How manual contract approval introduces risk to your organization

Contracts set the rules for inter-company relationships, company-client interactions, and allow both parties to pursue legal action if the other party breaks the rules. In short, these agreements rule your operations much like a judge does a courtroom.

But the actual drafting and negotiation of these contracts can be challenging, even if you finally arrive at the approval stage. If a contract stalls, you could find yourself in trouble. 

Don’t let your company trip up before reaching the finish line. Learn about the most common risks of the contract approval process so you can avoid and respond to them effectively.

Why manual processes create contract approval risks

Manual workflows cause some of the approval stage’s most frustrating — and avoidable — challenges. Many contracting professionals find that the most common culprits for these problems are emails, spreadsheets, and other outdated tech. They slow processes down unnecessarily and can lead to losing track of important data and contract information.

Manual reviews are also time-consuming and more error-prone, with research suggesting inaccuracies as high as 15 to 25%, depending on the reviewer. Basically, these approaches are inefficient.

Wondering what other problems might be caused by manual contract approval workflows?  

See if any of these sound familiar:

• Ambiguous approval chains: Your company’s approval structure directly impacts contract quality and speed. Manual workflows are often slower than automated approval processes. They also tend to lead to inconsistency and ambiguity. As a result, contracts might get sent to the wrong people, and approvals might happen in the wrong order, leaving important stakeholders out of the conversation.
• A lack of visibility into contract status: Manual processes are far harder to track than automated ones. People often rely on sending an email or dropping by a colleague’s office to find out where the contract is in the process. This lack of visibility can make it a lot harder for sales teams to effectively plan for the future. It can also make it harder for legal teams to manage their workloads and keep track of the company’s responsibilities.
• Difficulty tracking contract versions: Over the course of drafting and negotiation, contracts can change a lot. Sometimes, you have to return to a previous version. Manual approval processes can make these older versions harder to find and use. They often end up buried in a hard drive or an email that only a handful of people can access. This means previous versions and important redlines can get lost in a sea of data.
• Approver burnout: Manual processes can increase the administrative burden on already busy teams. Chief Financial Officers (CFOs) may be inundated with documents and requests for approval, and Legal may have to juggle multiple versions of different contracts simultaneously. Over time, that weight can lead to burnout, which can result in poor work and subpar contracts. And that spells trouble for everyone.

How manual approval processes impact your work

These challenges can have a huge impact on your company — and your bottom line.

Other costs of manual contract approval include:

1. Missed revenue opportunities: Slow approval processes prevent deals from closing, decreasing the ability to generate or tap into new revenue streams. Quarterly financial reports and sales commissions won’t be able to reflect that promised boost, either. You may even lose the ability to provide goods and services to customers and business partners on time. All these problems combined can stunt company growth.
2. Unfavorable terms slipping through: Hasty approval processes can be just as problematic. Harmful terms can slip through unnoticed. For example, a reviewer may sign off on an impossible payment schedule before anyone notices that it isn’t actually feasible. At that point, however, approval has been obtained, and a new problem arises with cash flow.
3. The erosion of negotiated savings: During some deals, your company may be able to secure discounts if the agreement is signed by a certain date. Manual processes can compromise these savings by pushing the approval beyond that date. As a result, contract stakeholders are often forced to rush the signing or attempt to renegotiate the contract or discount. Both routes can cause trouble for your organization.
4. Damaged business relationships: Slow and sloppy manual approval processes can inconvenience clients and partners. They can delay contract negotiations and signings, leading to unnecessary frustration. Partners might offer less-favorable contracts in the future due to a lack of trust. In some cases, they might even choose not to renew the contract at all.
5. Regulatory noncompliance: Hasty and uneven processes lead to a higher probability of missing critical details. If an unintentional violation occurs, you will have some compliance issues to resolve. Each industry’s regulations are different, but noncompliance often results in the same thing — exorbitant fines and penalties.

The future of contract approval processes 

Luckily, there are ways to make contract approval easier and safer at the same time. The most practical solution is a preventive one that makes the approval process more thorough while taking less time — one that’s capable of centralizing all contract data and processes, plus improving your data security and making audit trails easier to follow.

The answer you’re looking for is a Contract Lifecycle Management (CLM) platform. These solutions streamline review processes while keeping all drafting, editing, and approving in one place. With a “single source of truth,” tracking changes and ensuring compliance become much easier. Robust CLM platforms like Agiloft can even automate the repetitive, low-effort parts of the contract management process to increase efficiency.

Plus, implementation doesn’t have to be disruptive to operations or create more issues than it solves. An effective CLM solution offers seamless integrations with other essential business tools. By integrating directly with other critical systems, you can streamline common workflows like invoicing, purchase order creation, and more.

And the best part? Getting started is easy.

Embrace digital contracting with Agiloft

Transforming your contract management processes is easy with Agiloft. More than 95% of our customers stick with us because our award-winning CLM platform is easy to use, flexible, and scalable. Every part of the platform is designed with your organization’s unique needs in mind, centralizing information and empowering your company to manage contracts with ease.

Reach out today for a free CLM platform demo or give us a call at 800-358-9568!