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What is contract automation?
Contract automation refers to the use of technology, usually software and AI, that can streamline, simplify and optimize the process of creating, managing and analysing contracts. Contract automation can encompass different aspects of contract management, from contract creation to ongoing administration and compliance monitoring. It can improve efficiency and reduce the risk of contract-related issues, and is utilised in various departments including legal, procurement, HR and business operations to enhance compliance and productivity.
Examples of key components of contract automation include:
- Creating and Drafting Contracts: Generate contracts based on predefined templates. Users are able to input specific details and the software will automatically populate the contract, reducing the need for manual drafting.
- Template Management: Contract automation usually includes a centralized set of contract templates that make it easier to access and update standardized contract documents.
- Contract Workflow Automation: Automate the contract approval and review workflows by routing contracts to relevant parties for input and approval, streamlining the contract lifecycle process.
- Electronic Signatures: Simplify the execution process by allowing digital signatures and execution, eliminating the need for physical documents or manual signatures.
- Contract Analysis: Contract automation solutions can analyse contract data and produce insights and risk assessments. This can help organizations manage contractual obligations more effectively.
- Reducing Errors: By automating the contract creation and management process, this can significantly reduce the risk of human errors typically occurring from unmanaged document versioning, manual drafting and more.
- Compliance Monitoring: Contract automation can track deadlines, key dates and obligations to ensure that parties meet their contractual commitments and comply with the relevant laws and regulations.
- Improved Collaboration: Document automation provides a centralzed platform for sharing and working on contracts, encouraging collaboration between teams.
- Time and Cost Savings: Contract automation streamlines processes, saving time and resources that can be allocated to more complex work.
- Scalability: Contract automation is particularly valuable for organizations that deal with large volumes of contracts. It allows organizations to scale their contract management process without increasing their administrative workload.
How does contract automation software work?
Contract automation software works by leveraging technology such as AI and document automation tools to simplify and streamline the creation, management, and analysis of contracts. The entire contract lifecycle can be made more efficient, reduce cost, minimize human error, and help organisations better manage their contractual relationships.
What is the key difference between a contract automation software & CLM?
Contract automation software (CAS) and contract lifecycle management software (CLM) are similar, but serve different purposes in the context of contract management. These differences can be distinguished when looking at scope and functionality, and the choice between the two is dependent on the needs and priorities of the organization when it comes to managing contracts.
Contract automation software is most useful in the pre-execution phase of contract management, focusing on automating and streamlining the creation, drafting and initial stages of contract management. It is used to expedite and simplify the contract generation process, and excels in creating contracts from templates, document automation, and facilitating electronic signatures.
In contrast, contract lifecycle management provides a platform for managing the lifecycle of a contract, from creation and execution, through to post-execution phases such as compliance monitoring and performance tracking. It goes beyond contract creation, and provides features such as a centralized document storage system, contract analysis, compliance monitoring, and ensures that parties adhere to the terms of the contract and fulfil their contractual obligations.
What to look for when trying to find a contract automation solution
When looking for a suitable contract automation solution, it is important to choose software that aligns to your organization’s specific needs and objectives. Demos and trials are a great way to determine which solution best matches your organizational needs. Some key factors to consider when evaluating contract automation solutions include:
- Ease of Use: The software should be intuitive in design and navigation, and have a user-friendly interface that allows all users to easily create and manage contracts.
- Document Assembly: The solution should provide efficient and accurate document assembly capabilities to create contracts quickly and accurately.
- Data Validation and Accuracy: Look for tools that validate any entered information to minimize errors and ensure compliance.
- Cost and Pricing Structure: Evaluate the cost of contract automation tools to ensure it aligns with budget and ROI expectations.
- Scalability: Ensure that the solution can grow with organizational needs, and that it can handle an increase in contract volume as your business expands.
How are different departments & industries using contract automation
Legal
Examples:
Human Resources
Examples:
Procurement
Examples:
Finance & Tax
Examples:
Compliance
Examples:
How do different industries use contract automation?
Software
- Software companies use contract automation to generate standard contracts such as SLAs and software licensing agreements. This ensures that all necessary terms and conditions are consistent across their customer base.
- Software companies frequently enter into NDAs with various stakeholders to protect their information and intellectual property. The creation and management of these contracts are easily achieved by using contract automation tools.
- Third-party vendors and suppliers are commonly engaged by software companies. Contract automation is used to manage these agreements, and ensure that vendor compliance and performance is monitored.
Manufacturing
- Complex procurement contracts are common in the manufacturing industry. Contract automation can streamline the creation process, and allow users to easily manage and find different agreements quickly.
- Manufacturing companies also rely on a network of suppliers to source materials, and goods and services. Contract automation can efficiently create supplier agreements and ensure consistency when it comes to quality standards and pricing.
- Contract automation is also used by manufacturers to create and manage manufacturing agreements that cover important terms such as quality standards, production processes, and intellectual property rights.
Real Estate
- Contract automation is used to create various real estate contracts including purchase agreements, lease agreements, rental agreements and sales contracts.
- Real estate contracts also need to comply with various regulations, and contract automation can help ensure that contracts meet all legal requirements, and mitigating the risk of legal issues and complications.
- Many real estate organizations are also integrating contract automation software with their existing management software, CRM systems, and property databases to ensure data accuracy and consistency.
Private Equity
- Private equity firms use contract automation to create, manage, and track investment agreements such as limited partnership agreements, subscription agreements, and shareholder agreements.
- Contract automation tools can also assist private equity professionals to conduct their due diligence when structuring investment deals. The software can extract, analyse and organise relevant information from different documents efficiently.
- Private equity firms also use contract automation for fund formation documents such as private placement memorandum, partnership agreements, and other relevant documents that are required to establish and administer investment funds.
Finance
- Contract automation can help financial institutions generate and manage loan agreements more efficiently.
- Given the highly regulated environment of financial services, contract automation helps institutions to comply with complex regulatory requirements, and can automatically generate and track compliance reports.
- Financial institutions have a variety of contracts with their customers and contract automation can help track and manage all customer contracts in one place.
Law Firms
- Contract automation can be used to generate contracts automatically based on pre-approved templates and clauses. This saves time and effort, especially when it comes to drafting routine contracts.
- Contract automation software can also be used to facilitate negotiations by tracking changes and suggesting revisions.
- Contract automation software can be used to ensure that contracts are compliant with applicable laws and regulations, protecting the firm from legal risk.
Professional Services
- Professional service firms use contract automation to create engagement letters and client agreements quickly and accurately by utilising standardized templates.
- Firms can often collaborate with various stakeholders such as legal teams and clients. Contract automation can enhance collaboration on the creation and review of documents.
- Some firms are also using contract automation to generate sustainability reports to help clients meet their ESG objectives.
Benefits of contract automation
By investing into contract automation, organizations can access a myriad of benefits that save on cost and reduce risk. Efficiency and time savings are a major benefit as contract automation can streamline the entire process, reducing administrative overhead and allowing teams to focus on higher-value tasks.
Contract automation can also result in reduced errors, as standardized templates can be customized with pre-approved terms and clauses which affords consistency and accuracy in contract language.
Document security is also a major benefit as organizations can access control and security measures to protect sensitive information and ensure that only authorised users can view, edit, and approve contracts.
Lastly, contract automation solutions allow for scalability, as the software is able to handle higher volumes of contracts as the organization grows. This makes it suitable for all business sizes.
What key features should you look for in a contract automation software
Why use Checkbox as a contract automation software solution?
Checkbox offers a comprehensive, no-code automation platform that empowers businesses to simplify and automate their contract management processes effectively.
With Checkbox, users can effortlessly generate contracts using templates, ensuring that all essential contract terms are included. The contract approval and review workflows can also be automated by routing contracts to relevant parties for input and approval, streamlining the contract lifecycle process. Teams can also access the storage, organization, and retrieval of information across their contracts.
Checkbox also allows teams to monitor crucial contract milestones and deadlines, providing timely alerts for upcoming events and enabling ongoing monitoring of contract performance. Collaboration with other parties on contract-related tasks, document negotiation, and change tracking is made easy.
Checkbox is equipped with robust reporting and analytics features, allowing teams to create reports on contract status, performance, and compliance, as well as identify trends and potential risks. Checkbox also offers a high level of security and access controls to ensure secure storage and restrict access to authorized users.
In summary, Checkbox's no-code automation platform delivers a flexible and scalable solution suitable for businesses of all sizes, enhancing the efficiency and effectiveness of their contract management processes.
Interested in exploring how our platform can revolutionize your contract management capabilities? Schedule a consultation with one of our technology experts to learn more.
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