Studies have shown that contracts govern 60 to 80% of business operations. However, nearly 70% of growing businesses still use manual processes for drafting contracts and managing workflows.
As a growing business, manually onboarding and maintaining contracts at scale can have severe implications, from non-compliance and poor delivery to litigation and financial losses.
However, as automated systems continue to emerge, businesses are becoming increasingly efficient with contract lifecycle management, closing deals faster, and eliminating business risks.
In this guide, we will explore tools that automate the contract creation process as well as pro tips you can leverage to ensure your contracts are as top-notch as possible.
Why must you automate your contract creation process?
Speed is one of the main perks of automation in contract management. With manual processes, teams often rely on multiple tools like word processors, calendars, emails, CRMs, and ERPs to create a fully-fledged contract. Because they have to switch between systems every time, developing contracts becomes challenging and painfully time-consuming.
Automation tools integrate these independent systems, allowing users to utilize them for contract creation within a single interface. You also get access to a robust repository of templates to expedite your contract creation process.
Furthermore, there are usually cases of long-drawn-out misalignment between legal teams and other departments during manual contracting procedures. However, with automation, organizations can foster alignment, reduce contract cycles by 50%, and close deals faster.
According to World Commerce and Contracting, a typical Fortune 1000 company manages between 20,000 to 40,000 contracts at any time. High-performing organizations create and manage contracts at scale by automating all repetitive tasks.
This eliminates burnout, errors, and other risks associated with manual processes, allowing the team to focus on what matters: growth.
Also, no business wants to scale the legal team the same way they scale the rest of the business units—considering the costs of hiring extra manpower in legal departments. Thus, it is essential to leverage automation tools to remain efficient and scalable with minimal headcount.
3: Efficient quality control, error detection, and risk mitigation
Automated contract creation tools offer standardized, brand-fit methodologies for contract creation and management. This allows individuals from different departments to create and collaborate on contracts with minimal errors.
Automated tools make it easier for legal teams to review contract documents and ultimately eliminate risks associated with error-ridden contracts—customer churn, non-compliance, over-charging, and litigation.
4: Improved collaboration
Misalignment between sales and legal teams is fairly common in organizations. While the sales team sees legal as a bottleneck in contract procedures, the legal team sees the sales department as reckless and capable of putting the business at risk. Traditionally, ironing out their contrasting opinions during contract procedures is time-consuming, and can make them lose deals altogether.
However, automation eliminates this by providing pre-made contracts, automated approval routing, fallback clauses, and integration with business tools. That way, the heated back-and-forths between both teams (and other teams, for that matter) becomes minimal.
5: Improved compliance
An automated contract creation tool helps with compliance tracking, making it easier to ensure that all parties deliver contractual obligations without violating company, government, and industry standards.
This is made possible by automating compliance-related tasks like tracking milestones, monitoring payment schedules, maintaining an up-to-date clause library, and protecting data according to existing privacy regulations.
Microsoft Word—The OG contract creation too
While it wasn’t specifically built for creating contracts, Word was among the tools that pioneered the digitization of contract creation processes, playing a crucial role in revolutionizing the “hard copy” experience.
More modern and flexible tools have since emerged, but Word remains the most popular tool for contract creation, “hosting” the majority of contracts currently in existence worldwide.
Microsoft Word’s lean but useful features
Microsoft Word comes fitted with a bunch of contract templates you can leverage to avoid writing contracts from the ground up.
It also supports version control by allowing users to track contract changes at any time. While this is a helpful feature, it doesn't come enabled by default, and most users actually fail to turn it on.
Word also comes with an eSignature functionality that participants can leverage for signing contracts quickly.
Is Microsoft Word an ideal tool for creating contracts?
As a multi-purpose word processor, Word is designed to detect grammar errors, not legal oversights. Thus, identifying legal gaps and mitigating contract risks with this tool is a heavily manual process for lawyers.
In general, Microsoft Word is widely used by legal teams for its simplicity. But since it isn't built explicitly for contract creation, it lacks the flexibility and robustness needed to create high-quality contracts on time and at scale.
Enter the era of Contract Lifecycle Management (CLM) tools
Contract Lifecycle Management (CLM) is the dynamic and systematic management of contracts from request and approval to compliance and renewal.
The use of technology in CLM has helped companies close deals twice as fast as they could've done with traditional tools. These purpose-built systems come fitted with mission-critical components—clause libraries, templates, analytics, and more—that help teams create and manage contracts at speed and at scale.
SpotDraft offers a complete ecosystem of functionalities that automate an entire contract lifecycle and simplify workflows for teams.
How SpotDraft automates the contract creation process
The platform comes with predefined workflows that automate stakeholder approval, making it easier to track approval history for audit purposes. You also get a centralized repository of all existing contracts with SpotDraft, so you never have to spend time manually searching for critical contract data at any time.
SpotDraft also comes fitted with analytics features that provide insights and data on bottlenecks, lifecycles, turnaround times, and areas of improvement.
Furthermore, the tool expedites your end-to-end contract creation processes through a library of comprehensive templates with built-in approval workflows, clause triggers, and guardrails for risk management. That way, you can create a fully-fledged contract and close deals two times faster.
Click here to learn more about how SpotDraft can revolutionize your contract creation experience.
Also read: How to Master the Contracting Process
6 Tips to automate your contract creation process like a pro
1: Utilize templates for high-volume contracts
Creating contracts from scratch can be time-consuming, and when your company begins to experience growth, the workload can become mind-numbing. A smart way to work around this is to templatize high-volume contracts like NDAs, MSAs, SLAs, and SOWs. The best CLM tools in the industry come with a library of robust templates to choose from while letting you customize them to suit your unique objectives.
2: Create a clause library for most-negotiated clauses
A contract clause library houses all the clauses you use for building your contracts. It contains definitions, use cases, and fallback positions (alternative clauses) you can use when required. This ensures consistency across generated contracts, and with CLM tools, legal teams can search and import clauses quickly.
3: Enable business teams to make small changes to contracts on their own
You can get even more efficient by granting "selective permissions" to specific aspects of the contract for authorized business teams. This enables them to make small changes independently without going through long approval processes. CLM tools also offer redlining capabilities, helping you keep track of all changes made to the contract. That way, you can easily approve or rescind modifications.
4: Set up an approval workflow for each template
You can make your contract templates more efficient by integrating conditions and triggers for approval workflows. You can set automatic approval for contracts that meet specific criteria, such as deal size or client location. With this, you won't have to lose valuable time waiting for stakeholder approvals. Here's a guide on how to set an efficient approval workflow, with templates and examples.
5: Centralize all your Contract Data in one Place
Data silos are very harmful to organizational progress. When departments create and store contracts separately, getting access to contract data and streamlining future processes becomes difficult.
You can prevent this by providing a central hub for storing your organization’s contract data. This makes data accessible to the legal teams and enables them to explore insights around existing data, streamline processes, and create better contracts in the future.
6: Implement role-based access controls to keep business data secured
Data security is mission-critical for every business, as leakages and unauthorized access can present multiple financial and reputational risks. Your contracts should be set to make them only accessible to authorized stakeholders.
Re-imagining your contract creation experience with ultra-modern technology
The traditional contract creation process is plagued with many challenges, from high error margins and privacy breaches to slow approvals and daunting review processes. But thanks to automated contract creation tools, most of these challenges are gone.
While making the switch to your preferred CLM tool, it is important to pay attention to the nature of your business, the industry regulations, and your unique objectives. That way, you can identify the tool that has the right functionalities for sealing contracts and scaling your business.
Want to check out SpotDraft and how it can help you close more deals? Request a demo!