Top 5 Benefits of Contract Automation in 2024

Organizations are motivated to maximize the benefits of contract automation since two-thirds have set up financing, particularly for contract technology tools.

Companies that expect to streamline their contract management operations need to understand the benefits of contract automation technology. Thus, this article covers contract automation and its top 5 benefits. 

What is contract automation? 

Contract automation is the technology that automates all the workflows within the contract management framework. This means all the aspects of drafting and enforcing the contract will automatically be done by robots. 

For instance, a contract between two parties stipulates that party A has to reduce its commission for selling party B’s goods after six months of sustained relationship.

Contract automation software allows you to automatically connect the contractual performance indices or KPIs with the company’s ERP systems. So, in this scenario, the software allows you to set a rule-based triggering system that once the six-month threshold has passed, an email would be sent to the retailer reminding them of the reduced-commission stipulation. 

The benefits contract automation offers to businesses includes:

1. Reduce contract-drafting time 

The time it takes to draw up a contract varies with its length and purpose. But it is estimated that a basic, one-page contract could take a few days, while more complex ones would take weeks or months. 

A contract automation software can be programmed to house different templates for different use cases. Moreover, through EDI, API, and OCR functionalities, it would be able to retrieve the relevant information from different databases to fill in the blanks. 

For instance, once a new partner is registered on the designated database, and the nature of the partnership is declared, the software will automatically pick the template that is appropriate to the case. Furthermore, it will then automatically copy-paste all the relevant information on the documents, such as: 

• The company’s information (name, address, the signee, etc.) 
• Length of contract, 
• The kind of services that have been agreed upon between the two parties, 
• And more. 

This reduces the time it takes to start the preliminary stages of drawing up a contract. 

2. Avoid monetary and environmental costs 

The money spent on purchasing printing papers, and complementary products – printers, their maintenance cost, ink, electricity bills, etc – for printing contracts can be spent elsewhere. 

Printing documents is also an environmental cost, as producing a single sheet of A4 paper uses 10L of water, and producing 1KG of paper needs 2, 3KG of trees.

Contract management solutions digitize the process , and they allow the business to carry on creating contracts, en masse, with lower monetary and environmental costs. 

3. Increase customer satisfaction 

You might lose customers if you do not make things simple for them. Imagine the number of companies that might have lost a potential customer simply because they needed him/her to print out the contract, fill it with wet ink, go to the post office, mail it to them by hand, and wait for 2, 3 business days for it to reach their head office. 

Ideally, you should pursue your clients, not the other way around. So if you make them go out of their way to do business with you, chances are they will move on to another competitor that values their time. 

Contract automation and digitization will ensure that all the legal proceedings are done digitally and in the comfort of the counterparty’s location. This will, in return, increase their satisfaction, resulting in: 

• Them doing more businesses with you, 
• Them keep doing business with you,
• Them referring you to other customers. 

4. Reduce bureaucracy

Before a contract is sent to the customer, it needs to go through different departments, such as financial and/or legal, to make sure of its accuracy and compliance. For instance, if done manually, there might have been a clause copied from another unrelated contract, that would unnecessarily and mistakenly make the company liable for an event that hadn’t been agreed upon beforehand. 

Now imagine the distance a three to four-page contract has to travel within a company to have all its stipulations verified. The implication would be taking up the staff time with needless and time-consuming proof readings. 

Contract automation software can automatically create different contracts by leveraging from ready-made templates that already contain case-specific stipulations. For instance, let’s say a company is singing with a new vendor. To draw up a contract, the sales department would specify the contract category (i.e., B2B, B2C, etc), and the software would then create a contract that had had precedence before. 

5. Digitize archiving  

Contract automation means digitization. So each contract that is drafted leaves a digital footprint which users can trace back if there was ever a need. This makes archiving more efficient and increases transparency. 

Contract automation means digitization. So each contract that is drafted leaves a digital footprint that users can trace back if there was ever a need. This makes archiving more efficient and increases transparency. 

For instance, suppose a client claims to have not agreed to a clause in the contract they’d signed. The legal team can look up the contract by searching its identification code to retrieve all the relevant information, such as the type of contract (i.e., B2B, B2C, etc.), the counterparty’s information, contract details, and more. 

They can then cross-check this contract with other similar contracts in the same B2B or B2C realm to show the client some overlapping, standard-procedure clauses that they have with other clients as well. 

For more on automation

If you are interested in learning more about the automation of different processes, read:

• Top 7 Benefits of Warehouse Automation
• Retail Intelligent Automation: Top Use Cases & Case Studies
• Top 9 Use Cases and Benefits of Payroll Automation

And if you believe your business would benefit from leveraging an automation solution, head over to our automation hub, where you will find data-driven lists of different vendors for various use cases.

We will help you choose the best one based on your needs: