What is digital contracting?

Contracts form the cornerstone of all business operations, regardless of company size. These documents legally govern interactions between companies, clients, and employees, making them essential for business success and risk management.

But a lot of companies are still using pen, paper, and emails to manage these critical documents. This manual method slows contracting processes across their entire lifecycle. It also makes people spend their precious time and energy on processes that could be automated with the proper oversight and guardrails. Ultimately, these manual processes put the contracts themselves at risk.

Digital contracting is the solution. It transforms static documents into valuable contract data points to help guide and protect your business, and makes contract management simpler and faster. And that’s just the beginning of the practical benefits of this approach. Keep reading to learn more about digital contracting and how it can modernize your company.

The basics of digital contracting

“Digital contracting” is just what its name implies: the creation, negotiation, and management of contracts using digital tools. The cloud and Contract Lifecycle Management (CLM) software are two of these tools. Think of digital contracting as a high-powered sports car to manual contracting’s horse and buggy. It is faster, easier, and opens up a world of possibilities.

The digital contracting lifecycle

The manual contracting lifecycle has eight stages spanning from initiation to termination and record keeping. Conventionally, businesses handled each step in-person or through email. Now, it’s possible to manage the entire lifecycle with CLM software to promote higher accuracy and efficiency throughout.

Here’s how:

1. Initiating: This step is all about gathering information and making sure everyone’s in alignment. A CLM platform simplifies these processes by centralizing information and automating the more repetitive parts of the early contract workflow. This makes it easier for stakeholders to plan the outline and focus on interpersonal communication.
2. Drafting: Many organizations use pre-written templates for their contracts. Digital contract templates expedite editing and copying. In addition, multiple people can access and alter digital contracts simultaneously, helping reduce reliance on email threads. Using a digital contract also provides universal, real-time access to the same electronic document, instead of fallible paper copies.
3. Negotiating: This is the stage where everyone involved works with a single contract or “source of truth.” Each user can access and comment on the same document, making communication more efficient and timely. Digital contract software tracks redlines, too. If, at any point, you need to return to a previous version of the contract, you can.
4. Approving: This stage might look like a series of internal signatures and little else from the outside. Actually collecting those signatures can take some time, though, especially if you use email. Digital contracting simplifies the process by automatically routing contracts to the right people. Approvers can then approve or reject the contract quickly and easily. The platform automatically records each approval step, ensuring immediate, secure access to the latest version whenever needed.
5. Executing: Even the final exchange of signatures is easier with a CLM platform. Digital signatures offer convenience, and CLM platforms work with common e-signature solutions to ensure this option is available for everyone. This can reduce contract downtime and keep things moving forward.
6. Managing compliance and obligations: Signing the contract is meaningless without enforcement of its provisions. CLM platforms let you monitor stakeholder performance and make sure all parties are following its terms. The software provides everyone with visibility into schedules and KPIs, ensuring alignment across the team.
7. Renewing or terminating: Renewing or terminating contracts is a common part of business operations. For some, this involves lots of digging through old contracts and coordinating plans across departments. Digital contracting centralizes the process. Calendars and alerts make expiration dates and renewal windows clear to everyone, helping legal teams stay on schedule with renewals and negotiate from a stronger position.
8. Record keeping: A physically signed and executed contract can fade from view, unlike digital ones. A CLM platform adds every new contract to its repository, where stakeholders always have easy access to it. This makes it easy to find contracts, clauses, and collections without having to search a filing cabinet or hard drive.

Why digital contracting matters for your organization

The benefits of digital contract management extend beyond contract lifecycles and benefit your business’s most critical operational teams.

Legal and compliance teams

Digitizing a contract increases its visibility across legal and compliance teams, giving these team members easily accessible insights into contract language. With digital contracting, compliance errors become easier to identify and resolve. Many CLM platforms provide pre-approved clause libraries to make resolving discrepancies even easier.

Plus, you can automate parts of the review process. Automation gives legal teams a second set of eyes during manual reviews and reduces the overall workload. Then, legal professionals can focus on higher-value, more strategic work.

The platform also logs any changes made to your company’s contracts for review whenever necessary. This way, the legal team can easily retrieve and revise the document or revert to a previous version.

Sales

Sales teams also benefit from contract digitization. Because CLM platforms often speed up contract negotiations, they can indirectly increase revenue. Electronic contract workflows might let you hire new reps sooner or close a deal in half the time.

Customer and supplier contracts often use distinct language, which can be confusing when comparing them for decision-making purposes or running numbers. Digital contract software can standardize this language across documents to make evaluating different terms faster and easier.

CLM platforms also help Sales streamline its contracts and renewal processes. This can support speedier negotiations and less time spent sending emails back and forth.

Finance

CLM platforms strengthen both strategic decision-making and budgeting. Contract data helps finance teams keep track of expenses, which can then inform budgeting and future financial decisions.

CLM software also helps Finance identify contracts that break the rules or can’t be executed. Team members can then renegotiate those terms in an effort to cut costs or increase company value.

You can even integrate your CLM platform with your company’s Enterprise Resource Planning (ERP) and financial planning software to automate data entry.

Embrace the power of CLM platforms with Agiloft

Our award-winning CLM platform helps organizations save money and reduce risk with easy-to-use interfaces, intuitive navigation, and powerful contract management features spanning the entire lifecycle. That’s why more than 95% of our customers choose to stick with us each year.

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