While contract management automation has significantly improved the efficiency and effectiveness of legal teams, some organizations and legal professionals may still face challenges in adopting and fully utilizing contract management tools.
This can be a result of improper planning, poor integrations, slow adoption by stakeholders, or the varying complexities of contract documents.
In this guide, we will go back to the drawing board, exploring the fundamentals of automated contract management and offering a deep dive into best practices and tools you can leverage to get better results.
What is contract management automation?
Contract management automation is the use of technology to manage every aspect of the contracting process with minimal human contribution.
With contract management automation, you can automate processes like:
- Generating contracts
- Tracking contract status
- Managing negotiations
- Collecting signatures
- Storing contracts
- Monitoring compliance, and much more
Studies from McKinsey Quarterly have shown that as many as 45% of all business operations can be automated. Another study by Goldman Sachs highlighted the benefits of leveraging automation for contract management, citing:
- A 10-30% reduction in operating costs
- 90-100% boost in compliance
- 75-95% reduction in erroneous payments
- 50% reduction in negotiation cycles, and
- 30% increase in renewal revenue.
Also read: 8 Top Contract Management Software Platforms
How does contract management automation differ from contract automation?
Contract management automation and contract automation are terms that are used interchangeably. But at a granular level, both have fundamental differences you might need to note.
First, let's consider the scope. Contract management automation is a more comprehensive concept, encompassing every aspect of the contract management lifecycle, from the initial drafting process down to storage, compliance tracking, renewal, analytics, and other post-execution activities.
On the other hand, contract automation hones in on specific aspects of the contract creation process. Thus, it has a narrower scope. Specific contract creation processes you can automate include:
- Contract drafting (using templates)
- Contract approvals (using automated approval workflows)
- Contract signing (using e-sign tools) and
- Document sharing (using bulk sending tools), among others.
Secondly, contract management automation can be complex, as it usually requires the integration of multiple systems and processes into one robust mechanism. Contract automation, on the flip side, is typically less complex since it requires just the tool needed for automating specific processes.
5 Best practices for contract management automation
Despite the advancements in automated contract management technology, many organizations still face challenges in fully optimizing and leveraging the benefits of these systems.
However, the best practices discussed in the section will ensure that you won’t have to struggle with contract management automation anymore. Let’s dive in.
#1 Identify contract workflows that need to be automated
The first step is to dive into your existing contract workflows, from creation and negotiation to approval and renewal. Identify specific tasks that can benefit from automation. This typically includes repetitive tasks like, data entry, approvals, document generation, redlining and version control, report generation, and more.
It is also helpful to prioritize contract management workflow automation opportunities according to their feasibility and potential impact on your company’s bottom line. Consider factors such as the frequency of a particular workflow, the complexity involved, the volume of contracts processed, and the potential for error reduction or time savings.
#2 Centralize your contract data for easy management
Housing your contract data in one central repository is one of the most critical steps in contract management. When all your organization's contract data is adequately centralized, contracts become much easier to manage and automate.
That said, ensure you centralize your contract data in a repository that has role-based access control features, is searchable, and has the capacity to connect related documents for better context.
"Think about how many contracts sit on someone's laptop or in multiple databases, and then think about the value of contract management. The importance of simply being able to locate all of the company's contracts and relevant amendments in one place without significant effort cannot be minimized."
~ Sterling Miller, CEO and Senior Counsel, Hilgers Graben PLLC
Ten Things: Minimizing Risks in Commercial Contracts
#3 Standardize contract templates and clauses for consistency
Make sure you have a robust library of contract templates comprising all the common clauses, fall-back provisions, terms, and conditions your organization uses across contracts.
This creates a level of consistency in contract language and formatting, eliminates the need to build from scratch, and reduces the chances of errors or omissions. It is also important to keep your templates up to date with any legal changes that may affect the terms and obligations outlined in the contracts.
“The absence of contract templates leads to non-standardisation and makes contracts prone to errors. The legal team, therefore, is required to delve deep into contracts and proofread all clauses with a fine-tooth comb to identify and rectify the simplest of human errors.”
~Igor Poroger, Director of Legal, EMEA, Vectra AI
The Counsel Corner: How CLMs Empower Legal Teams in B2B SaaS Companies
#4 Ensure data security and compliance to protect important data
Contracts usually contain sensitive information that needs to be protected within the boundaries of data privacy regulations like HIPAA, GDPR, and SOC-2.
Ensure your automation tools have robust security features like encryption, access controls, audit trails, and reliable backups.
Furthermore, you should define clear data retention and archival policies for different types of contracts based on legal and business requirements.
#5 Regularly evaluate your automation strategy to identify areas of improvement
No matter how robust your contract management automation strategy is, there is always room for improvement. You must create a schedule for evaluating the impact of the automation strategy on your overall contract management performance.
Evaluate key metrics such as contract cycle time, error rates, compliance levels, and user satisfaction. You can collect feedback through surveys, 1-on-1s, or focus groups.
After identifying areas of improvement, your next move would be to develop an action plan for eliminating any identified bottlenecks and optimizing your automation strategy. This might include updating your templates and clause library, upgrading your automation tools, or establishing better performance monitoring mechanisms.
Before implementing any major changes, conduct pilot tests or proofs of concept. This allows you to validate the effectiveness of the proposed solutions in a controlled environment.
Also Read: Contract Management KPIs
Key contract management automation tools
The legal tech industry is buzzing with an ever-increasing number of automation tools, some of which can be beneficial for contract management.
In this section, we’ll look at a few categories of automation tools you can utilize to make your contract management processes more efficient.
#1 Contract repository and organization tools
Contract repository and organization tools allow you to house all your contract documents and data in one central location. This can include template files, clause libraries, historical and current contracts, supporting documents, correspondence, and more.
These tools typically provide ample space and allow you to create folders and subfolders where you can upload and organize documents in a variety of formats. They also come with search functionalities, allowing you to easily find specific documents using a simple search box.
Repository tools also offer automatic version control features, allowing you to track version history for files and revert to previous versions if needed. Furthermore, these platforms provide security functionalities like access control, encryption, and two-factor authentication.
Examples: Google Drive, Dropbox, and Zoho WorkDrive
#2 Document collaboration software
Legal teams leverage document collaboration tools to access, edit, and offer feedback on documents simultaneously. Some of these platforms provide word processors, spreadsheets, or a combination of both.
With document collaboration tools, you can draft your contract, suggest changes or make edits, reply to comments and feedback, track changes, etc.
Document collaboration tools also offer a level of security for your contracts, allowing you to set who gets to view, comment, or edit the contract.
Examples: Microsoft Office, Google Workspace, Quip, and Dropbox Paper
#3 Electronic signature platforms
Electronic signature (e-signature) platforms provide a secure and convenient way to sign documents without the need for physical signatures or paper-based processes.
You can create your digital signature on these platforms by typing in a textbox or drawing your signature with a stylus on a touchscreen.
These platforms convert your signature into a digital format and secure it through a variety of methods, like end-to-end encryption, two-factor authentication, email verifications, and more.
One thing to note about e-signature is that its validity and enforceability vary according to jurisdiction. So you need to ensure your use of these platforms complies with relevant regulations, like the ESIGN (United States) and eIDAS (Europe).
Examples: DocuSign, SignEasy, HelloSign, and SignNow
#4 Contract analytics software
“Insights can help the legal team identify gaps in the system and work toward improving workflows and building solutions that would increase efficiency.”
~ Igor Poroger, Director of Legal, EMEA, Vectra AI
The Counsel Corner: How CLMs Empower Legal Teams in B2B SaaS Companies
Contract analytics tools leverage artificial intelligence (AI) and natural language processing (NLP) techniques to analyze and extract insights from contracts and legal documents.
You can use these tools for diving into data from historical contracts, uncovering bottlenecks, exploring improvement areas, and developing optimization strategies. They also come with reporting capabilities, allowing you to export and share your insights with stakeholders in a few clicks.
Other things you can do with these tools include compliance tracking, risk assessment, and general contract review.
Examples: Kira, Luminance, Thought River, and Evisort
#5 Contract Lifecycle Management (CLM) platforms
Contract Lifecycle Management (CLM) platforms are comprehensive solutions structured to facilitate and automate various repetitive contract management processes across the entire contract lifecycle.
You can leverage a CLM to automate contract creation using its collaborative editor, prebuilt templates, clause libraries, third-party integrations, workflow automations, e-signature tool, etc. These significantly reduce the time and effort involved in generating a fully-fledged contract while enhancing accuracy, compliance, and collaboration throughout the process.
“Leveraging a CLM has been key because it has reduced a lot of friction from handoffs between legal and business. Rather than going back and forth over email, Slack, Word, Zoom, DocuSign, and a whole tech stack, the CLM acts as a single source of truth. And that's why what you do at SpotDraft is so important because that's what in-house GCs and legal heads need the most: A way to streamline their contracting motion.”
~Jonathan Franz, Head of Legal, Crunchbase
The Counsel Corner: Navigating Economic Turbulence and Thriving in Chaos
In fact, a fully-fledged CLM like SpotDraft, combines all the tools mentioned above into one robust, easy-to-use platform, allowing you to manage your contracts and automate tasks more productively.
Specifically, here’s an outline of some useful features you can get on SpotDraft:
- Centralized storage: You may everage SpotDraft’s repository to store contract documents in a secure and searchable way
- Contract management workflow automation: SpotDraft allows you to automate processes like contract creation, approvals, contract requests, contract signing (for standard, low-risk contracts), and more
- E-Signature: SpotDraft, comes with in-built secure and compliant e-signature tools that allow you to collect signatures seamlessly.
- Analytics: You can also get deep insights into contracts using SpotDraft. It allows you to identify potential risks, bottlenecks, best-performing contracts, total contract value, and much more. That way, you can optimize for better results
- Templates: SpotDraft expedites your contract creation process by offering robust templates fitted with standard legal guardrails and approval routing functionalities to help you create contracts in record time while keeping risks low and maintaining compliance.
How to choose the right contract management automation tools
Selecting an automated contract management software involves sifting through an intimidatingly extensive collection of options. But how do you ensure that the one you pick is actually the right one for you and your organization?
This section dives into that.
#1 Identify your specific requirements
Begin by understanding your organization's contract management needs. Make a list of essential features and functionalities you require from the automation tool. Consider aspects like contract creation, tracking, version control, notifications, analytics, reporting, integration options, and any specific industry or compliance requirements.
#2 Set a budget
Determine the budget allocated for the contract management automation tool. Consider the upfront costs, such as software licenses or implementation fees, and ongoing expenses, like maintenance, updates, and support. It's important to strike a balance between affordability and the value the tool provides.
#3 Evaluate the ease of use
User-friendliness is crucial for successful adoption of the tool within your organization. Look for intuitive interfaces, streamlined workflows, and customizable settings that align with your organization’s needs. Consider whether the tool offers training or onboarding resources to help users quickly get up to speed.
SpotDraft ranks as one of the most user-friendly CLMs in the industry, scoring 9.2 on G2 against the industry average of 8.8. Alongside its intuitive interface, SpotDraft amplifies positive user experience by offering assistance with implementation, template setup, and contract migration for new customers.
#4 Assess customer support
Reliable customer support is essential for resolving issues and getting timely assistance. Research the reputation of the vendor or provider in terms of responsiveness, availability, and expertise. Check if they offer various support channels, such as phone, email, or live chat, and verify whether these channels are available to users based on pricing tiers.
SpotDraft is well-known for its responsive and highly-skilled customer support team that helps customers get the best in all aspects of their contract management experiences. Each SpotDraft customer gets access to 24/7 support, shared Slack channels, and a dedicated customer success manager for one year.
Below is just one of the many reviews on G2 about the quality of SpotDraft’s customer support.
#5 Consider compatibility with other systems
Evaluate the automation tool's compatibility with your existing systems and software. It should seamlessly integrate with your organization’s existing business tools, such as CRM, ERP, or document management systems.
SpotDraft, for instance, comes with an easy-to-use API that enables you to connect any existing business tool in your company’s tech stack. It comes with inbuilt integration to a variety of popular apps, like Salesforce, Google Drive, Slack, HubSpot, and DocuSign. Furthermore, if you need help integrating a specific tool that doesn’t come out of the box, you can always get in touch with the team.
Integration capabilities eliminate the need to jump between systems, ensure smooth data transfer, cut off duplicate data entry, and improve overall contract management efficiency.
#6 Check for user feedback and reviews
Consider seeking reviews from existing clients or users to get insights into their experiences and satisfaction levels. You can get reviews on G2, Capterra, Gartner, TrustRadius, and more.
It is also vital to ensure that the reviews you consider are from real and verified users. Some platforms have a badge showing reviewers who have passed verification processes.
SpotDraft is one of the best-rated CLMs on G2, with users particularly impressed by its ease-of-use, customer support, and functionalities.
#7 Request demos
Narrow your options to a shortlist of automated contract management software that meet your requirements. Reach out to the vendors or providers and request demonstrations. SpotDraft, for instance, allows you to ask for a personalized demo where you get a direct perspective of how the platform's contract management automation capabilities can help you get better results for your organization.
#8 Evaluate long-term scalability
As your organization grows, the contract management automation tool should be able to accommodate increased volume and complexity. When you get in touch with the platform’s sales team, ensure you ask questions about scalability options and assess whether the system can adapt to your evolving needs in the future.
More deals, fewer hassles
Manual, repetitive tasks are the bane of contract management, fraught with oversight errors, risks, and mental exhaustion.
But by choosing the right contract management automation tool and implementing the best practices discussed in this guide, you will not only eliminate annoying repetitive tasks but also drive better results with contract management.
Want to get a close-up view of how SpotDraft can put an end to your organization’s contract management struggles? Click here to request a personalized demo.