Contract automation is transforming business operations by digitizing and streamlining the end-to-end contract lifecycle. As we enter 2023, contract automation solutions are becoming even more powerful and delivering significant value through efficiency gains, cost savings, risk reduction, and data-driven insights.
In my decade as a data extraction expert, I‘ve seen firsthand how organizations are leveraging automation to optimize contract processes. Here I‘ll explore the top 5 benefits companies can realize by implementing contract automation in the coming year.
1. Expedited Contract Creation
Manually drafting contracts is an extremely tedious and time-consuming process. Employees often start from scratch or dig through folders to find a similar legacy agreement to use as a template. They customize it for the new contract, route it for approvals, negotiate terms, and finalize the document.
This manual process often takes days or weeks to generate a single contract. It also introduces errors when old templates are reused without proper updates.
Contract automation software streamlines contract creation through smart templates that pull data from related systems. Users simply enter key details like parties involved and contract type, and the system automatically generates a complete contract draft within minutes.
Some advanced solutions even recommend clauses based on contextual insights from past agreements. This can reduce the average contract drafting time by 80% according to research by Aberdeen Group.
As an example, leading contract automation provider LinkSquares can create an initial draft in just 3 clicks and less than 60 seconds. By eliminating repetitive manual work, automation enables organizations to produce contracts on-demand instead of getting mired in manual processes.
2. Mitigation of Errors and Risk
Reliance on manual contract management inevitably leads to errors that expose organizations to major financial, operational, and legal risks. Employees may copy outdated clauses or neglect to include important provisions that leave the company non-compliant or vulnerable in a dispute.
Contract automation dramatically reduces these errors by maintaining clean templates integrated with downstream systems. Automated routing and approvals ensure the right people review agreements at each stage. And integration with external systems decreases manual work that often results in mistakes.
According to data from the International Association for Contract and Commercial Management (IACCM), companies using contract automation solutions decreased errors in their agreements by an average of 25%. That significant reduction in errors helps minimize risk related to revenue leakage, regulatory fines, and contractual disputes.
3. Vastly Improved Compliance
Non-compliance with contract terms and obligations can lead to serious financial penalties, lawsuits, and damage to organizational reputation. However, ensuring compliance is extremely difficult when contract data is scattered across siloed systems and physical documents.
Contract automation brings all agreements into one centralized, searchable digital repository. This unified view makes it easy to find and review contract details and clauses to verify adherence. Even more impactful, contract automation tools can monitor compliance proactively.
By setting up rules and reminders based on key dates, SLAs, renewal triggers, and other criteria, the system automatically notifies responsible parties to take action before obligations are missed. According to IACCM‘s study, 75% of businesses leveraging contract automation achieved better compliance outcomes.
4. Maximized Efficiency and Cost Savings
Manual contract systems demand a tremendous amount of time spent searching emails and folders for agreements, chasing approvals, and tracking renewal dates across siloed spreadsheets. Late renewals often lead to short lapses in coverage or services. Poor visibility into agreements frequently results in missed obligations and duplicative work or purchases.
Contract automation eliminates these inefficiencies by maintaining all contract data in centralized digital repositories. Employees can quickly find contracts through simple search. Rules engine enable the system to proactively notify approvers, ensure timely renewals, and track key performance indicators. Real-time dashboards provide complete visibility into spending and liabilities.
One company reported reducing contract management time by 50% after implementing automation. According to Gartner, top performing contract management teams achieve over 60% in cost reductions compared to low performers. By optimizing efficiency, contract automation delivers immense time and cost savings.
5. Enhanced Business Insights for Strategic Planning
Without access to complete, up-to-date contract data, executives cannot make fully informed strategic decisions about vendors, pricing, terms, and obligations. Managers lack critical insights into upcoming renewals, ongoing spend, and overall supplier or category performance.
Contract automation solutions aggregate all contract data into unified digital repositories. Intuitive dashboards deliver real-time visibility into actionable KPIs and metrics based on that consolidated data. AI-powered analytics provide deep insights that would be impossible to garner manually.
Armed with comprehensive data and insights, leaders can closely track spending by vendor or category, model different scenarios, and predict the impact of contract changes. Procurement teams can benchmark agreements and proactively renegotiate improved terms. The business gains the agility and intelligence to respond strategically to market shifts.
The Future of Contract Automation
As contract automation proves its ability to deliver these transformative benefits, adoption is accelerating rapidly. Analysts predict the contract lifecycle management market will expand at over 15% CAGR to exceed $5 billion by 2028.
Innovators like LinkSquares are enhancing capabilities like AI clause recommendation to enable more automated, touchless contract workflows. Integration with complementary technologies such as RPA will maximize end-to-end efficiency across systems.
Businesses that embrace contract automation now will gain a distinct competitive advantage. They will optimize efficiency, savings, risk mitigation, and data-driven decision making through digitally driven contract processes.
With the market poised for massive growth, contract automation will define the next era of resilient and agile contract management. Leading with automation in 2024 positions organizations to reduce costs, accelerate growth, and future-proof success.