Contracts are the bedrock of your business relationships. A lot of businesses focus on the cost of bad contract management but the flipside is that good contract management can not only save you from default but in fact can make you money. In this blog, I will cover five ways contract automation works for your business and how it can increase your revenue.
1. Automation Streamlines the Entire Contract Lifecycle
Until a few years ago, contract management was a highly manual, complex, and error-prone process. To function, it required highly skilled professionals, intricate storage and tagging hierarchies, flawless handoffs, and time and effort at every stage to ensure contracts were developed, fulfilled, and stored according to complicated business rules. Only 12% of staff involved with contracts found them easy to understand, and only 17% were happy with how they were formed and managed.
Contract management software like Anapact changed all that, introducing the powerful tool of contract automation to streamline, simplify, and protect the contracting process.
Put simply, contract automation is turning over processes that would otherwise be manual to software that can consistently and safely take actions on your behalf using established business rules. It means businesses can take advantage of capabilities like workflow management, machine learning, and natural language processing – things that computers do better than humans. It can be used at every stage of the contract development and fulfillment process and leads to accelerated decision-making, change management, and issue resolution.
The International Association for Contract & Commercial Management (IACCM) says contract automation can improve efficiency, outcomes, and visibility of contract function and process – and business leaders are starting to take note.
“Not many CIOs or CFOs pay attention when you are using a product which is just above Excel in terms of functionality,” it said in its 2018 automation report. “But if you show them natural language processing or semantic reading in a tool, they will – especially when it is accompanied by advanced analytics providing insights to risk, performance, incremental cost, and revenue opportunities.”
IACCM says contract automation can reduce the frequency of complaints or claims and facilitate on-time, on-budget completion of contracts or projects. It can also save you money in the following ways:
- The cost of legal employees and fighting challenges from poor contracting.
- Reducing the risk of financial loss from poor fulfillment and obligation management.
- Reducing sales operations costs by reducing the sales cycle by up to 24 percent.
- Shortens the contract drafting process and makes it more secure.
- Integrates with other systems, reducing the need for messy handovers.
- Ensures that you are always ready to renew, with current and new contracts accessible at your fingertips.
2. Automation Leads to Faster, Better Contract Drafting
Contract managers often say that to create good contracts, you need to start from the end of the process and think your way backward. The idea is that if you’re writing contracts with the last few stages of contract management in mind – auditing, reporting, renewal, and disposition – then you’re more likely to make decisions that will make those final stages easier, streamlining and standardizing in the process.
The cost of drawing up contracts is no joke. Recent figures from the IACCM found even low-risk contracts cost about $6,900, mid-complexity contracts cost about $21,300, and high-complexity contracts frequently run over six figures.
One of the ways contract automation can simplify contract drafting is in the use of an automated clause library. As the name suggests, a clause library is an easily searchable database of the contract clauses your company needs most often.
Your company can set appropriate permissions and business rules so the clauses can only be edited by approved staff (usually the legal team) and used in a determined set of circumstances (to avoid clauses built for one part of the business accidentally showing up in a contract for a different department). Clause libraries are dynamic and allow for a user to update the clause once instead of having to update across multiple templates, which reduces the risk of variance in clauses.
The business case for a clause library is twofold: It is a safer, faster way to produce contracts, and it democratizes the process, meaning that people who are not contract experts can be involved in contract construction, freeing up your high-level legal and contract staff for more skilled work.
3. It Speeds Your Contract Approvals Process
Once the contract is drawn up, it moves to the approvals stage of the contract lifecycle management process – and these new automation capabilities come with it. Workflow automation in a contract management tool like Anapact allows you to create workflows, assign approvers, and set conditions based on particular values, types, or other criteria. At any time, you should be able to see the status of the contract and how long it has been in the system. Built into some tools is an eSignature capacity that eases redlining and approval.
Once approved, the right software can then trigger additional workflows and integrations with other systems, leading to the creation of workflows or tasks that aid fulfillment. They can create notifications that integrate with email, calendars, or other fulfillment tools, create triggers for reporting requirements that will help with auditing, and escalate workflows according to business rules when a defined action is, or is not, taken in a certain timeframe. Companies who aren’t able to action newly signed contracts and start fulfillment immediately are leaving money on the table.
4. It Aids Contract Storage and Discovery
Let’s say you’re six months into a complex fulfillment process and you hit a snag. The vendor no longer has the part you had planned to use, so you go to your contracts to see what actions you can take. Fulfillment for your customer grinds to a halt while you work this out, requiring a change in assembly line scheduling. Unfortunately, the vendor contract was signed a year ago and the point of contact has since left the company. You make a phone call to IT and ask them to dig through the former employee’s email. Now two days have passed, your assembly line window has closed and you are several days of negotiation away from getting a new contract in place, the part manufactured, and your machines turned back on. If you had been able to find that contract at the time, you could have saved several days of productivity.
Missing, incomplete, and out-of-date contracts have very real business ramifications. The answer is to have a searchable repository that categorizes your contracts by type, groupings, and connection to other contracts. Much of the categorization can now be done by software, as your tool ingests the contracts and uses metadata and tagging to register keywords like client names, contract type, clause clusters, and fulfillment needs.
5. Contract Automation Streamlines Reporting and Analysis
Having a searchable repository unlocks your ability to compare performance across contracts, and create automatic red flags when the system identifies a discrepancy. You can also manage disputes inside your contract management software, creating an approval workflow, reporting, and connecting dispute activities to the client record and relevant contracts.
How Much is Your Business Losing to Bad Contract Management?
Did you know that the number of businesses using automated contract management tools grew 18 percent last year? Those are your competitors, and they’re moving away from slow, error-prone, manual processes and embracing automation for safer, faster, and less expensive contract management. Contracts are a vital part of your business – they are worth getting right.
Anapact is a complete contract management solution that was built by contract managers to simplify and strengthen small and medium-sized businesses. Get a demo today!