Legal teams are often thought to be the slowest function in a business, which is quite untrue if you ask me. It’s just that the processes are dependent on external stakeholders, which eventually leads to the wastage of valuable time and resources.
With multiple contracts in the works, including client agreements, procurement, and vendor contracts, each stage of the contract management process can get overwhelming. An effective contract workflow is an optimum solution to speed up your contract execution process.
Not only will you be able to reduce overhauls and speed up the entire process, but also enhance compliance and reduce risks.
Let’s explore how an effective contract management workflow can benefit businesses of all sizes and how you can optimize your own workflow for maximum efficiency.
What is contract workflow?
Contract workflow refers to the series of steps and processes involved in the creation, negotiation, approval, execution, and management of a contract. It outlines the various stages and actions required to ensure that contracts are drafted, reviewed, and finalized efficiently and effectively.
The workflow involves coordinating activities across multiple stakeholders, including legal, sales, procurement, and finance teams, to ensure that contracts are created, reviewed, approved, and executed efficiently and effectively.
To manage contract workflows effectively, you must have a clear understanding of the various stages involved in the contract lifecycle, as well as the roles and responsibilities of the stakeholders involved. You must also have the right tools and technologies in place to streamline and automate contract-related tasks, reduce manual errors and duplication of effort, and ensure compliance with legal and regulatory requirements.
There are some important steps of a contract workflow that must never be missed out on:
- Contract drafting
The first stage of the process is the creation and negotiation of the contract terms. This includes identifying the parties involved, specifying the scope of work, outlining payment terms, and detailing any other relevant terms and conditions. You can use existing templates to draft contracts instead of creating them from scratch.
Download SpotDraft's NDA Negotiation Playbook Template
- Contract approval
The second stage involves obtaining approval of contracts from all necessary parties involved, including legal, finance, and management.
- Contract execution
This is the stage where the actual signing and execution of the contract happens. This stage is critical to ensure that all parties are legally bound by the contract terms.
Also read: A Quick Introduction to eSignatures
- Contract monitoring and management
The fourth stage of the process involves ongoing monitoring and management of a contract to ensure that both parties are fulfilling their obligations and that any changes or issues are addressed in a timely and efficient manner.
- Contract renewal or termination
The final stage is all about contract renewal or termination, depending on the terms and conditions specified in the original agreement.
All these stages ensure that contracts are executed and managed more efficiently. But there’s more to it than just that. Let’s go figure.
Also read: Why Contract Monitoring Checklists are Essential for Effective Contract Management
4 Benefits of an effective contract workflow process
Benefits of an effective contract workflow
An effective contract workflow enables businesses to manage contracts in a systematic and streamlined manner, reducing the risk of errors, miscommunications, and misunderstandings.
By optimizing the contract management workflow, businesses can ensure that contracts are executed quickly and accurately, reducing the risk of legal disputes and improving overall business operations.
Here are some more benefits:
1. Improved turnaround time for sales contracts
By implementing an efficient contract workflow management system, businesses can significantly reduce the time it takes to prepare, review, and approve contracts.
This, in turn, can help sales teams close deals faster and improve their overall productivity.
With the help of automated workflows, contract requests can be quickly routed to the right stakeholders for review and approval, reducing the time it takes to complete each step of the process.
Additionally, the use of eSignatures can further streamline the process, allowing contracts to be signed and executed in a matter of minutes rather than days or weeks. All these factors contribute to faster contract turnaround times, which is crucial for the success of any sales team.
2. Replace manual work with automation
An effective contract workflow management process can significantly improve efficiency and productivity by streamlining the entire process from contract creation to execution and management.
You don’t need to manually track your contracts and ensures that all necessary parties are aware of their roles and responsibilities at each stage. This reduces delays and errors, improving overall productivity and allowing businesses to focus on other critical tasks.
3. Reduced contract management costs
A well-designed contract workflow helps businesses reduce the costs associated with contract management. By streamlining the process, you can save time and resources on tasks such as contract creation, tracking, and renewals. It also eliminates the need for manual processes, which can be prone to errors and lead to additional costs.
Also read: Tools & Tips to Automate Contract Creation
4. Better contract compliance
Contract management workflows can help ensure that contracts are executed in compliance with legal and regulatory requirements. This includes ensuring that all parties are aware of their obligations and responsibilities under the contract and that any necessary approvals or documentation are obtained. This helps businesses maintain contract compliance and reduces the risk of legal disputes and penalties.
7 Steps to set up an effective contract workflow
Selecting the right contract management software is critical to ensuring an effective contract workflow. The software should be able to automate the contract management process, including contract creation, tracking, and renewal, and should be scalable to meet the business's growing needs.
Check out this free guide to choosing a CLM for your business.
"Before adopting a tool, see all your options - explore products of at least 5 different vendors. After shortlisting a couple of those, test them out thoroughly in a sandbox environment to see if those tools are bringing in value."
~ Igor Poroger, Director of Legal, EMEA, Vectra AI
SpotDraft is capable of not only enhancing but also easing the contract management process along with helping you create workflows to speed up execution. More on that later.
Once the contract management software is selected, you must configure it to meet the business's specific needs. Let’s see how.
Step 1: Identify the stakeholders involved and define their roles
Before setting up a contract workflow, you MUST identify the stakeholders involved in the process, such as legal, procurement, sales, and finance teams, and define their roles and responsibilities. This helps ensure that everyone is aware of their roles and responsibilities in the contract management process, improving accountability and efficiency.
For instance, you need to answer the following questions to know who’s doing what.
- Who is responsible for owning the contract templates?
Typically, the legal team is responsible for creating and maintaining contract templates.
- Who creates contracts from these templates?
Usually, it is the sales team who creates contracts from these templates.
- Who approves contracts before they are sent out?
This may vary based on the organization's specific needs and may involve the sales operations or legal team.
- Who negotiates contracts?
Sales is often responsible for negotiating contracts under a certain value, while high-value contracts may involve legal and sales leadership.
- Who signs contracts?
C-suite executives are often authorized signatories.
Having clarity on all these roles will ensure that contracts you don’t end up sending contracts to the wrong team or function and avoid delays in the process. Once you have assigned these roles, you are ready for the next step in setting up an effective contract workflow.
Step 2: Map out the workflow process
The next step is to map out the workflow process, starting from contract creation to execution and management. Define the various stages of the contract management process and determine the tasks involved in each stage. This will help identify any inefficiencies or bottlenecks in the process that can be eliminated or improved upon.
- Drafting with templates: The first stage is to draft contracts from templates existing in the CLM.
- Review and approval: Once the contract has been authored, it needs to be reviewed and approved by all parties involved. This ensures that everyone is aware of the contract's terms and conditions and agrees to them
- Execution: Signing the contract and ensuring that all parties have signed it. This stage may also involve capturing and storing electronic signatures
- Performance monitoring: Monitor the performance of the contract to ensure that all parties are meeting their obligations
- Amendment and renewal: As business needs change over time, it may be necessary to amend or renew the contract to reflect these changes
- Termination: When the contract comes to an end, it needs to be terminated in accordance with its terms and conditions
Step 3: Define the contract templates and clauses
To ensure consistency and accuracy in contract creation, it is essential to define contract templates and clauses. A contract template is a pre-designed document that contains standard terms and conditions for a specific type of contract. By using templates, you can create new contracts quickly and efficiently while maintaining consistency across all contracts.
You can either create a custom template yourself or have your CLM provider create them for you. SpotDraft is seamlessly integrated with template-building features, so you can easily do it yourself at your own time, without having to worry about going to an external stakeholder for this purpose.
Secondly, to define a contract template, you'll need to review past contracts and identify common clauses and language that are essential for each contract type.
In addition to templates, you'll need to define clauses that can be added to contracts as needed. Clauses are specific sections of a contract that address a particular issue or concern. For example, a non-disclosure agreement (NDA) may include a clause that specifies the duration of the agreement or the consequences of breaching the agreement.
By defining contract templates and clauses, you can streamline the contract creation process, reduce the risk of errors, and ensure that all contracts comply with legal requirements and best practices.
Also read: 6 essential types of contract clauses you need to know
Step 4: Set up an approval workflow
After defining the various stages of your contract management process, you need to establish an approval workflow. This workflow should define the steps involved in obtaining approval for each stage of the contract process, from contract creation to execution. By setting up an approval workflow, you can ensure that all necessary parties review and approve the contract before it is finalized.
Here’s what a contract approval workflow looks like.
In an automated contract management system like SpotDraft, you can easily set up an approval workflow with customizable approval rules. These rules can include things like required approvals from specific individuals or departments, and automatic notifications to stakeholders when a contract requires their approval. This helps to streamline the approval process and reduce bottlenecks, ensuring contracts are processed quickly and efficiently.
Also read: How to Set Up an Efficient Contract Approval Process
Step 5: Leverage eSignatures
One of the biggest time sinks in contract workflows is the process of obtaining physical signatures on a contract. This can involve mailing or faxing documents back and forth, which can be slow and costly. However, with the use of electronic signatures (eSignatures), the entire signing process can be completed online, in a matter of minutes.
SpotDraft offers built-in eSignature functionality, which allows users to request signatures from all parties involved in a contract. This can be done directly from within the platform, eliminating the need for manual signatures and the associated delays. This not only speeds up the signing process but also reduces the risk of errors or missing signatures, improving the overall efficiency of your contract workflow.
Step 6: Test the workflow process
Before implementing the workflow process, it is essential to test it thoroughly to identify any issues or inefficiencies that need to be addressed. This helps ensure that the workflow process is effective and efficient and meets the business's specific needs.
Here are some key steps to follow when testing your contract management workflow:
- Conduct a pilot test: Select a small group of stakeholders who will be involved in the workflow and test the process on a limited number of contracts. This will help identify any issues or errors that need to be addressed
- Gather feedback: Collect feedback from all stakeholders involved in the pilot test. You will be able to identify areas where improvements can be made and ensure that the workflow meets the needs of all stakeholders
- Make necessary adjustments: Based on the feedback received, make necessary adjustments to the workflow process and templates. Ensure that the workflow is efficient, easy to use, and meets the needs of all stakeholders
- Conduct a full-scale test: Once you have made the necessary adjustments, conduct a full-scale test of the workflow process. This will help you identify any additional issues or errors that need to be addressed before deploying the system
- Refine the workflow process: Based on the results of the full-scale test, refine the workflow process and templates as needed. Ensure that all stakeholders are comfortable with the new system and understand their roles and responsibilities.
Step 7: Train employees on how to use the software and follow the workflow process
“No matter how nifty and cool the technology is, it will fail miserably if no one on your team (or in the company) uses it. This is why user acceptance is among the most critical tasks in your project plan. User acceptance is primarily the process to ensure the technology is presented – and works – in a way that people will use it, along with the training program on how to use the tool.”
~ Sterling Miller, CEO and Senior Counsel, Hilgers Graben PLLC
Ten Things You Need to Know as an In-House Counsel
Finally, it is essential to train employees on how to use the contract management software and follow the workflow process. Only when you train them will they be aware of their roles and responsibilities in the contract management process and follow the contract workflow process consistently and accurately.
Here are some tips for training your employees:
- Develop a training plan: Create a plan that outlines the training objectives, the topics that will be covered, and the timeline for training
- Use a mix of training methods: Consider using a variety of training methods such as online tutorials, classroom training, and one-on-one coaching
- Provide hands-on training: Give your employees the opportunity to practice using the software in a real-world setting so that they gain confidence and become proficient in using the software
- Provide ongoing support: Make sure that your employees have access to ongoing support and resources, such as user manuals and online forums. This will help them troubleshoot any issues that they may encounter while using the software
Also read: How to Master the Contracting Process
Benefits of working with SpotDraft to manage contract workflow
SpotDraft is a cloud-based contract lifecycle management software that not only allows you to create workflows from scratch but also improves efficiency, speed, and productivity while doing so. By configuring SpotDraft to meet your business needs, you can streamline your contract management process and save time and money while reducing the risk of errors and omissions. Here’s how.
1. Create custom templates
You can easily use pre-existing templates or create custom contract templates to create contracts in SpotDraft while saving time.
To create a custom template, simply click on the "Templates" tab in the SpotDraft dashboard, and select "New Template." You can then add custom fields, clauses, and formatting to create a template that meets your specific needs.
Here’s a guide on how to create contracts from a template on SpotDraft
Create a contract from a template on SpotDraft
2. Build automated contract workflows
For instance, if it is an approval workflow, you can set it up by clicking on the "Approvals" tab and selecting "New Approval." You can then define the approval process, including who needs to approve the contract and in what order. SpotDraft allows you to set up multiple approval workflows for different types of contracts, making it easy to manage even complex contracts.
Build automated contract workflows
3. Leverage eSignatures
SpotDraft makes it easy to leverage eSignatures to speed up the contract signing process. Simply select the "eSignatures" tab and follow the on-screen instructions to add eSignatures to your contracts. With SpotDraft's eSignature feature, you can get contracts signed in a matter of minutes, rather than days or weeks.
Also read: A Quick Introduction to eSignatures
Conclusion
All in all, an effective contract workflow is essential for businesses of all sizes. It ensures that contracts are managed efficiently, reducing costs and mitigating legal risks.
SpotDraft is an all-in-one contract management solution that simplifies the entire contract management process, from creating templates to contract execution. With features like AI-powered contract review and collaboration tools, SpotDraft is the perfect solution for businesses looking to streamline their contract management workflows.
So why wait? Book a SpotDraft demo today and experience the benefits of an effective contract workflow for yourself!
