Manual vs. automated contract management: Which is right for you?

Imagine this: an ocean of paper cluttering your desk, frantic dives searching for a specific clause just hours before a critical meeting, and the nagging worry that a key renewal date might be slipping away into the depths of the sea. Unfortunately, this is the reality for many businesses still relying on manual contract management. Contracts, the rivers that drive any organization, can quickly become a source of chaos and inefficiency if not handled effectively. But while the traditional, manual approach has been the standard for many years, a solution has emerged in the form of automated contract management. But what are the fundamental differences of manual vs automated contract management, and how do you know which is more suitable for your organization?

What is manual contract management?

Manual contract management, as the name suggests, involves handling contracts through largely traditional, paper-based methods, with minimal reliance on dedicated software. It typically has the following traits:

• Reliance on physical documents: Contracts are often printed, signed in ink, and stored in physical filing cabinets or boxes. This creates challenges in terms of accessibility, searchability, and security.
• Drafting and redlining using word processors: While digital, the initial drafting and negotiation stages often rely heavily on word processing software like Microsoft Word. This involves manual version control, with multiple copies of documents potentially circulating via email, leading to confusion and errors.
• Spreadsheet or calendar tracking: Key dates, such as renewal deadlines, expiration dates, and obligations, are often tracked manually using spreadsheets or calendar reminders. This method is prone to human error, and it can be challenging to maintain an accurate and up-to-date overview of all contract-related deadlines.
• Manual routing for review and approval: Contracts are often routed for review and approval through physical hand-offs or email chains. This process can be time-consuming, difficult to track, and prone to delays.

This approach places a significant emphasis on human effort and often involves a combination of physical documents, basic office tools, and manual tracking systems.

What is automated contract management?

Meanwhile, automated contract management leverages dedicated software solutions, most notably Contract Lifecycle Management (CLM) platforms to streamline and optimize every stage of the contract lifecycle.

This approach aims to minimize manual effort, reduce errors, and significantly accelerate the entire contracting process. Automated contract management with a CLM system looks like this:

• Centralized contract repository: The CLM platform provides a secure, searchable, and easily accessible digital repository for storing all contract-related documents, making the tiresome search for physical or digital documents a thing of the past.
• Workflow automation: CLM solutions realize streamlined and automated routing of contracts through various stages, such as drafting, review, and approval, with defined roles and responsibilities.
• Template and clause libraries: Utilizing pre-approved, standardized templates and clause libraries, CLM systems expedite contract creation and ensure compliance.
• Automated alerts and notifications: CLM solutions also provide automatic reminders for key dates, obligations, and deadlines, ensuring timely action and preventing missed opportunities or breaches.
• Reporting and analytics: CLM systems offer tools to track contract performance, identify trends, and gain valuable insights for better decision-making.

Which approach is right for my business?

The best approach to contract management is heavily influenced by an organization’s specific needs, resources, and priorities. Like any swimmer in uncharted waters, you’ll need to carefully consider several factors before taking the plunge.

First, the volume and complexity of contracts is a key determinant; if a company manages a high volume of complex agreements, automation is often indispensable. The number of stakeholders involved also plays a significant role, as automated workflows can substantially enhance coordination among multiple departments and individuals participating in the contract lifecycle.

Furthermore, the importance of compliance and risk management is paramount, particularly for organizations in highly regulated industries, where automation can provide greater control and minimize the risk of costly errors. While budget constraints are a valid concern, it’s essential to weigh the initial costs of automation against the long-term expenses associated with manual processes, potential errors, and legal liabilities.

Finally, an organization’s growth plans should be considered, as automated systems offer superior scalability compared to manual methods. Although some businesses may initially opt for a hybrid approach, gradually automating portions of their contract management, the long-term advantages of full automation typically become more compelling as organizations expand and their contract portfolios grow in volume and complexity.

So, what now?

Before you fasten your sails and make the decision to adopt manual or automated contract management, you need to carefully consider the unique needs, resources, and priorities of your organization. After all, you know your own business best!

Still, while manual methods may suffice for businesses with simple and low-volume contract needs, the shift towards automation becomes increasingly compelling as contract volume and complexity grow. Automation not only streamlines processes – it also mitigates risks, enhances compliance, and offers scalability.

For organizations seeking a seasoned navigator to optimize their voyage through the contract lifecycle, CLM providers with a proven track record like Agiloft offer a robust solution that is tailored to every business’s unique use case. It’s time to batten down the hatches – contact us today and let’s chart a course for your specific needs.

Check out the power of automated contract management in action. Register for this month’s CLM Platform Tour.