Enterprise Contracting: Processes and Best Practices
March 8th, 2023
Contracts involving at least one signatory enterprise have the same components as any other kind of business contract – mutual agreement, adequate consideration, enforcement recourse, and legality.
Nevertheless, enterprise contracting does sufficiently raise the scale and complexity of contract management to warrant special consideration for best practices.
This guide covers enterprise contracting processes and best practices to ensure efficient processing, compliance, and security.
- Due to the size and complexity of the participating organizations, enterprise contracting presents organizations with unique contract management challenges.
- Enterprises are large-scale organizations employing thousands of individuals and comprising multiple departments.
- Contract management software with capabilities for automated workflows, document generation, redlining, and digital signatures can facilitate enterprise contracting.
😉 Learn the 10 contract management KPIs every business should know HERE.
What Is Enterprise Contracting?
Enterprise contracting refers to the generation and management of contracts involving one or more enterprises – large-scale commercial organizations as distinguished from small-to-medium-sized businesses. While definitions of an enterprise based on a specific number of employees are arbitrary and vary by source, the distinction provides useful clarification when an organization’s size necessitates different operational processes and practices than those suitable for smaller businesses.
In the case of contract management, enterprise-level businesses require software and IT tools capable of coordinating the contributions and edits of dozens to hundreds of different users in multiple organizations. Enterprising contracting presents challenges related to both the scale of the organizations involved and the potential complexity of meeting the approved language requirements of all signatories.
Enterprise Contracting Best Practices
Although every enterprise-level organization has unique contracting needs, there are several best practices organizations can implement to improve contract management efficiency and effectiveness.
1. Design Workflows for Automated Contract Lifecycle Management
Ensuring sufficient oversight for complex enterprise contracts can exhaust the resources of even experienced management teams. When work must pass across multiple desks and departments, downtime and the risk of human error accumulates. Designing automated workflows for contracts in your organization with contract lifecycle management (CLM) software reduces bottlenecks and error rates.
Having predetermined contract workflows routes contracts to the next right person or department, eliminating unnecessary downtime and keeping those responsible for oversights and approvals informed at every lifecycle stage. You can use CLM software to create workflows that automate many important decisions and reporting tasks, such as:
- Notifications for completed tasks
- User-defined fields
- User logs for audit trails
2. Streamline Contract Generation and Approvals
Manual contract generation and approval processes tie up legal and IT teams with repetitive, rote tasks, leaving them with less time to apply their most value-driving skills. Between request and execution, contract generation and securing necessary approvals involve several critical but automatable tasks that contract management software can handle. These include:
- Document generation
- Data entry
- Version control
- Document merging
Automated contract assembly can streamline these stages of contract lifecycle management (CLM). Drawing on preapproved language libraries, your teams can generate compliant language and clauses without direct legal input.
Your contract management software can also house templates for common contract types involving guidelines such as General Services Administration (GSA) requirements, healthcare data privacy regulations, and Federal Acquisition Regulations (FAR) or Defense Federal Acquisition Regulations (DFAR). Combined with version tracking controls associated with individual users, streamlining these processes eliminates significant manual work hours while improving overall compliance rates.
3. Migrate Contract Redlining to a Secure Web Application
Negotiating enterprise-level contracts often involves dozens of contributing counterparties. Traditionally, organizations conduct redlining processes by email and MS Word documents with track changes enabled. However, when multiple contributing parties suggest changes and other modifications to review and approve, it becomes difficult to keep the process moving with adequate version control.
Contract management software with redlining features in a secure web portal can radically simplify counterparty negotiations. A single online repository for contracts ensures that all contributing parties see the most current version and that all parties receive update notifications as soon as they go live. Additional redlining features that enterprises benefit from include:
- Rule-based editing permissions
- User-specific commenting tools
- Clause ownership assignment
- Approval routing
4. Adopt Electronic Signatures and Digital Signatures
SOURCE: Eye on Tech via YouTube
Although commonly confused, electronic signatures and digital signatures are two distinct technologies that organizations can apply to contracts. Electronic signatures replace wet signatures on hard copies, saving time spent exchanging physical documents between remote locations. In contrast, digital signatures are a cryptographic technique for securing signed digital contracts.
As electronic signatures are simply stand-ins for hand signatures, enabling their use in an organization speeds up the signing phases of contract execution but does not change the process in any other way. On the other hand, digital signatures – also known as public key certificates – encrypt an association between a signatory party and the exact version of the document signed.
Using an encryption format called public key infrastructure (PKI), signatory parties register signed contracts with a third-party registration authority that issues registration keys to both contracted parties. Once all parties have digitally signed the contracts, the unique association of digital signatures with contracts in possession of the PKI registration authority ensures that no single party can alter a contract-signature pairing.
5. Assess Risk with AI and Machine Learning Systems
Even with a large and capable legal staff, identifying and quantifying potential risks in enterprise-level contracts with human oversight always falls short of failproof. Contract management platforms with AI and machine learning capabilities can radically enhance an organization’s ability to upload existing contracts into the software and automatically extract key information to be autopopulated in the contract record.
This not only eliminates the need for manual data entry, it accelerates an organization’s digital transformation efforts.
Streamlined Contract Negotiation and Collaboration with Contract Logix
Contract Logix’s Collaboration Room enables real-time contract negotiation with complete visibility for both internal and third parties. With features for collaborative reviewing, editing, commenting, and applying digital and electronic signatures, Contract Logix streamlines every stage of enterprise CLM.
To learn more about enterprise CLM solutions for your organization, contact Contract Logix.
Looking for more articles about Contract Management? Check out our previous article “Financial Services Contract Management: What You Should Be Looking For“.
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