Automation of Contract Management: Why It's Necessary & How To Do It

Date
December 6, 2022
Category
Date
December 6, 2022
Author
Gary Sangha | Founder & CEO
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This year, 70% of businesses are looking to upgrade their contract management software, according to a 2022 survey of 861 Chief Legal Officers across 20 industries and 38 countries. The main impetus? To drive profits and invest in employees. Increasingly, workers expect to have access to those tools that help them to get their jobs done.

And it’s easy to see why. A wealth of time and money gets wrapped up in everyday due diligence. For legal teams, every agreement must be reviewed, negotiated, and renegotiated in minute detail. It’s no wonder companies are eyeing the automation of contract management to shore up efficiency and make an impact on their operations—expediting deals, freeing up counsel, improving training programs, and reducing organizational risk in the process.

Automation of contract management represented by man reviewing contract on phone

Automation of Contract Management: Top Benefits

The potential benefits for corporate legal departments switching to automated contract management are numerous. While the true value is relative to individual pain points and needs, there are several broad benefits that apply to every business investing in new contract management technology.

For example, with automated contract management, legal teams can: 

  • Save time: Contract automation is a huge time-saver. The average NDA drafted in-house, for example, takes 1-3 days to review. If the NDA is coming from another party, it can take up to 10 days to ensure that the company’s interests and preferred positions are accurately represented.

    Today, the automation of contract management allows for full redlining, review, risk analysis, and the inclusion of contextual suggestions within five minutes. While lawyer review will always be necessary, allowing technology to take the first pass helps conserve manpower, prioritize attention, direct workflows, reduce escalations, train new staff, and accelerate deals.    
  • Cut back: Contract automation can help cash-strapped legal teams cut back on valuable resources. Many legal departments are shrinking as the work is increasing. When outsourced, a single contract can cost $600-$800 to review. External reviewers must also consider whether the company’s best interests are understood and fully represented by an outsourced reviewer, which can be difficult.

    In-sourcing isn’t cheap either, with the average salary of a junior contract analyst amounting to $67,878 plus training and benefits (not including the high cost of turnover). And it’s not just junior-level attorneys doing the work; over 80% of in-house lawyers had to participate in contract drafting and review, according to a 2019 Benchmark Survey by the ACC—at an average cost of $80/hour.

    Instead of hiring a dedicated contract analyst and having all hands on deck, contract automation enables the work to be shared by other employees and routed with better efficiency. The automation of contract management can also reduce escalations to senior lawyers by 70%, freeing up their time for more value-driven work such as developing strategic positions and negotiating contracts. 
  • Increase opportunity: Ernst & Young found that 50% of businesses lost opportunities due to inefficiencies in the contracting process. Bottlenecks lead to stalled negotiations. Poor document tracking leads to customer service hiccups and diminished trust between parties. Failure to properly track renewals and the status of renegotiations means value gets lost in the shuffle.

    Without effective contract governance, companies lose up to 40% of a contract’s value. Businesses that want to succeed and thrive require visibility into the contracting process, tools to automate document management, and efficiencies that free up productivity so top employees can focus on relationship building.

Steps for Automating Contract Management

The automation of contract management may seem daunting, but generally involves: 

  • Investigation: There are many different types of contract management systems for legal teams to consider. Some are overarching workflow tools while others focus on a specific part of the process where bottlenecks are most likely to occur. Most commonly, additional support is required for the contract review and negotiation phase.

    Here, automation technology reduces workloads and accelerates business significantly, offering the greatest value. Other needs may include cloud storage, drafting templates; digital signature capabilities, or post-execution analytical tracking.
  • Implementation: To work, automated contract management depends on legal teams uploading essential documents, such as contracts, to the associated system.

    Companies may also choose to migrate their entire contract database to the cloud to make agreements fully searchable and trackable. Or they can add a dozen or so of their most exemplary agreements. Lawyers can help program automation rules to tailor the system to their specific needs and preferences, too.

    Keep in mind that any good contract automation software company will offer full support to help companies seamlessly integrate their existing tools with the new technology.

Make Managing Contracts Easier with LexCheck

LexCheck is a one-of-a-kind, AI-powered legal solution that makes short work of pre-execution contract review and negotiation. Drafts are returned fully redlined and/or color-coded by risk within five minutes. The proprietary system cross-references drafts with a Digital Playbook, previously reviewed contract drafts, and lawyer-inputted automation rules to ensure every agreement is up to company standards. For many legal teams, digital transformation starts with improved contract management, and LexCheck is leading the charge toward its automated future.

For more information on the automation of contract management and review, contact us at sales@lexcheck.com or request a demo to see our technology in action.

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