Contract workflow. It might not be the first thing that comes to mind, but it's the unsung hero of business efficiency. This concept is your key to streamlining agreements, getting deals done faster, and leaving the days of endless back-and-forth behind.
In this blog, we’ll learn what is a contract workflow, understand the essential stages of a contract workflow, from drafting and reviewing to signing and storing, discuss common challenges you might encounter at each step, and explain how to ensure smooth and efficient contract management for your business.
What is a contract workflow?
A contract workflow is the step-by-step process that a contract goes through from creation to completion. Think of it as a roadmap for handling contracts.
The term “workflow” is used because it describes the flow of work through a series of steps or stages. Much like the stages of building a house, where each phase must be completed before moving to the next, a contract progresses through various phases, each with specific actions and responsibilities.Â
This structured approach helps ensure everything is done systematically, reducing the chance of errors and making the process more efficient.
A workflow helps to:
- Organize the steps involved in handling contracts.
- Standardize procedures, ensuring consistency.
- Track progress and responsibilities.
- Automate certain tasks, saving time and reducing manual effort.
By following a workflow, businesses can manage their contracts more effectively, ensuring all necessary actions are taken and nothing is overlooked.
Typical stages of a contract workflow
To effectively manage contracts, it’s essential to understand each stage of the contract workflow.Â
1. Initiation
This is where the idea for a contract comes to life! Maybe you need a contract with a new supplier, a marketing partner, or a new employee. During this stage, gather all the important details, like who’s involved, what needs to be done, and when. Think of it as setting the stage for the agreement.
2. Drafting
With a clear understanding, it’s time to write the actual contract. You can use a pre-written template or start from scratch. Remember, keep it simple! The contract should be easy to understand for everyone involved. It should also be clear on who does what and when.
3. Review and Approval
Before moving forward, relevant people in the company, like legal and sales, must closely examine the contract. They ensure it aligns with company rules, follows the law, and is written well (without ambiguity). This stage is like a double-check to ensure the contract protects your interests. And once it does, the approval of the contract comes into the picture.
4. NegotiationÂ
This is where the other party comes into the picture. You need to discuss and agree on the final terms. This is a chance for both sides to have their say and reach an agreement that works for everyone. Negotiation could involve discussing prices, deadlines, or specific details in the contract.
5. Signing
Once everyone’s happy, it’s time for the official signatures! Traditionally, this meant printing the contract, signing it with a pen, and sending it back and forth through email or courier. Today, things are much faster with electronic signatures. Many systems offer secure ways for everyone to sign the contract from anywhere.
6. Management
Just because the contract is signed doesn’t mean the work is done. Contract management involves ongoing tasks like securely storing agreements, setting reminders for renewals or terminations, and tracking performance against outlined terms. A good system can help businesses keep track of all their contracts and ensure they’re followed.
If you’d like to know more about stages of contract management and how you can streamline it, check out our article on What is contract management? Tips, challenges, and best practices.
Stakeholders involved in a contract workflow
A well-defined contract workflow isn’t a solo act, it involves a team effort from various stakeholders within your company. Having clear roles and responsibilities for each stakeholder in the contract workflow ensures a smooth and efficient process, minimizing delays and potential errors.
Here are the key players typically involved:
1. Initiator
This person starts with the need for a contract. They could be from any department, such as sales initiating a contract with a new client, human resources for a new employee, or operations for a supplier agreement.
2. Contract drafter
This role is responsible for writing the actual contract document. They might draft from scratch or use pre-approved templates, ensuring the contract clearly reflects the agreed-upon terms and is easy to understand. Legal teams often draft or review contracts to ensure legal compliance.
3. Reviewers
Before finalizing the contract, it’s crucial for relevant departments to review it. This might include legal for legal compliance, sales for alignment with commercial terms, and finance for payment details.
4. Negotiators (Optional)
Negotiators are individuals authorized to discuss and agree on the final terms. This could be sales representatives, project managers, or executives, depending on the complexity of the contract.
5. Approvers
Once the contract is reviewed and (if applicable) negotiated, designated individuals with the appropriate authority must approve it before it’s sent for signatures formally. Depending on the company structure and contract value, this could be department heads, managers, or executives.
6. Signatories
Finally, the authorized representatives from each party involved in the agreement must sign the contract. This could be the CEO, a designated sales manager, or someone with signing authority.
What are the challenges of contract workflows?
The multiple stages and stakeholders involved in a business contract workflow showed it’s a tough job. And businesses deal with a big chunk of bulky contracts almost every day.Â
Many businesses manage contracts manually, using email threads, shared folders, and spreadsheets. While manual handling might seem manageable for a few contracts, it becomes a nightmare as your business grows.Â
Some of the common challenges with manual contract workflows are:
1. Manual errors
Managing a large volume of contracts manually becomes increasingly difficult and inefficient. As the number of contracts increases, so does the complexity of managing them. Human error during drafting, reviewing, and approving can lead to contract inaccuracies and omissions. These errors can cause delays, misunderstandings, and potential legal issues.Â
2. Losing track of paper trails
Traditional paper-based contracts are easily misplaced or buried in overflowing filing cabinets. This can lead to wasted time searching for crucial documents and delays retrieving important information. Imagine urgently needing a specific clause from a contract, only to spend hours sifting through endless folders.
3. Missing deadlines
Keeping track of due dates for approvals and signatures on paper contracts can be a constant struggle. Missed deadlines can lead to delays in projects or even jeopardize business deals. Sticky notes and reminders can only go so far, and manually managing multiple contracts can easily lead to missed deadlines.
4. Floating versions
With multiple copies of contracts lost in email threads or saved on different computers, there’s a high risk of using an outdated or incorrect version. This can lead to confusion and potentially create problems down the road. You might accidentally reference the wrong terms in a negotiation or miss out on key details because you’re referencing an outdated version.
5. Inefficient approval process
When multiple approvers or signers are involved, the process becomes slow and cumbersome, especially if done manually. Tracking each approver or signer, coordinating schedules, and managing multiple contract versions lead to significant delays.
6. Security concerns
Physical paper contracts or documents stored on individual computers pose a significant security risk. In the case of a data breach or loss of a device, sensitive information could be compromised. Paper contracts are vulnerable to physical loss or theft, and storing them electronically on unsecured devices can expose them to cyberattacks.
7. Lack of visibility
Without clear visibility into each stage of the contract workflow, it can be difficult to track progress, identify bottlenecks, and ensure accountability. Imagine having dozens of contracts – tracking everything manually would be nearly impossible.
How to improve contract workflow?Â
Improving your contract workflow is essential to ensuring efficiency, accuracy, and compliance. Here are some strategies for optimizing each stage of the process.
1. Automate where possible
Automation can significantly reduce the time and effort required to manage contracts. Many tasks can be automated, such as contract creation, sending reminders, and tracking contract status. It helps minimize human errors and speeds up the entire process.
2. Standardize processes
Create standardized templates and checklists for each stage of the contract workflow. This ensures consistency and reduces the risk of missing critical elements. For example, customizable templates tailored to your needs ensure they are legally approved and compliant.Â
3. Enhance collaboration
Improve collaboration by using digital tools that allow real-time feedback and communication. Enabling multiple stakeholders to review and comment on contracts simultaneously streamlines the review process and ensures all concerns are addressed promptly.Â
4. Implement digital approvals and signatures
Switch from manual to digital approval and signature workflows. Digital approvals and electronic signatures are faster and more efficient, eliminating the need to track down signatures and approvals manually.Â
5. Ensure compliance and security
Maintain compliance and security to protect sensitive information in contracts, especially in industries like healthcare, where patient information must be securely managed.Â
This involves using secure digital signatures with robust encryption, digital certificates, and audit trails, implementing access controls to restrict unauthorized access, conducting security audits, training employees on best practices, storing contracts in secure digital repositories, and ensuring all contracts meet relevant legal and regulatory requirements.
6. Monitor and analyze
Regularly monitor the performance of your contract workflow to identify bottlenecks and areas for improvement. Contract analytics and reporting tools shed insights into how long each stage takes and where delays occur.
7. Integrate with other systems
Integrate your contract management system with other business tools such as CRM, ERP, and project management software. This ensures seamless data flow and reduces the need for manual data entry.Â
Integration with document management software such as Google Workspace, Microsoft Suite or email providers like Gmail and Outlook ensures you can manage workflows within those platforms, saving time and avoiding the hassle of switching between apps.
8. Train your team
Ensure that all team members involved in contract management are familiar with your processes and tools. Regular training sessions and updates on best practices help maintain efficiency and consistency. Provide resources and support to help your team.
9. Set clear deadlines and responsibilities
Clearly define deadlines and assign responsibilities at each stage of the contract workflow. This helps ensure accountability and keeps the process on track.Â
10. Continuously improve
Regularly review your contract workflow and seek feedback from your team to identify areas for enhancement. Implement changes based on feedback and performance data to keep your workflow optimized.
How contract management software can streamline the contract workflow
Contract management software significantly enhances the efficiency and effectiveness of contract workflows.Â
Here’s a detailed look at how this software executes various actions:
1. Automated contract creation
Contract management software automates the creation of contracts by using pre-approved templates. This reduces the time spent drafting new contracts and ensures consistency across all documents.Â
Signeasy allows you to create, store, and share customizable templates that can be quickly accessed and used, ensuring that all necessary legal language and clauses are included every time.
2. Simplified collaboration
Collaboration is crucial during the drafting and reviewing stages of a contract. Contract management software enables multiple stakeholders to review, comment, and make real-time changes.Â
Signeasy’s integration with Google Workspace and SharePoint allows team members to collaborate seamlessly, provide real-time feedback, and ensure that everyone is on the same page during contract creation and review.
3. Efficient approval processes
Approval processes can often be a bottleneck in contract workflows. Contract management software allows you to set up automated approval workflows that route documents to the appropriate approvers.Â
4. Secure eSignatures
The signing stage is crucial for making contracts legally binding. Contract management software offers secure eSignatures that are compliant with global eSignature laws.Â
Signeasy provides robust eSignature capabilities, allowing parties to sign documents from anywhere, at any time, with full legal compliance and security.
Signeasy allows you to specify the signing order, automatically routing the contract to each signer sequentially. This ensures that all parties sign in the correct order, maintaining the integrity of the contract.
5. Centralized storage and access
It is essential to store contracts securely and ensure easy access to them. Contract management software provides centralized storage solutions, where all contracts are stored securely and can be accessed as needed.Â
Signeasy offers secure storage for all your documents in one location. You can organize contracts into folders based on their stages, making locating and managing documents easy. This centralized approach simplifies document management and enhances accessibility.
6. Real-time tracking and alerts
Keeping track of contract status and key dates is vital to managing obligations and deadlines. Contract management software provides real-time tracking of contract progress and automated alerts for important dates.Â
Signeasy’s dashboard offers comprehensive tracking and notification features, ensuring you never miss a deadline or renewal date. Real-time status tracking allows you to monitor the progress of each contract.Â
Additionally, email notifications keep all stakeholders updated on the status of their documents, ensuring everyone is informed, and actions are taken promptly.
7. Integration with other systems
Seamless integration with other business tools such as CRM, ERP, and email platforms, is essential for efficient contract management. Contract management software integrates with these systems to streamline workflows and reduce the need for manual data entry.Â
Signeasy integrates with popular platforms like Google Workspace, Microsoft Suite, Gmail, and Outlook, allowing you to manage contracts within your existing workflow without switching between apps.
8. Enhanced security and compliance
Ensuring the security of sensitive information and compliance with legal standards is a top priority. Contract management software provides robust security features, including encryption, access controls, and audit trails.Â
Signeasy ensures that all your contracts are secure and compliant with global regulations, protecting sensitive data and maintaining integrity.Â
It offers two-factor authentication (2FA) and SSO to add an extra layer of security. This feature ensures that only authorized users can access and sign contracts, protecting sensitive information from unauthorized access.
Signeasy provides a Trust Seal or Digital Signature Certificate to ensure the authenticity and integrity of signed documents. This feature certifies that the document has not been altered after signing, providing legal assurance and enhancing trust among all parties involved.
9. AI for enhanced efficiency
Artificial Intelligence simplifies contract management by automating and optimizing various aspects of the workflow.Â
Signeasy incorporates AI to streamline your contract workflow further:
- AI Summary: AI can generate concise summaries of long contracts, making it easier to quickly understand key points and terms.
- Smart Q&A: AI can answer questions about contract terms and clauses in real time, helping you make informed decisions and clarify doubts instantly.
- Key Term Extraction: AI extracts important data from contracts, such as dates, names, terms, clauses, etc. so you can find relevant information quickly.
Advantages of a contract management platform in streamlining contract workflows
A contract management platform offers numerous advantages that significantly streamline contract workflows, directly benefiting teams that work with contracts:
- Increased efficiency: Automating repetitive tasks like contract creation, reminders, and approvals speeds up the entire process, reducing the time and effort required.
- Enhanced collaboration: Real-time feedback and collaborative tools ensure all stakeholders are aligned, improving accuracy and reducing revision cycles.
- Improved security: Features like two-factor authentication, encryption, and secure storage protect sensitive information and maintain compliance with legal standards.
- Better organization: Centralized storage and organization of contracts in easily accessible folders simplify document management and retrieval.
- Time savings: Automation and streamlined processes free up valuable time for team members, allowing them to focus on higher-value tasks and strategic activities.
- Consistency and standardization: Using templates and standardized processes ensures that all contracts adhere to the same high standards, reducing the risk of errors and inconsistencies.
- Enhanced compliance: Built-in compliance checks and audit trails ensure that all contracts meet regulatory requirements, reducing legal risks.
Improving contract workflows with Signeasy
Understanding and optimizing your contract workflow is crucial for ensuring efficiency, accuracy, and compliance in your contract management processes. A well-structured workflow helps streamline the various stages, from drafting to storing contracts, reducing the risk of errors and delays.
Contract management software enhances these workflows by automating repetitive tasks, improving collaboration, ensuring security, and providing better organization.Â
With features like customizable templates, automated reminders, signing order management, two-factor authentication, and centralized storage, such software transforms how teams handle contracts.
By leveraging these advanced tools, you can significantly improve your contract management processes, saving time and resources while maintaining high standards of consistency and compliance.
To experience the benefits of streamlined contract workflows firsthand, take a demo with Signeasy. Discover how our robust features can enhance your contract management and support your business operations efficiently.
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