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How Automation of Contract Workflow Assists Businesses

How Automation of Contract Workflow Assists Businesses
The Siliconreview
09 March, 2022

Legal documents allow businesses to operate smoothly and securely. As organizations expand and stakeholders increase, legal documentation becomes necessary to ensure rules are followed and agreements honored. Contracts are critical to protecting companies and their interests. With the increase in scale of businesses, an ever-increasing number of resources has to be allocated for contract creation and workflow management. Automation of contract management through technologies like contract workflow software are necessary to businesses at this rate.

This article aims to explore how automation streamlines the contract workflow process. If you have not introduced automation in your contract creation and management systems, read on to find how your organization has the potential to increase its efficiency by investing in it.

Problems in the Manual Contract Workflow

Traditionally, contract workflow has been dominated by repetitive tasks, delays, and errors, making the process inefficient and, at times, counterproductive. The details of the problems faced in manually handling contract workflow are explored below:

1. Inefficient Resource Allocation

Time, money, and talent are wasted when companies do not automate their contract workflows. According to IACCM studies, manually handling paper contracts and involving unnecessary personnel and resources makes the average cost of a simple contract $6,900, and that of complex agreements rises to $200,000. In addition, the Aberdeen Group estimates that it takes around a month for the creation, negotiation, and finalization of a contract.

Gartner reports that 25% to 40% of a lawyer’s time is wasted on tasks that do not need a lawyer, resulting in productivity loss approximating $2.7 million. Unautomated contract workflow even requires lawyers to start working on templates from scratch every time and keep updating them manually. Compliance issues can also arise when clauses, templates, and approved language become obsolete or inconsistent with contractual standards.

Information must be also searched for every time, and data must be entered manually, making the process prone to errors. Work often has to be duplicated as it is first done on a platform that the contract creator uses and then in tools that the rest of the organization does. Moreover, the manual processes of printing, scanning, and posting take time, not letting companies close their deals fast enough.

2. Management Issues

According to World Commerce and Contracting, poor contract management decreases profitability by 9% of annual revenue. A KPMG survey further revealed that organizations can lose 40% of a contract’s value if it is not governed closely.

Difficulties in management begin right at the creation process. Seamless collaboration is necessary for teams to draft accurate and profitable terms. Communication is a challenge in manual processes, especially if team members have to do it remotely. Changes made by colleagues are also difficult to keep track of: this can lead to inconsistent content and can even pose a security issue.

Even though contract and procurement teams work tirelessly to negotiate favorable terms for companies, the lack of proper and continuous tracking of contract terms ends up yielding lesser returns than possible per agreement. If teams lack leading-practice knowledge and resources to govern and are not backed up by technology to fill the gaps for them, contract management can be disastrous.

3. Storage, Update, and Renewal Challenges

The Journal of Contract Management revealed that approximately more than 70% of the businesses it researched could not locate at least 10% of their contracts.

Traditional repositories make storage and retrieval an ordeal. When stored as printed files, separate sections and rooms must be allotted as contract repositories. This adds to overhead costs, makes retrieval a mess, can cause contracts to get misplaced, and offers no solution to alert for contract renewal and updates.

Although storing contracts as PDf files solves a few of these problems, security, data breaches, and lack of update and renewal reminders are still challenging. Improper tracking and lack of fulfillment of legal obligations can not only lead to reduced profitability but can also hurt your reputation and have costly consequences in the form of fines.

Automation as the Solution

Automation reduces, if not eliminates, a majority of the problems associated with manual contract creation and management. Aberdeen estimates a reduction of contract administration costs by more than 25% when businesses move towards automation. The same report estimates the length of contracting cycles to decrease by half through automation. Let’s look at how automation facilitates the contract creation and workflow process.

1. Allows Swift Creation

Automation eliminates the need for the workforce to handle repetitive and redundant tasks manually. Contract creation software offers pre-designed, easily modifiable templates, freeing legal teams from continuously designing and updating contract templates. The approved ones can then be set up to be digitally available for access, allowing for instant initiation of the creation process. The self-service feature further enables any employee to access pre-approved templates without consulting legal teams every time.

2. Facilitates Communication

Automation allows authorized employees to access and edit remotely. Editing rights can be controlled through software, and contracts can be routed through preset approval routing workflows. Communication is further facilitated through e-signatures, enabling contracts to be wrapped up swiftly.

3. Enhances Security

Automation records the audit trail, allowing changes to be carefully monitored. In addition, end-to-end encryption that contract workflow software offers further strengthens data security, allowing you to control who has access to data.

4. Ease of Storage and Retrieval

Cloud-based solutions offer a centralized platform dedicated to the organized storage of contracts. Locating, retrieving, and updating contracts becomes straightforward through automation. Since no physical space is needed, extra costs do not have to be incurred to store essential data. Reminders can also be set up to renew contracts on time, letting your company fulfill all its legal obligations timely.

Endnote

Automation has taken over the world and transformed everything from menial tasks of organizing data to surprising innovations like employing robotics in podcasts. Moreover, by offering solutions to improve efficiency, it has redefined the limits of productivity.  

The increasing competition in today’s market is pushing organizations to improve their performance. As a result, companies are developing and investing in strategies that can soothe their pain points. Contracts are extremely valuable to businesses, and so their creation, management, and tracking need to be as smooth as possible. Tech-enabled platforms streamline contract workflow processes significantly by automating them. Given the benefits of such technologies, investing in them is no longer a choice: you have to do it if you aim to survive in the market.