One overlooked clause cost Acme millions in a surprise lawsuit. The culprit? A hidden liability, buried in a manually managed contract. This is a scenario that’s all too common.
In today’s dynamic business environment, the reliance on cumbersome, paper-based contract management systems is rapidly becoming obsolete—not to mention a potential liability. The imperative for digital transformation, driven by the need for heightened efficiency, stringent compliance, and enhanced operational agility, has permeated every facet of modern enterprise. Automated contract workflows have emerged as a pivotal strategy, fundamentally reshaping how organizations handle agreements, transitioning from archaic manual processes to streamlined, digital operations. This shift to automate contract workflows is not merely a technological upgrade but a strategic necessity to maintain competitiveness and mitigate risks in an increasingly digitalized marketplace.
Businesses run on contracts. As organizations expand, the sheer volume and complexity of these agreements escalate significantly. Even seemingly simple tasks, such as verifying contract expiry dates or locating the most current version, can consume substantial time and resources, leading to operational bottlenecks. Moreover, absence of efficient contract management processes can result in substantial revenue losses, underscoring the critical need to automate contract workflows. Automation provides a strategic advantage, enabling businesses to manage their contractual obligations—from electronic creation, signing, and negotiation to management–with greater precision and speed, thereby enhancing overall operational effectiveness.
Automation is no longer a mere convenience but an indispensable component of effective contract lifecycle management (CLM). It empowers organizations to organize, track, and analyze contracts with greater accuracy, significantly reducing financial exposure and improving operational and financial outcomes.
Crucial strategies to automate contract workflows
Automating contract workflows requires a meticulous, step-by-step approach. Below are several crucial strategies to get started on the journey.
Define objectives
Initially, organizations must define clear objectives and strategies, involving key stakeholders to identify pain points and desired outcomes. Determining which teams will benefit and how success will be measured is crucial, as is clarifying priorities, such as pre-signature or post-signature processes, and securing the necessary funding and resources. Subsequently, ensuring successful implementation necessitates engaging experienced legal business partners for guidance and expertise, addressing data migration and system integration challenges, and customizing the system to meet specific organizational needs.
Prepare data so it is AI-ready
Preparing data for automation is paramount. This involves transforming unstructured contract data into a structured format, standardizing key data points for accurate AI processing, and ensuring the data is “AI-ready” to maximize the effectiveness of automated tools. Data cleansing, roll-ups, and quality assurance are equally critical, requiring the implementation of a robust data quality strategy before system implementation, establishing processes for extracting, storing, and validating contract data.
Develop a contract intelligence system that works in concert with CLM
Recognizing that each organization possesses distinct operational requirements, the development of bespoke contract analysis tools and processes ensures precise data extraction, targeted analysis, and the delivery of actionable insights tailored to specific organizational needs. This customized approach empowers organizations to conduct comprehensive portfolio-wide searches for critical provisions, generate nuanced contract risk assessments, and leverage contract data for in-depth risk analysis, among other functionalities.
Leading contract intelligence platforms leverage comprehensive contract data models, encompassing thousands of pre-structured contractual elements, applied uniformly across both newly executed and legacy agreements. To maintain optimal accuracy, AI-driven reviews are augmented by expert human oversight. Ultimately, these data models enable legal departments to transform their contractual obligations into actionable intelligence, seamlessly integrating with preferred CLM systems to enhance platform efficacy through customized AI-driven insights.
Integrate automated contract workflows into enterprise systems
Integrating insights from contract data with other enterprise systems is essential for cross-functional intelligence. This integration enables sales, procurement, supplier management, and finance teams, for example, to leverage contract data for informed decision-making and allows data to flow into systems that handle CRM, ERP, and other business intelligence tools.
Pre- and post-contract signature automated contract workflows
Of course, these steps are just the beginning. AI can also help automate contract workflows in other pre- and post-signature activities, including the creation of contracts from templates, analyzing proposed contract terms against predefined risk profiles, flagging potential issues, and providing alternative language suggestions. Further, beyond basic tracking, automated contract workflows can monitor contract obligations and trigger alerts for upcoming deadlines, renewals, and milestones, and route contracts through predefined approval chains based on specific criteria, ensuring proper authorization and reducing delays.
Post-execution, automated contract workflows can track key performance indicators (KPIs), and compliance metrics allows organizations to measure contract effectiveness and identify areas for improvement.
Unlock the full potential of contracts
The future of contract management is undeniably digital, with automation at its core. By embracing digital solutions, organizations can enhance efficiency, reduce risks, and drive better outcomes. Integrating automation into a robust CLM strategy is a critical step toward achieving agility and maximizing contract value. By implementing these strategies and understanding how AI can automate contract workflows, businesses can unlock business insights and the full potential of their contracts.
To learn more about UnitedLex’s Contract Intelligence Repository, let’s talk.
