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Contract automation: what is it and why is it important?

3 Mins read

Richard Mabey is the CEO and co-founder of Juro.

The legal industry is taking strides towards becoming more innovative, and over the past few years we’ve seen a variety of tech vendors emerge, offering unique solutions to help in-house legal teams better manage their day-to-day operations. 

One of the more common terms in the legal tech industry is ‘contract automation’ – but what does this mean? And what does it involve? To understand this, we need to better understand in-house legal’s role, and the process through which they interact with contracts.

What does the contract process look like?

Legal teams have traditionally managed contracts across multiple tools, like Microsoft Word, email, DocuSign, GDrive and Excel, which means that the process is usually time-consuming and painful for all parties involved. Specifically, switching between these tools creates friction for the end user, and data integrity issues can appear downstream.

A manual contract process usually goes as followed:

  • Someone in the business finds a contract template, likely saved on a shared drive. They edit the relevant information and email the contract to legal for review
  • Legal will review the contract, make a few amendments, before emailing it back. The person will then forward the contract to the counterparty
  • Contract negotiations are often lengthy and time-consuming, taking place via Word and email. This creates back-and-forth email chains and makes it difficult for teams to track the document or see an audit trail of edits – especially if the counterparty is redlining in Word without tracked changes
  • Eventually both parties agree and the document is converted from Word to PDF. They sign the contract either via an eSignature tool, or through a print/sign/scan process, with a wet signature. The latter can also delay time-to-sign, especially if the counterparty doesn’t have a printer or scanner to hand
  • Once signed, the document lives as multiple versions in a shared drive, on personal desktops, and sometimes even as hard copies in a filing cabinet, never to be seen again

This is a problem at most businesses, but especially at high-velocity scaleups – legal can often be seen as the blocker to getting deals over the line, and at a small business geared towards growth, this has a huge impact. 

Why is this a problem?

This process is painful for multiple teams in the business, and can: 

  • Bury legal under low-value work. The first legal hire is both an important and an expensive one – so the last thing both the sole counsel and the leadership team wants is that time spent on low-value admin work, such as manually correcting information in contracts
  • Waste time. The sales team has aggressive targets they need to meet each business quarter. The HR team has aggressive hiring targets. But the manual process of printing, signing, tracking and reuploading a document takes too long and can lead to lost momentum in important
  • Lead to a poor counterparty experience. The painful workflow can cause friction between parties, and can even discourage the counterparty from signing altogether
  • Make teams look unprofessional. The business sets a poor example as an amateurish company, with documents that aren’t standardized. 
  • Increase risk. Manually inputting contract information increases the chances of human error, as well as opening the business to risk – with no standardized process in place, the business could be agreeing to outdated terms

All-in-one contract automation can help reduce these pain points for teams in the business – the use of software to agree and manage contracts can enable teams in the business to self-serve on legal documents. This allows teams outside of legal to take control of the contract process, without needing input from legal every time.

What does an automated contract workflow look like? 

With contract automation software in place, the end-to-end process for legal documents becomes faster, better, and easier to manage.

  • Legal owns the wording of key terms and conditions in the contract, and so they’ll be responsible for creating a template that lives in an easily accessible location. Having a single source of truth for non-disclosure agreements, for example, means that the document is standardized, and teams can self-serve from a single, updated version of the contract
  • People using the contract template can quickly enter data without running the risk of human error. In a contract automation platform, this data auto-populates the contract, and makes the document searchable and easy to track
  • Contract negotiations take place in a single window, instead of across multiple systems such as Word, email, and Slack. Teams can collaborate internally on the document, and can negotiate externally with the counterparty, without having to leave the browser. Plus, with an audit trail in place, edits made in a contract platform are easy to follow
  • Parties can sign the document safely and securely through a native eSignature tool. This also allows them to sign from any device, at any time – no printers and scanners required
  • The signed document lives in the same workspace as the templates, ensuring it’s easy to access, and easy to track

Streamlining the contract process

Handling high volumes of routine contracts, such as non-disclosure agreements, order forms, and employment offer letters is especially hard in a scaleup environment. The targets for growth are super high and legal resource is often super low. Often, legal teams consist of one or two lawyers, serving double-digit or triple-digit commercial teams. 

Contract automation software becomes a must-have for these teams where automation is vital to ensure that legal acts as an enabler of growth, instead of a blocker.

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