster.
4. Prevention of human errors
Automation is fantastic for minimizing - if not eradicating - errors. Automation is dependable and consistent so you can be sure when using automation software that your contracts are not riddled with mistakes created by human hands. And, of course, that is so crucial when it comes to contracts.
Not only does it minimize the administrative effort required to ensure there are no errors within a contract, but it also means that a contract can be relied upon should it be needed to argue a legal standpoint. Errors can make relying on a contract when needed far more difficult.
5. Easier contract storage and access
You’re already aware of how cumbersome papers are and how easily they get damaged. Only a water spill is enough to render your legal documents unusable. You can prevent that with automated contract management and save your office space for a new flower vase or painting.
The easier access it brings also means multiple personnel can confirm contract content at the same time. They will get necessary updates as they are available and efficiency has improved.
6. Measure success and improve processes
Automating allows you to get quick assessments about contracts and related processes. It will also give you reports on the number of contracts closed and others that need improvements.
7. Improved security
Incorporating automation helps to ensure optimum security for legal documents. Not only will the files be accessible to only authorized personnel through legal document automation, but it will also secure file transfer among team members.
Looking for more benefits of contract automation? We have listed the 11 most game changing benefits of contract automation.
Contract automation features
An excellent automation tool can make the difference between a tiring and an effective workflow. Since you need to create and deal with contracts every day, you should invest in a complete solution to all your automation needs. While different tools may offer slightly different solutions, below are some of the features you should never compromise.
Several dynamic templates
Creating a contract from scratch can be daunting and leads to the likelihood of leaving out important aspects. With several templates to choose from, contract automation software can help your legal departments create contracts quickly.
This means they can concentrate on crucial clauses and spend less time thinking of basics, especially for recurring contracts. They can also assist with informing personnel about newer developments.
Manual processes often mean only one contract is employed for related and unrelated contracts. However, an automated platform can provide dynamic templates, which you can edit for each business contract.
Dynamic contract editor with unlimited features
Templates may be useless without an editor that lets you customize each template. Unlike manual contracting that uses word processors, an automated contract management process should have numerous features.
It is also important for a contract editor to find the right balance between being feature-rich and complex. While businesses should train their employees on working with automated processes, the editors should be easy enough for anyone without training.
For instance, the editor should allow you to include contract peculiarities and branding materials such as tables, images, graphs, and charts. They should also allow integration with various document types.
Since contracts may need to pass through several individuals, it is essential to include features that make self-serve on contracts possible. That includes features like highlighting and comments to draw attention to specific portions of the document. The tool should also make it easy to make changes and save simultaneously without version confusion.
Visual audit timeline
Tracking contract progress is one of the most challenging parts of a contract management process. Hence, a contract generator software should incorporate visual timelines for every concerned personnel to track changes and versions. It should include the date and time stamps and create backups to prevent loss of information.
Another feature that may assist with tracking changes is notification. An excellent software can let you customize the type of alerts you receive and how to receive them. For instance, you may set up the software to receive an alert when any change has been made to documents. Or you could simply receive a notification only when a contract needs your attention.
Versatile and helpful integrations
Since contracts have to be in-depth, it can be helpful to get integrations with other tools. Whether other SaaS tools, CRM tools, or software for editing or grammar check, there is no limit to the level of benefits available through integrations.
Electronic signature system
An automation system must include a feature for signing documents. For a more efficient contract workflow, the software must allow the latest digital signature technologies. This will ensure ease as well as promote faster collaboration among teams.
Automated local and cloud storage
Storage is another feature contract automation tools cannot do without. However, the storage has to be systematic for ease of file retrieval and secure for keeping sensitive information safe. Some useful filters for storage include names, dates, personnel, customer details, etc. It should also include a search function for quick file management.
How do you Automate Contracts?
Now that you know the features of excellent automation processes, you can automate a contract process with the steps below.
1. Create contract templates
Templates are excellent ways of getting you up to speed and it’s recommended that you start by preparing them. Usually, it should be the responsibility of the legal department. Nonetheless, you can create templates automatically for businesses or teams based on their contract needs. A properly designed template can make a whole lot of difference for teams and the business.
2. Share contract management responsibilities
Contracts can come in various forms, depending on the specific demands. It helps to enlighten each team on their responsibilities beforehand to help the automation process. This ensures each concerned personnel is aware of situations where their attention is required.
For instance, the sales department may require a contract for finalizing a deal. This would naturally shift the responsibilities of such contracts to the head of the sales department. The same will apply to the human resources department when presenting a contract to a new hire.
3.Automate monitoring and tracking
A good automation system should include essential details for monitoring contracts. Data like date, personnel in charge, department, milestones, and deadline can make tracking possible. Lack of proper monitoring could hinder the contract process. Hence, there should be a system for making sure all boxes are ticked and all spaces filled.
4. Enable change detection and other notifications
To keep every party that’s involved in a contract updated about happenings, you should set up notifications. This system will detect when changes are made to any document and alert relevant individuals or teams so they can take necessary actions.
Documents can be redlined to specify changes and it helps to have comparisons between file versions. This enhances performance because it eliminates the need for third-party tools, such as Microsoft Word or Google Docs.
You should also make it easy for customers to edit and sign documents. With a change-tracking feature in place, it should be easy to recover omissions and deletions from any file.
5. Automate workflow for approval
The approval process also needs to be automated. There is a good chance that as your business grows and gets more customers, contract approval may get quickly tiresome. An automated approval process can help you prevent this. That’s because it would delegate approval to concerned stakeholders.
6. Automate reporting
It is common for businesses to focus on other aspects and ignore contract reporting. However, it can reveal a lot of information about each contract. A good way to make this work is to allow every concerned personnel to input comments. Reporting will clarify how contracts fared and how they affect the overall business operation.
7. Automate contract signing
Contract signing is usually the final step for contract management. The manual method of getting signatures can last for weeks and months unless you automate the process. This is particularly the case for contracts that require multiple signatories. It can even be more disturbing because it exposes contracts and sensitive information.
An electronic signature software can speed up the process. Using standalone tools is tedious and hence, it’s a good idea to invest in automated contract management with the built-in feature. While appending signatures is usually the duty of CEOs, departmental heads may occasionally be allowed to sign too.
Frequently asked questions about Contract Automation
How do you automate a contract?
You can automate a contract by simply replacing manual contract processes with automated options, such as automated templates. Automation softwares can make the process seamless. Then you can consider setting up templates, monitoring, reporting, and approval processes.
What is an automated contracting system?
The automated contracting system streamlines contract management by generating contracts automatically with data and contract-specific inputs. It is particularly essential for dealing with repetitive processes and facilitating new ones.
Why automate contract management?
The basic objectives for automating contract management are to improve how contracts are generated and managed to streamline processes, save cost and time, prevent errors, and ensure a better employee and customer experience. It also enhances security, measures success, and makes storage better.
What is a typical contract lifecycle?
A typical contract lifecycle involves contract drafts, contract creation, contract review, contract audit, contract approval, execution, and signature. It involves the entire process from its creation to execution.
Who should oversee the contract management?
Depending on the contract, the company head, departmental heads, legal team, or any other particular individual may be saddled with the responsibility. That said, automated contract management can make the process easy, regardless of the person in charge.
Contractbook and Contract Automation
Contract automation is increasingly becoming an essential feature of any forward-thinking company, whether big or small. Apart from helping you save time and cost; automation can eliminate the difficulties and errors to streamline processes and make the experience better.
Contracts are some of the assets of a company, but creating them should never be an onerous affair. You can use Contractbook to steer through the entire process of generating a contract.
While there are other pieces of automation software out there, we believe ours to be the best thanks to its robust approach to the contract management lifecycle and its ability to integrate into a company’s systems easily. Book a demo with us today and try our contract automation software.