Before signing on the dotted line, all the parties must review and approve the legal agreement. When organizations take the traditional route, the contract approval process spread across multiple authorizers and platforms can be time-consuming. It could adversely affect onboarding vendors or customers.
Moreover, the complexity and length of the contract approval process can vary significantly between organizations depending on the business size, the nature of the agreement, and the level of risk involved. But throughout the contract lifecycle, from contract drafting to negotiation, there are several steps organizations can take to streamline the approval workflow. Before we get into typical challenges and solutions, let's examine what contract approval entails for an organization.
The contract approval process refers to reviewing, authorizing, and officially approving a contract before it becomes legally binding through execution. Contract approval processes can be time-consuming and complex for growing organizations with numerous stakeholders and intricate relationships. Furthermore, the approval workflow for high-value business agreements may involve multiple stages. This complexity often leads to delays and inefficiencies as contracts progress through various levels of review and approval. The common challenges faced by businesses during the contract approval process include:
Unavoidably, changes and revisions will be made during the negotiation and review phases. In large organizations or those with decentralized operations, it can be challenging to maintain visibility and version control throughout the contract lifecycle. Lack of version control is typical when parties make revisions by playing email tag with the document. Different departments or individuals may have varying levels of involvement, making it an uphill battle to track contract alterations and ensure everyone is always on the same page. Otherwise, there is no assurance that the legal document will be valid or that all the alterations will make it to the final stage. Therefore, organizations cannot complete the approval process without making the latest contract version accessible to all stakeholders.
As the quality of the contractual agreement greatly influences the duration of the review and approval process, standard contracts are still the requisite for most business relationships today. Unfortunately, organizations may find it difficult to guarantee consistency and adherence to legal and regulatory requirements without standardized contract templates and clear guidelines. They need templates outlining the standard language, the terms, conditions, rights, and obligations for specific contracts. If the contract draft is not up to par, it may need alternations during the review stage before moving on to the next step. This can lead to delays, disputes, or non-compliance issues, particularly if contracts require extensive revisions or negotiation.
Effective communication and collaboration are crucial for successful contract approval. Organizations often rely on email or manual means to communicate with counterparties during the contract lifecycle. Emails are never 100% reliable – from connection problems, discrepancies in spam detection, and accidental errors. Naturally, email or third-party sites are less than stellar for communicating your concerns regarding something vital as a contract. Challenges may arise due to miscommunication, inadequate information sharing, or difficulty obtaining feedback from all relevant stakeholders. Ans they may fail to bring consistency and accuracy in the contract management lifecycle. It can result in misunderstandings, delays, and errors in the contract approval process.
Many organizations still rely on manual and paper-based processes for contract lifecycle management. Businesses falling behind in embracing digital transformation and automation may face challenges streamlining the contract approval process. They will have to rely on sending emails or physical documents back and forth to review and approve a contractual agreement. This approach is prone to errors, loss of documents, and slow turnaround times. It also hampers collaboration, as physical documents must be physically routed to different stakeholders for review and approval. When multiple parties are involved in the contracting process, maintaining version control is a joke with a manual or paper-based approach.
Now that we know, we can see how crucial but difficult the contract approval process is for businesses. The most efficient way to handle the typical approval bottlenecks is to adopt a contract management system to automate the entire contract lifecycle.
Contract approval workflows are an automated progression of contractual agreements through a sequence of authorizers. In Dock 365 contract management software, organizations can customize and maintain the workflow order during the approval process. Consequently, they can track, review, and assess the as the agreements progress through the workflow. It enables them to identify and rectify bottlenecks before they hinder progress. Generating a contract approval workflow in Dock 365 contract management system involves the following steps:
The number and level of approvals can vary depending on the organization's hierarchy and approval processes. The contract may require authorization from specific individuals or positions within the organization, such as department heads, legal counsel, or executives. After all necessary approvals have been obtained, the contract is considered finalized and ready for execution.
Adopting a contract management software solution to centralize and streamline the contract lifecycle can streamline the contract approval process. Dock 365 CMS provides features such as contract templates, version control, automated workflows, electronic signatures, and notifications to improve visibility, collaboration, and overall efficiency in managing contract approvals.
The centralized platform built on Microsoft Office 365 provides clear channels for real-time communication to ensure prompt feedback and alignment. A seamless contract approval process also encourages stakeholders to provide input in a timely manner to avoid delays.
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