What is Contract Automation? Software, Processes, and Benefits

Picture this: Your legal team is drowning in a sea of contracts, each one demanding meticulous review and negotiation. Hours turn into days, deals slow to a crawl, and the risk of costly errors looms large.

Now imagine dramatically reducing that workload, closing deals faster, and ensuring ironclad compliance across every agreement.

This isn't a far-off dream—it's the reality of contract automation.

In this guide, we'll explore the world of contract automation, from its basic concepts to advanced applications. We'll delve into the software and processes that make it possible, examine the benefits for various industries and roles, and discuss the challenges you might face during implementation.

Whether you're new to contract automation or looking to optimize your current processes, this guide will provide valuable insights to help you navigate this transformative technology.

Main takeaways from this article:

• Contract automation leverages AI-powered software to streamline every stage of the contract lifecycle, from creation to execution and monitoring.
• Key benefits of contract automation include increased efficiency, cost reductions, improved accuracy, enhanced compliance, and better risk management.
• Implementing contract automation can be challenging, as it involves initial setup costs, integration with existing systems, and a bit of a learning curve for users.
• Contract automation transforms business processes by saving time, reducing errors, ensuring legal compliance, and improving overall operational efficiency.
• Tools like DocJuris's AI-powered platform stand out with features like instant markups, negotiation tracking, and side-by-side contract comparisons, significantly reducing manual effort and errors.

What is contract automation?

Contract automation refers to the use of software and digital processes to streamline and expedite various stages of the contract lifecycle. This can include everything from contract creation and negotiation to signing, storing, and analyzing agreements.

Benefits of automating contract management

Contract automation offers a wealth of advantages that extend far beyond mere time and cost savings. Let's explore how this technology is revolutionizing contract management, from enhancing accuracy and boosting compliance to fostering collaboration and mitigating risks.

Increased efficiency

One of the most immediate and significant benefits of contract automation is the dramatic reduction in time spent on manual tasks. Here's how efficiency is improved:

• Faster drafting: Automated systems can generate initial contract drafts using pre-approved templates and clause libraries. This process, which might take hours manually, can often be completed in minutes.
• Streamlined review: AI-powered tools can analyze contracts, flag potential issues, and suggest edits based on predefined criteria. This can significantly reduce review time compared to manual processes.
• Quicker approvals: Automated workflows route contracts to the appropriate stakeholders for approval, sending reminders and tracking status in real-time. This eliminates the need for manual follow-ups and reduces bottlenecks.
• Rapid execution: E-signature integration allows for quick and secure contract execution, eliminating the need for physical signatures and potentially reducing turnaround time from days to hours.

Cost reduction

Contract automation can lead to significant cost savings in several ways:

• Reduced legal spend: Organizations can minimize the need for extensive legal review on every contract by automating routine contract tasks. This frees up valuable legal resources for more complex, high-value work.
• Fewer errors: Automated systems reduce the likelihood of costly mistakes that could lead to disputes or compliance issues.
• Faster deal closure: Businesses can close deals faster by speeding up the contract process, leading to quicker revenue realization.
• Resource optimization: Automation allows teams to handle a higher volume of contracts without increasing headcount, optimizing resource allocation.

Improved accuracy

Human error is a constant risk in manual contract management. Automated systems improve accuracy through:

• Consistent application of rules: Automated systems can consistently apply predefined rules and standards across all contracts, reducing variations and errors.
• Reduction in typos and formatting errors: Automated document generation eliminates common mistakes, such as typos, inconsistent formatting, or outdated clauses.
• Comprehensive review: AI-powered review tools can analyze contracts more thoroughly than manual review alone, potentially catching subtle issues that might be missed by human reviewers.
• Version control: Automation systems maintain clear version histories, ensuring teams always work with the most up-to-date document.

Greater collaboration

Contract automation platforms often include features that facilitate better collaboration between teams:

• Centralized access: Cloud-based systems allow multiple stakeholders to access contracts from anywhere, promoting collaboration across departments and locations.
• Real-time editing: Many platforms allow multiple users to work on contracts simultaneously, with changes tracked in real time.
• Comment and feedback tools: Built-in commenting and feedback features streamline communication about specific contract clauses or terms.
• Role-based permissions: Automated systems can enforce role-based access, ensuring that the right people have the right level of access at each stage of the contract lifecycle.

Enhanced compliance

Ensuring adherence to internal policies, industry regulations, and legal requirements is essential. Contract automation improves compliance in various ways:

• Automated compliance checks: Systems can automatically screen contracts against predefined compliance rules, flagging any potential issues.
• Standardized language: By using pre-approved templates and clauses, organizations can ensure that all contracts adhere to compliance standards.
• Audit trails: Automated systems maintain detailed logs of all contract-related activities, which is crucial for audits and regulatory compliance.
• Policy enforcement: Automation can enforce approval workflows based on contract value or risk level, ensuring high-risk contracts receive appropriate scrutiny.

Risk management

Effective contract management is a key component of organizational risk management. Automation helps in several ways:

• Consistent risk assessment: Automated systems can apply consistent risk scoring to contracts based on predefined criteria.
• Early warning systems: AI-powered tools can flag potential risks in contract language, allowing for early intervention.
• Obligation tracking: Automated systems can monitor contract obligations and send alerts for upcoming deadlines or potential breaches.
• Scenario analysis: Advanced systems can run "what-if" scenarios to assess the potential impact of different contract terms.

Organizations can leverage these benefits to transform their contract management processes from potential bottlenecks into strategic advantages. As we continue to explore contract automation, we'll delve deeper into who should invest in this technology and which specific areas of the contract lifecycle are prime candidates for automation.

Who should invest in contract automation?

Contract automation offers strategic advantages across various industries and roles. While the benefits are wide-ranging, certain sectors and departments stand to gain particularly significant advantages from this technology:

• Legal departments: Streamline contract review and negotiation processes, freeing up time for more strategic legal work.
• Sales teams: Quickly generate accurate quotes and contracts, reducing time from proposal to signed agreement.
• Procurement: Standardize vendor contracts and terms, ensuring favorable conditions across the supply chain.
• Human resources: Streamline the creation and management of employment contracts and policy documents.
• Finance: Gain better visibility into contractual obligations and their financial implications.
• IT and operations: Easily manage software licenses, service level agreements, and equipment leases.
• Large corporations: Ensure consistency in contract management across different regions and subsidiaries.

By investing in contract automation, these roles and organizations can transform their contract management from a potential bottleneck into a strategic advantage. The key is to identify where contract-related inefficiencies are holding back your operations and to implement automation solutions that address these specific pain points.

Which areas of the contract lifecycle can you automate?

Let's explore the key areas where automation can significantly impact your contract management process.

Contract creation

Automation revolutionizes contract creation, the first step in the contract lifecycle. Contract authoring tools can automatically generate agreements from predefined templates, saving time and ensuring consistency. With just a few clicks, you can populate a robust contract template, eliminating the tedious and error-prone task of manual drafting.

These tools allow you to tailor templates to meet specific business needs. For example, DocJuris offers an advanced template library that caters to various industry requirements, simplifying the creation process. Automated contract creation empowers you to focus on strategic decisions rather than administrative tasks, providing a stronger foundation for future negotiations and compliance.

Learn more about how contract authoring tools power better contract management.

Contract review

Contract review is critical for ensuring every term and clause aligns with your company's standards and compliance needs. Automating this process saves considerable time and mitigates risks. Instead of sifting through pages manually, contract automation tools like DocJuris provide AI-powered analysis to instantly flag discrepancies or potential issues.

These tools utilize playbooks with pre-approved language, ensuring every contract meets your requirements and reducing the likelihood of human error. Features like one-click markups streamline the review process, allowing for quick revisions and approvals.

Discover how to design effective contract playbooks and standards.

Contract approval

The approval process involves all relevant stakeholders reviewing, revising, and approving contract terms. Traditionally, this phase can suffer from delays and miscommunications. However, contract automation customizes approval workflows for streamlined, selective stakeholder engagement.

These workflows ensure no contract bypasses necessary approvals by embedding robust templates and automating compliance checks. This expedites review processes while maintaining thorough oversight, accelerates contract finalization, fortifies compliance, and aligns with organizational standards.

Contract negotiation

Contract negotiation is often one of the most time-consuming aspects of contract lifecycle management, and automation can significantly improve this phase. Real-time collaboration and version control tools allow all parties to work on the same document, sharing comments and reaching consensus faster while eliminating email exchanges.

Automated workflows track every change and send notifications for approvals, reducing delays. Features like negotiation tracking keep a detailed record of all suggested changes and resolutions, streamlining the process and enhancing transparency and accountability.

AI-powered platforms like DocJuris offer one-click markups and AI-powered playbooks, making the negotiation process more efficient and error-free. Automation speeds up negotiations, ensures alignment among all parties, and leads to smoother business operations.

Learn about the top five negotiation strategies to implement today.

Contract execution

Contract execution, the finalization, and the signing of agreements, often involve a manual, paper-based approach, which can be slow and error-prone. Contract automation streamlines this phase significantly.

Digital signatures and automated workflows ensure rapid contract processing, regardless of the parties' locations, reducing the risk of missed signatures and lost documents. Automated alerts and reminders keep all parties on track, ensuring deadlines are met without constant follow-ups.

Leveraging tools like DocJuris's AI-driven platform ensures a smooth, efficient, and secure execution process, allowing your business to proceed without unnecessary delays.

Contract monitoring

Once executed, monitoring contracts ensures adherence to agreed terms. Contract automation software provides comprehensive tools to track agreements throughout their lifecycle. Automated alerts for key dates and obligations ensure you never miss a renewal or compliance deadline.

Real-time visibility into contract performance helps identify potential issues before they escalate. Centralizing contract data makes managing and auditing numerous contracts efficient. Continuous oversight improves operational efficiency and minimizes risks associated with non-compliance or lapses in contract management.

Automated contract monitoring ensures your contracts remain active and enforceable while aligning with business objectives.

Explore how contract management software helps businesses increase revenue recognition and eliminate unknown costs.

Key features of contract automation software

Contract automation software comes packed with various powerful features designed to streamline every aspect of the contract lifecycle. Below, we explore the key features that make a contract automation software tool indispensable.

Automated compliance checks

Automated compliance checks in contract automation help ensure that all contracts adhere to regulatory and internal standards. This feature significantly mitigates non-compliance risk, which can lead to severe penalties or legal repercussions.

Here’s how it can benefit your business:

• Real-time monitoring: Automatically monitor contracts against compliance requirements, ensuring they meet all necessary legal standards.
• Consistent enforcement: Ensure uniform application of compliance policies across all contracts.
• Reduced manual errors: Minimize human error by automating tedious compliance checks.
• Audit trail: Maintain a complete, traceable history of compliance checks for auditing purposes.
• Instant alerts: Receive automatic notifications if a contract fails to meet compliance standards, allowing for quick corrective action.

Automated compliance checks safeguard your business and offer peace of mind, knowing your contracts are always in line with required standards.

Instant markup tool

One of the standout features of contract automation is the instant markup tool. This tool is a game-changer for anyone involved in contract review and editing.

Here's why:

• Efficiency: Instantly apply standard clauses and adjustments with just one click, saving you hours of manual revisions.
• Consistency: Ensure uniformity in contract language and terms across all documents, reducing discrepancies and misunderstandings.
• Error reduction: Minimize the risk of human errors by automating repetitive tasks and leveraging vetted language from your clause library.
• Speed: Rapidly respond to counterparty changes and proposed edits, enabling faster negotiations and quicker deal closures.
• Compliance: Automatically adhere to compliance requirements using pre-approved language, reducing non-compliance risk.

The instant markup tool transforms the contract review process into a streamlined, efficient, and error-free experience.

Negotiation tracking

Efficiently tracking negotiations is vital to successful contract management. Contract automation software allows you to monitor every stage of the negotiation process seamlessly.

Here’s how negotiation tracking can benefit your operations:

• Transparency: Keep all parties informed about changes and progress in real time.
• Version control: Maintain a clear record of all contract versions and updates.
• Milestone tracking: Set and monitor critical dates and milestones to ensure smooth progression.
• Actionable insights: Gain insights into negotiation patterns and areas needing improvement.
• Historical data: Access past negotiation data to inform future contract strategies.

Utilizing these features ensures everyone is aligned, minimizing miscommunications and delays. Ultimately, it supports a more streamlined and effective negotiation process, enhancing your contract management's overall efficiency.

Side-by-side contract comparison

Side-by-side contract comparison is an invaluable feature in contract automation. This tool lets you quickly identify contract version discrepancies and alterations, offering a clear visual parallel between different iterations.

Here’s why this feature stands out:

• Visual clarity: Quickly spot differences with color-coded changes.
• Efficiency: Save time by comparing documents simultaneously rather than toggling between them.
• Accuracy: Reduce the risk of missing crucial updates or inclusions.
• Enhanced negotiation: Facilitate smoother negotiations by clearly presenting modifications.
• Better decision-making: Make informed decisions based on a comprehensive review of changes.

This feature is especially beneficial when dealing with multiple stakeholders. It ensures everyone is aligned and informed about contract specifics without room for misunderstandings.

Accessible clause database

One of the standout features of contract automation is the accessible clause database. This tool is invaluable for both legal professionals and business managers. Here's why:

• Centralized repository: You store all the standard clauses in a single, easy-to-navigate location.
• Quick access: Users can quickly find and insert legally vetted clauses, saving time during contract creation.
• Consistency: Ensures that all documents adhere to corporate standards and legal requirements.
• Update management: Allows easy updates and contract modifications, ensuring regulatory compliance.
• Search functionality: Advanced search options help users locate specific clauses relevant to their needs.

By utilizing an accessible clause database, you can improve the efficiency and accuracy of contract drafting, ultimately enhancing your business operations.

Collaborative editing

Another standout feature of contract automation software is its collaborative editing capabilities. This functionality allows multiple stakeholders to work on a contract simultaneously, significantly streamlining the drafting and review process.

Here's how collaborative editing can benefit your organization:

• Real-time updates: All collaborators can see changes as they happen, ensuring everyone is on the same page.
• Version control: The software maintains a history of edits, making it easy to track changes and revert to prior versions if necessary.
• Streamlined communication: Built-in commenting and chat features allow for seamless communication and quick resolution of issues.
• Enhanced accuracy: Multiple reviewers can help catch errors and inconsistencies, leading to more precise contracts.
• Immediate feedback: Stakeholders can provide instant feedback, reducing the back-and-forth typically required in contract negotiations.

Embracing collaborative editing can drastically improve the efficiency and quality of your contract management process.

Automatic amendment drafting

Automatic amendment drafting is another prominent feature of contract automation. This capability can save you considerable time and minimize errors. Here’s how it benefits you:

• Time-saving: The system quickly generates amendments based on predefined contract templates and rules instead of manually revising documents, allowing you to focus on more strategic tasks.
• Error reduction: Automated drafting reduces human error, ensuring that amendments are accurate and consistent with the original contract terms.
• Consistency: Ensures all amendments follow the same structure and language, maintaining coherence across all documents.
• Easy updates: Quickly implement changes as business requirements evolve without the back-and-forth associated with manual updates.

Automatic amendment drafting in platforms like DocJuris streamlines the entire contract lifecycle by ensuring you handle every modification efficiently and accurately.

Challenges of implementing contract automation

While contract automation offers numerous benefits, adopting it can present specific challenges for organizations. Here are some common obstacles:

• Technological integration: Integrating new software with existing systems can be complex and time-consuming. To mitigate this, choose contract automation solutions that offer seamless integration capabilities with your current tools.
• Accommodating training needs: Employees may require training to use new automation tools effectively. Implement comprehensive training programs and ongoing support to ensure a smooth transition and user proficiency.
• Bearing initial set-up costs: The upfront investment for contract automation software can be substantial. To justify the costs, focus on the long-term ROI, such as increased efficiency, error reduction, and cost savings.

Overcoming these challenges calls for resorting to strategic actions like:

• Incorporating change management practices: Develop and execute a plan to guide your organization through the transition. Communicate the benefits clearly to ensure buy-in from all stakeholders.
• Selecting the right software: Evaluate various contract automation solutions to find one that fits your organization's needs. Look for user-friendly interfaces, robust support, and customization options to enhance adoption and usability.

Streamline your contracts with DocJuris

Streamlining your contract processes saves valuable time and enhances overall accuracy and compliance. Leveraging advanced tools and methodologies lets your team focus on what truly matters—making impactful business decisions.

DocJuris stands out with its AI-powered contract review platform, featuring innovations like AI-powered playbooks and one-click markups. By eliminating tedious manual tasks, DocJuris allows your legal and business teams to focus on high-value strategic initiatives. This fuels innovation and gives your business a competitive edge in today's fast-paced market.

So, say goodbye to manual contract handling, which slows you down. Switch to smart review and markup processes, which help you skim and redline your contracts in minutes.

Request a demo today and see how DocJuris can help you unlock your contract management's full potential!