10 Keys to Digital Contract Transformation
By David Parks
With the vast majority of CEOs expecting their business models to change over the next three years, it’s no surprise that digital transformation (DX) continues to be a strategic priority for organizations of all industries and sizes. But what does DX mean for procurement, finance, and legal teams and what is their role in the execution of it?
A big part of that answer is centered around the concept of digital contract transformation (DCX). DCX is all about the digitization of contracts and contract lifecycle management (CLM) processes. DCX is a foundational element of an organization’s broader digital transformation strategy because it not only modernizes their contracting efforts, it enables them to harness the data in their contracts to deliver actionable business insights which is the heart of digital transformation.
Let’s look at 10 keys to digital contract transformation that legal, procurement, and finance teams (or anyone involved in the contract process for that matter) can implement and be well on their way to helping their organization be successful with its broader DX strategy.
1. Use a cloud-based central repository to store, manage, search, and secure your contracts.
Do you store and track contracts in shared folders and spreadsheets? This makes it hard to digitally access and gather information (i.e. data) in and across your contracts. What if you want to search all your agreements for a specific clause? Or, maybe you want to view all agreements by contract type, but they are only organized by vendor? Centralizing your agreements in a digital contract repository eliminates these issues. It keeps agreements organized and reduces the risk of them being lost, overlooked, or accessed by the wrong individuals.
2. Implement automated alerts and reminders to avoid missed deadlines and obligations.
Have you ever missed a contract obligation? Doing so can result in serious consequences. Imagine missing the termination window of an automatic renewal you wanted to cancel or missing a certain condition that’s activated by a milestone that makes you eligible for a discount. Setting up automated alerts and tasks is the perfect way to stay on top of these critical contract deadlines. No more manually tracking dates using filters and custom sorting in spreadsheets or setting reminders in Outlook, Gmail, or iCalendar.
3. Create cloud-based clause and template libraries to increase contract compliance and speed.
Drafting an agreement can be time-consuming when staff members are unsure if they are using the right legal language. This uncertainty is a liability and hard to avoid when using manual contract management techniques. Creating shared and legal-approved clause and template libraries is key to increasing the productivity and compliance of any contract process. They help assemble documents faster—while eliminating deviations from standard legal language. Documents can be automatically formatted eliminating the need for any manual clean-up. You can also apply your organization’s business rules around which clauses to use under specific circumstances such as a contract value or local laws.
4. Collaborate with version control to avoid missing, duplicate, or incorrect information
Keeping track of all the edits throughout contract negotiation is a difficult task when you are managing them manually. Not only do multiple people have a copy of the document at the same time, but they are making simultaneous changes that may or may not be tracked properly. The key to effectively managing version control is to use a digital contract management solution that tracks changes by user and allows them to simultaneously review, redline, and approve contracts directly in the system. This ensures you avoid missing, duplicating, or using inaccurate data that can result from emailing back and forth and comparing different versions.
5. Clearly define your contract lifecycle workflows to ensure compliance to business rules and automate processes.
Chances are, you have many steps and stages throughout a contract’s lifecycle. To keep things moving smoothly, it’s important to have well-defined and documented contract workflows that follow your business rules. This ensures governance and compliance to your processes. One of the keys to digital contract transformation is to create automated contract workflows that eliminate the need to manually track and facilitate each step required to request, draft, review, approve, and execute a contract. Workflows can differ by role, contract type, or by any data within a contract.
6. Set up automated notifications for approvals and embrace electronic signatures.
If securing contract approvals is one of the slowest parts of contract management you’re not alone. That’s why improving it by automating and digitizing the approval process is one of the keys to digital contract transformation. This speeds up your approvals in two main ways. First, when a contract is ready for approval you can automate email notifications to be sent to the approvers, alerting them they need to sign. Second, you can use e-signatures to get documents signed electronically from any device anywhere in the world in minutes.
7. Establish role-based and feature-based permissions for greater security and governance of your sensitive contract data.
Another one of the big keys to digital contract transformation is ensuring that people in your organization have appropriate access to contracts and parts of the process. To do this effectively, you want to establish role-based and feature-based permissions for enhanced contract security and compliance. This prevents unauthorized users from seeing or editing specific contract details. For example, you may not want anyone on the sell-side of the business to see contracts executed by procurement. Or perhaps you only want to give “read-only” users access to specific parts of the process.
8. Build visual dashboards and real-time reports to provide quick answers and business intelligence.
Reports and dashboards are key for measuring the success of your contracts and tracking productivity so you can refine and optimize your process. You’ll want to ensure that you can generate reports that provide real-time visibility into your contracts, processes, and associated risks. And dashboards take your valuable report data and present it in a visual format. This will give you actionable insights to make data-driven business decisions, establish benchmarks, and track KPIs – all of which are keys to digital contract transformation.
9. Establish a standard, simple, and online contract request and submission process to save time and improve accuracy.
Do you rely on email, voicemail, or hallway conversations to request contracts and capture the info necessary to create them? Often, that approach results in incomplete or incorrect data. An important best practice is to establish a standard and easy-to-use process for intaking contract data digitally. This lets your team accurately submit existing contracts, request new ones, and if they have the authority, instantly create a contract themselves. And they do it online, not via email or some other way that might get lost in the shuffle.
10. Keep a full and detailed audit trail for compliance with your specific regulatory and internal requirements.
When you have a decentralized, spreadsheet-based, and/or shared folder-based contract management process it makes it really hard to create an audit trail. Having a centralized and digital contract repository with complete audit trail data and auditing capabilities tied to each agreement is critical and one of the most important keys to digital contract transformation. You’ll want to make sure you can capture and store full contract history data such as edits, updates, logins, and user permissions.
The need for digital transformation is accelerating. Legal, procurement, and finance teams can play a vital role in leading DX initiatives by embracing digital contract transformation. By implementing these 10 best practices, you can make significant progress in achieving digital contract transformation for your organization. You’ll be able to improve your overall contract management effectiveness and leverage the wealth of data in your contracts to make accurate and intelligent business decisions. Contract management software from Contract Logix makes it easy and efficient to implement all the best practices covered in this article and more. If you’d like to learn more, we encourage you to schedule a contract management software demo.