Contract Automation: Software, Process, Benefits and Use Cases

Contracts are the lifeblood of every business. They are the cornerstone of customer, vendor, partner, and employee relationships. 

Businesses increasingly depend on relationships to lower costs, improve quality, and drive innovation. But traditional contract management tools and processes just don’t cut it. Contract automation solutions address these issues.

In the era of digital transformation, implementing a contract automation solution to unlock contracts’ underutilized potential is becoming the norm. 

This blog explores the costs of manual contracting, the stakeholders involved in the CLM process, how to automate the contract process, and more.

What is contract automation?

Contract automation is the process of streamlining contract drafting, internal approvals, counterparty negotiations, signing, storage, and tracking. It eliminates mistake-prone, wasteful administrative work across the contract lifecycle. 

Automating contract management addresses problems like manual processing, poor counterparty experiences, the risks associated with version control, and compromised data integrity across devices, teams, and organizations.

The financial impact of manual contract management

According to WCC, poor contract lifecycle management can cause your company:

All contracts contain gaps and ambiguities, and the sheer volume makes contract data difficult to track. They need uniformity and predetermined standards to organize, manage, and update. Traditionally, contract management involved a labyrinth of paperwork, manual processes, and scattered data.

In contract management, a party may also fear being ‘held up’ by the other. Despite the legal team’s best efforts to plan scenarios and get ahead of bottlenecks, this only hurts the bottom line.

In the complex world of legal operations, managing contracts efficiently is paramount. Contract management software helps streamline and automate the contract management process, from creation, approvals, and negotiations to signing and tracking.

The impact of contract management processes, according to Gartner Reports:

Who benefits from contract automation?

Contract automation revolutionizes multiple industries streamlining contract processes, enhancing efficiency, and mitigating risks. Here are real-world applications of contract automation across a few industries:

1. Real-estate

The real estate industry handles large volumes of lease and sales contracts. Communication across stakeholders like buyers, sellers, agents, and legal teams while ensuring compliance with local regulations is also challenging.

Instead, sales contracts and lease agreements can have standard templates, no-code workflows, signature integrations, and systems to handle routine tenant communications for rent due, maintenance updates, and contract renewals.

2. Manufacturing & supply chain

The supply chain industry demands handling high volumes of complex clauses. Approvals across multiple departments and regulatory locations are a key challenge.

Contract automation in the industry simplifies administrative work, payments, renewals, and reminders while keeping rote work transparent, traceable, consistent, and compliant. Integrations with existing procurement systems also help track contract statuses in a unified workspace.

3. Healthcare

In healthcare, collaborative processes may conflict with customer privacy and confidentiality per HIPAA and other regulations. The industry stewards sensitive information around patient care, supplier agreements, and industry regulatory compliance while responsibly coordinating with departments and external care partners.

Automation for patient care agreements emerges when creating and managing consent forms, treatment agreements, and insurance claims. On the buy side, you can standardize vendor agreements and SLAs, streamline contract workflows for medical equipment, pharmaceuticals, and services, and track renewals with automated alerts.

4. Construction

The construction industry manages contracts with subcontractors, suppliers, and clients with tight deadlines and budgets. It also frequently processes change orders and amendments.

The right CLM helps you generate and send bid requests with standard templates. Subcontractor agreements and change orders can be automated efficiently with workflows and pre-approved clauses based on project type and scope.

5. IT

IT institutions manage high volumes of SLAs and other project contracts while abiding by compliance data security and privacy laws.

A CLM automates standard form contracts like software licensing agreements, SLAs, MSAs, and NDAs from creation to completion to commitment.

4 Major challenges of manual contracting and their solutions

Each business has distinct characteristics. There could be various reasons why you need to automate contract management. Here are some reasons the current circumstances may warrant a new contract automation system.

1. Faces challenges with manual request management

Fragmented requests to in-house legal and legal ops teams are the norm in manual contracting. Each team spends a lot of time trying to bounce emails and documents for reviews on the fly. This causes delays, frustration, and inconsistency across departments.

In a digital contract management system, a central workflow management and automated reminders eliminates the need for endless back-and-forth on email, enhancing efficiency, accuracy, and collaboration.

2. Experiences high contract TAT

Operating without a CLM tool leaves your teams no choice but to rely on manual processes like spreadsheets, back-and-forth emails, cluttered Slack communications, outdated tech, and creating ad hoc reports. This not only steals time away from strategic work but also heightens the chances of human error, causing you to overlook vital insights.

In an automated contract management system, the contract creation process is fast-tracked with standard templates and legal-approved clauses. No-code workflow waterfalls can be configured with an audit log and version control. AI-redlining with an in-browser editor allows for faster contract reviews. Also, E-sign integrations and native hand-drawn or OTP-based signing options help close contracts in 2 clicks.

3. Miss out on contract renewals

Fragmented CLM processes cause revenue leaks from missed renewals and opportunities. Especially for high-volume, low-complexity contracts that further impede legal productivity and erode trust in business relationships. Without key strategic analytics and intelligence of contractual obligations, your business goals don’t align with team KPIs and fail to serve your business and partners effectively.

In an automated contracting system, obligation tracking with auto-extracted metadata and automated reminders helps legal teams maintain viability and control of risks and liabilities. Dashboards and analytics can be valuable for real-time decision-making without legal dependencies. They can help track contract performance, identify bottlenecks, and automate the reporting process.

4. Lacks visibility into contracts

Manual contract management lacks visibility making status and turn tracking difficult. Opacity causes further inefficiencies, delayed decision-making, non-compliance, and missed opportunities. 

In an automated system, an in-flight dashboard centralizes all contract process data in one place accessible to administrators. It tracks process metrics like contract status, number of turns, contract review time, upcoming deadlines, and compliance.

Top 10 contract automation software features to know

1. Pre-approved contract templates

A robust contract creation solution should provide simple clear and intuitive templates for users to draft contracts easily. Augmented with a legally approved clause library, standard language templates align with business goals and aid in creating contracts with consistency. They can also ensure accuracy through OCR capabilities. Intake forms can further standardize contract requests by prompting users for key details.

2. Conditional logic for contracts

Conditional logic empowers teams to automate contracts with error-free terms without drafting and editing each new contract. These rules and conditions can be pre-set in contract templates to automate the inclusion or exclusion of certain clauses based on context. The functionality allows legal and contract admin teams to retain visibility and control over clauses without manual tracking and editing.

3. No-code workflows

A pre-defined contract management approval process involves routing designated reviewers based on contract volume and department criteria. They can be configured without code to send contracts to stakeholders in their respective turns automatically. Frictionless workflows put legal back in control, enhancing visibility and reducing bottlenecks so you always know who has the pen and who has to sign. This means quick reviews, approvals, and faster closures.

4. AI-driven contract redlining

While human negotiation discussions cannot be replaced, pre-defined non-negotiable clauses can be auto-extracted with AI for redlining, cutting contract review time by 30-40%. An AI-based contract management tool automates the stages of the contract lifecycle including conditional access for reviews, audit trails, and version control.

In a unified workspace with integrations to email or Slack, they are great collaboration tools. Legal, finance, management, sales, HR, and counterparty teams are empowered to do more fulfilling work.

5. Bulk processing of contracts

Sending and tracking standard-form contracts individually is tedious. Contracting is challenging even without the paperwork. Bulk actions can be leveraged for ESOP agreements, employee agreements, offer letters, invoices, supply-side onboarding agreements, and procurement contracts. 

Variables can be recorded on a sheet and uploaded for bulk sending. They can then be tracked, followed up on, signed, and executed in batches. Processing contracts in batches saves HR and procurement teams routine contract admin time and errors while efficiently keeping track of standard rights and obligations proactively.

6. Automated contract reminder alerts

Automated alerts help notify relevant stakeholders about renewals, deadlines, and obligations, preventing delays and penalties. These alerts can match the specific needs of contract types, users, and roles. Timely notifications mitigate risk, keep operations running smoothly, and aid compliance. Contract administrative teams are transported from Excel spreadsheets to prompt custom actions at scale.

7. AI-driven contract metadata extraction

The true success of your business partnership lies not in signing a deal but in fulfilling obligations. You should be able to track key milestones, contract status, deadlines, performance metrics, and upcoming actions for proactive management, mitigating risks and maximizing opportunities. Auto-extraction of metadata can be done from imported contracts or external systems like CRM, ERP, and HRM software. This saves your teams the time and frustration of manual data entry, tracking, and reporting.

A 2023 World Commerce and Contracting report on AI in contracting revealed that out of all use cases of contracting AI technology, automated metadata extraction is the most common one with a share of 44%. Extracting metadata automatically saves your teams the time and frustration of manual data entry, tracking, and reporting.

8. E-signatures

The pen is the first act of commitment that bridges intentions and actions. Contract signing software speeds up execution with secure electronic signatures. This eliminates paper-based processes and ensures compliance with legal standards. Integrations with tools like Adobe Sign, DocuSign, and Hello Sign enhance efficiency, while options like hand-drawn and OTP-based signatures provide legally binding alternatives.

9. Central contract management dashboard

Automated analytics dashboards provide insights into contract performance, expiration dates, and renewal needs. They replace manual data capture with smart fields that help you visualize key contract data for prompt decisions.

Contract automation tools in the in-flight stage help you track real-time contract process data and the pulse of your contracting productivity. It provides a comprehensive overview of all ongoing contract pre-executions. It displays key metrics such as the number of turns, current turn, and total review time to optimize the process and close deals faster.

10. Third-party integrations

Integrations simplify tasks across contract lifecycle management from auto-drafts, routing, and reminders to e-signatures and renewal tracking on CRMs and ERPs. Before you pick a tool for your contract management automation, ensure that it integrates with existing systems The right integrations can empower your teams to self-serve on contracts without dependence on legal.

Key stages of automation in contract management

Looking for a reliable contract automation solution? Choose HyperStart CLM

As the stodgy image of the legal world cracks under the force of AI-powered contract automation and augmentation, this technology has the potential to reduce stress, eliminate manual drudgery, improve data accuracy, and nurture your business relationships and trust. 

HyperStart leads the industry with robust, secure, and intuitive contract automation at different touchpoints of the contract lifecycle, driving value at each of them. 

Why choose HyperStart for contract automation?

Recently, HyperStart CLM helped Qapita transform from manual to automated contract management. This leading digital equity management platform initially struggled with contract management while partnering with another CLM provider. 

Their challenges included limited bandwidth, high contract volume, and an unresponsive vendor. After transitioning to HyperStart CLM, Qapita experienced improvements in its contract operations. Here is the testimonial of their company secretary.

“Implementation was very smooth. Using the bulk upload feature, all contracts were integrated into the system within minutes. I was also able to see the AI extracted metadata on the tool immediately, which was impressive.”

View Case Study

Mayuri Jaltare

Company Secretary, Qapita

Want to streamline your contract lifecycle management process? Book your demo and get started in 5–7 days.