Table of contents
- What is contract management automation?
- The risks of manual contract management
- Key benefits of automating contracts
- Key features of contract automation tools
- How to implement contract management automation
- Integrating contract automation platforms with other tools
- How to measure the success of contract automation
- Legal and compliance considerations in contract automation
- Conclusion: Contract automation empowers your organization to grow
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If you’ve used software to get contracts signed electronically, then you’ve already experienced the power of contract automation. Here in this guide, we’re going to show you how to take your automation game to the next level.
But what exactly is contract automation? What are the key software features that’ll help you implement this technology in your organization’s existing contract workflows? To answer these questions, we’ll start by exploring a practical example of contract automation in action.
What is contract management automation?
Contract management automation is a technology that transforms the traditional process of managing contracts into a streamlined digital workflow. It’s used in contract lifecycle management (CLM) tools to automate many repetitive and time-consuming tasks associated with contracts.
For example, say you’re tasked with contract management in healthcare. Traditionally, this would involve manually typing names, job titles, and other personal details into each document — a time-consuming process that’s highly prone to human error.
With contract automation software, on the other hand, you can automatically extract all necessary information from a spreadsheet or other data source, and fill out dozens of contracts with just a few clicks. Once the contracts are ready, the software can send out notifications to all the new employees, inviting them to review and sign their personalized agreements.
And contract management automation is about far more than just getting healthcare contracts signed. It’s a comprehensive approach that speeds up many different tasks throughout a contract’s lifecycle. As a result, it’s reshaping how many organizations handle contracts — making the process quicker, more reliable, and adaptable to businesses’ growing needs.
The risks of manual contract management
The urgency of adopting contract automation becomes even more compelling when we think about the risks of managing contracts manually.
7 key risks of managing contracts manually
- Wasted time and resources
- Increased risk of human error
- Difficulty managing contracts at scale
- Compliance and regulatory challenges
- Inconsistent contract standards and practices
- Delays in contract signing
- Inadequate contract analysis and reporting
Let’s take a closer look at these manual contract management risks.
1. Wasted time and resources
Manual contract management often leads to a significant amount of time spent on repetitive tasks such as data entry, document organization, and manual searching for specific clauses or terms. This inefficient use of time diverts your team’s attention from higher-value activities like closing deals and beginning work on profitable projects.
2. Increased risk of human error
The manual handling of contracts is inherently prone to errors. Whether it’s misplacing important documents, entering incorrect data, or using outdated contract templates, these mistakes can lead to costly legal disputes or the need for time-consuming corrections, potentially harming your business’s reputation and relationships.
3. Difficulty managing contracts at scale
As your business grows, so does the volume and complexity of contracts. Managing these contracts manually becomes increasingly challenging, often resulting in misplaced documents or overlooked details. This can lead to a lack of control over the contract management process, making it difficult to effectively manage and fulfill contractual obligations.
4. Compliance and regulatory challenges
Keeping up with the ever-changing compliance requirements and industry standards is a daunting task when managing contracts manually. This can result in non-compliance with legal regulations, leading to penalties, legal issues, or even damage to your company’s credibility.
5. Inconsistent contract standards and practices
Without the standardization that contract automation provides, there’s a higher likelihood of inconsistencies in contract language, terms, and enforcement. These inconsistencies can create confusion and legal vulnerabilities, as well as hinder the efficiency of the contract management process.
6. Delays in contract signing
Manual processes typically result in longer turnaround times for contract review and signing. Delays in getting contracts signed can slow down business operations, delaying the start of projects or partnerships by weeks or even months as you send endless emails back and forth.
7. Inadequate contract analysis and reporting
Manual contract management makes it difficult to perform comprehensive analysis and generate meaningful reports. Without contract management reporting and analytics, your business may miss opportunities for contract optimization, lack a clear understanding of contract performance, and struggle to make well-informed strategic decisions.
By upgrading to contract automation, your business can address all these risks effectively. Automation streamlines the entire contract lifecycle, ensuring consistency and compliance while keeping your contract data safe and secure.
Key benefits of automating contracts
Contract automation offers distinct advantages over traditional contract processes, reducing risk by streamlining and standardizing your agreements.
5 key benefits of implementing contract automation in your organization
- Automated personalization and data integration
- Consistent contract clause language
- Accelerated contract lifecycles
- Central repository for contract data
- Detailed analytics and reporting
Let’s take a closer look at these five key benefits of using contract automation.
1. Automated personalization and data integration
Contract automation allows you to automatically populate contracts with relevant data from your existing systems, like CRM or HR databases. This means each contract is personalized and accurate, reducing the risk of errors that can occur with manual data entry.
2. Consistent contract clause language
Automation ensures that every contract adheres to predefined templates and clauses, maintaining consistency across all documents. A centralized contract clause library is extremely helpful for compliance, risk management, and maintaining a high standard of contract quality.
3. Accelerated contract lifecycles
From drafting to signing, contract automation speeds up every step of the process. Automated workflows enable faster review and approval cycles, and integrated electronic signature capabilities allow for immediate signing, dramatically reducing the time to complete contracts.
4. Enhanced tracking and compliance monitoring
With automation, you can easily track the status of each contract and receive alerts for important dates for contract renewals or expirations. This proactive approach ensures you stay compliant with contract terms and regulatory requirements, minimizing the risk of penalties or missed opportunities.
5. Detailed analytics and reporting
Contract automation tools often come with advanced analytics capabilities. This allows you to analyze contract performance, identify trends, and make data-driven decisions. Such insights can lead to improved contract terms in the future, optimization of negotiation strategies, and better overall contract management practices.
Key features of contract automation tools
When evaluating contract automation software platforms, certain key features stand out as essential for effective automation.
Here’s a list of eight features that are particularly helpful in contract automation:
- Contract clause libraries: These libraries allow you to store standard contract language and frequently used contract clauses. By having these at your fingertips, you can quickly generate consistent and compliant contracts, reducing the time spent drafting from scratch.
- Data integration capabilities: The ability to integrate with other systems, like CRM or ERP software, is crucial. This feature allows for the seamless transfer of data into contracts, ensuring accuracy and reducing the need for manual data entry.
- Automated workflow management: This feature enables the setting up of predefined workflows for contract reviews, approvals, and renewals. It helps streamline the contract lifecycle, ensuring that each step is completed in a timely and efficient manner.
- Electronic signature integration: HIPAA-compliant electronic signature capabilities are essential for speeding up the contract signing process. They allow parties to sign documents digitally, which is faster and more secure than traditional methods.
- Real-time collaboration and redlining: These tools enable multiple stakeholders to collaborate on a contract in real time, with changes and comments tracked clearly. This feature facilitates faster negotiations and ensures that all parties are on the same page.
- Contract analytics and reporting: Advanced analytics help in extracting insights from contracts, such as identifying common negotiation points or tracking contract performance. These insights can inform future contract strategies and decision-making.
- Compliance and audit trails: Keeping track of all actions taken on a contract is crucial for compliance purposes. This feature provides a transparent audit trail of edits, approvals, and signatures, which is essential for legal and regulatory compliance.
- Alerts and reminders: Automated alerts for key contract milestones, like renewals or expiration dates, help in proactive contract management. This ensures that important deadlines are not missed, reducing the risk of unintended contract lapses or renewals.
Each of these features plays its own important role in enhancing the efficiency and effectiveness of your contract management process.
How to implement contract management automation
Implementing contract management automation in your organization requires taking strategic steps to ensure a smooth transition and consistent use of the new system.
10 key steps to implement contract management automation in your organization
- Assess your current contract management processes.
- Define your automation objectives.
- Choose the right contract automation tool.
- Plan for integration and data migration.
- Set up your contract automation platform.
- Train contract-facing team members.
- Roll out automation in phases.
- Monitor results and gather feedback.
- Evaluate and adjust automation workflows.
- Stay updated on best practices and changes.
Let’s dive into each of these steps in greater detail.
1. Assess your current contract management processes
Begin by thoroughly evaluating your existing contract management procedures. Identify tasks that are time-consuming, prone to errors, or just generally inefficient. Understanding your current workflow will help you pinpoint what you need most from an automation tool.
2. Define your automation objectives
Clearly outline what you aim to achieve with contract management automation. Whether your overall goal is to reduce contract execution times, to minimize errors, to improve compliance, or all the above, well-defined objectives will keep your implementation strategy on track.
3. Choose the right contract automation tool
Select a tool that aligns with your business needs and objectives. Consider factors like ease of use, integration capabilities with existing systems, specific features you need, and the tool’s scalability as your business grows.
4. Plan for integration and data migration
Prepare for the integration of the new tool with your existing systems. This may involve migrating data from your current contract management system to the new one. Ensure that data migration is planned and executed carefully to prevent data loss or corruption.
5. Set up your contract automation platform
Work with your vendor to customize the tool to fit your specific business processes. Set up templates, clause libraries, and workflows that reflect your standard operating procedures.
6. Train contract-facing team members
Provide comprehensive training for your team on how to use the new system. Effective training ensures that your team is comfortable and proficient in using the tool, which is crucial for successful implementation.
7. Roll out automation in phases
Implement the new system in phases rather than all at once. Start with a pilot program or select a particular type of contract to automate first. Gradually expand the use of the tool across different departments or contract types.
8. Monitor results and gather feedback
Continuously monitor the implementation process and gather feedback from users. This will help you identify any issues or areas for improvement, and ensure the system is meeting your organization’s needs.
9. Evaluate and adjust automation workflows
Regularly review the performance of the automated system against your initial objectives. Be open to making adjustments and improvements based on user feedback and changing business requirements.
10. Stay updated on best practices and changes
Finally, stay informed about the latest trends and best practices in contract management automation. Regular updates to the system may be necessary to keep up with new features and technological advancements.
By following these steps, you’ll be able to implement contract management automation in your organization, and start reaping the benefits of more efficient and error-free contract processes.
Integrating contract automation platforms with other tools
Integrating contract automation with other business tools is a strategic step that amplifies the benefits of your contract management software system.
8 key steps to integrate your contract automation platform with other tools
- Identify integration points.
- Map the flow of information.
- Leverage your software platform’s advanced features.
- Work with Customer Success and IT for onboarding.
- Test integrations in advance.
- Train team members to use integrations.
- Monitor and optimize each integration.
- Keep integrated systems updated.
Let’s take a look at each of these steps in greater detail.
1. Identify integration points
First, identify which business systems could benefit from integration with your contract automation tool. Common integration points include Customer relationship management (CRM) systems, enterprise resource planning (ERP) software, human resources platforms, and financial accounting systems.
2. Map the flow of information
Map out how data flows between your contract automation system and other tools. Understanding this will help you identify the type of information that needs to be shared between systems, such as client details from the CRM or payment terms from the ERP system.
3. Leverage your software platform’s advanced features
When selecting a contract automation tool, be sure to choose one that provides the integrations you need. If possible, opt for features like third-party integrations and open API access, which allow different software systems to communicate with each other seamlessly.
4. Work with Customer Success and IT for onboarding
Collaborate with your software vendor’s Customer Success team, as well as your internal IT department, to ensure a smooth implementation process. These experts can help troubleshoot any issues and make sure the integration meets your security and compliance standards.
5. Test integrations in advance
Before rolling out integrations to the entire organization, conduct thorough testing. Check that data is syncing correctly between systems and that all integrations are functioning as intended.
6. Train team members to use integrations
Provide training to make sure your team understands how the integrated systems work together. Training should cover how data is shared between systems and how to use the integrated tools effectively to streamline their workflows.
7. Monitor and optimize each integration
After integration, continuously monitor the system to ensure it is functioning correctly. Gather feedback from users and be prepared to make adjustments to improve the efficiency and effectiveness of the integrations.
8. Keep integrated systems updated
Ensure that both your contract automation tool and the integrated systems are regularly updated. This will help maintain compatibility and take advantage of new features and improvements.
By following these steps to integrating your contract automation software with other business tools, your organization can achieve a more cohesive and efficient workflow, reduce manual data entry, and ensure consistency and accuracy across different systems.
How to measure the success of contract automation
Tracking the impact of contract automation in your organization is crucial to ensure you are reaping the intended benefits and identifying areas for improvement.
9 key metrics to help you evaluate the effectiveness of your contract automation system
- Contract cycle time: Monitor the time it takes for contracts to move from initiation to completion. A significant reduction in this cycle time is a strong indicator of successful automation.
- Contract error rate: Track the frequency of errors in contracts, such as data inaccuracies or misplaced clauses. A decrease in error rate signifies improved accuracy and reliability in your contract processes.
- Contract compliance rate: Assess how well contracts adhere to internal policies and external regulations. An increase in your contract compliance rate indicates effective control and standardization through automation.
- User adoption and satisfaction: Survey your team to gauge their satisfaction with the contract automation system. High user adoption and positive feedback suggest that the system is user-friendly and beneficial to your team’s workflow.
- Cost savings: Calculate the cost savings achieved by automating contracts, considering factors like reduced labor hours, decreased paper usage, and lower error-related costs.
- Number of contracts processed: Compare the volume of contracts processed before and after implementing automation. An increase in volume without a corresponding increase in staff or resources indicates higher efficiency.
- Auditing and reporting efficiency: Evaluate the ease and speed with which you can generate reports and conduct audits. Improved efficiency in these areas suggests effective data management and retrieval capabilities in your contract automation system.
- Contract renewal and fulfillment rates: Track the rates of contract renewals and successful fulfillments. Higher rates can indicate better contract management and client satisfaction.
- Deal closures and partner relationships: Assess the broader impact of contract automation on your business, such as faster deal closures, improved relationships with partners, and enhanced operational efficiency.
By regularly monitoring these metrics, you can gain a comprehensive understanding of how contract automation is performing and where you might need to make adjustments or further improvements. This ongoing evaluation is key to maximizing the return on your investment in contract automation software.
Legal and compliance considerations in contract automation
Navigating legal and compliance considerations is a critical aspect of implementing contract automation in your organization. Ensuring that your automated contract management system aligns with legal standards and regulatory requirements is essential for minimizing risk and maintaining trust.
8 key considerations in contract automation compliance:
- Understanding legal requirements
- Data privacy and security
- Electronic signature compliance
- Audit trails and record keeping
- Contract template compliance
- Regular compliance audits
- Training and awareness
- Consultation with legal experts
Let’s take a closer look at each of these considerations.
1. Understanding legal requirements
Different jurisdictions have varying legal requirements regarding contracts. It’s important to ensure that your contract automation system is capable of generating contracts that are legally binding and enforceable in the jurisdictions where your business operates.
2. Data privacy and security
With the increasing concern over data privacy, your contract automation system must comply with relevant data protection regulations, such as GDPR in Europe or CCPA in California. Ensure that the system securely handles sensitive information and adheres to industry standards for data privacy.
3. Electronic signature compliance
Electronic signatures are legally binding in many jurisdictions, but they must meet certain standards. Verify that your contract automation system supports legally recognized e-signature formats and includes proper authentication and verification processes.
4. Audit trails and record keeping
For compliance purposes, your system should maintain detailed audit trails of all contract activities, including who accessed the contract, who made changes, and the chronology of these events. These records are crucial for legal scrutiny and dispute resolution.
5. Contract template compliance
Regularly review and update your contract templates and clauses to ensure they are in line with current laws and regulations. This includes keeping up with changes in contract law, consumer protection statutes, and industry-specific regulations.
6. Regular compliance audits
Conduct regular audits of your contract automation processes to ensure ongoing compliance with legal and regulatory standards. This should include checking that contracts are being executed correctly and that data handling remains in compliance with privacy laws.
7. Training and awareness
Keep your team informed and trained on legal and compliance issues related to contract automation. Understanding the legal implications of automated contracts is crucial for everyone involved in the contract creation and management process.
8. Consultation with legal experts
It’s advisable to regularly consult with legal experts, especially when setting up or making significant changes to your contract automation system. Legal professionals can provide guidance on compliance with specific laws and industry regulations.
By getting proactive about legal compliance, you can ensure that your contract automation system not only enhances efficiency and effectiveness but also operates within a correct legal framework, safeguarding your organization against contract risks.
Conclusion: Contract automation empowers your organization to grow
As you move forward with contract automation in your organization, you’re taking a significant step towards streamlining your contract processes. This journey, from understanding what contract automation is to integrating it with your existing systems, positions your business to manage contracts more consistently and proactively.
Remember, the success of contract automation lies in careful implementation, regular monitoring, and adapting to legal and compliance requirements. By focusing on these aspects, you’re doing much more than just automating one process – you’re enhancing the way your business operates, and preparing your workflows for future growth.