How to Solve Your Biggest Contract Approval Process Problem
Contract cycle times are directly tied to business results: whether it’s finalizing the paperwork to bring on a new hire, reaching a deal to obtain key parts and supplies, or closing a sales deal with a new customer - lags in the contract approval process can delay results and profits, and thus directly impact your business bottom line. As business speed and agility increasingly become competitive differentiators, the ability to efficiently process contracts and move on to the execution phase has become a make-or-break imperative.
Even so, it can take the average company months to start seeing the benefits of a contract: according to the International Association for Contract and Commercial Management, on average, even medium-complexity agreements take between seven to 10 weeks for approval. Slower companies need much more time: in the bottom quartile of businesses, contract cycle times can be as long as 16 weeks. That’s four months before your new hire starts working, you can receive that important production part or supply or you can actually get down to business with a new customer.
While due diligence does require time and attention, there are also some avoidable process problems and snags that can needlessly delay contract approvals. Here’s how to solve your top business contract approval problems.
Problem 1: Contracts That Need to be Reworked Due to Out of Date Wording and Terms
Many businesses use standard contracts to address frequently-occurring types of agreements. But even when common contract templates are in use, there can often be older versions of the same type of agreement floating around. The problem with these older versions is that things change – and from new compliance rules to updated billing models, using outdated contract templates can slow down the approval process, as outdated terms are identified and updated during reviews. Such slowdowns might even be a best-case scenario: if the out-of-date sections are not spotted and modified during the approvals process, and contracts are signed as is, they can increase business risks.
Creating a library of standard agreements to address a variety of common contract scenarios can help to solve the problem. But templates won’t be sufficient if they aren’t being used so it's crucial to make sure that anyone involved in drafting contracts knows where to find and can access, your blank, up-to-date contract templates.
Problem 2: Problems with Versioning/Tracking Changes
Starting off with an old document isn’t the only versioning issue that can be encountered during the contract approval process. As various parties weigh in on an agreement, and email the document back and forth, maintaining the integrity of the document can become tricky.
While back and forth discussion is part of a healthy contract drafting and negotiation process, version confusion doesn’t have to be. Instead of email, a secure, centralized tool that allows parties to review and comment within a single document can ensure changes and comments are not inadvertently lost or overwritten.
Problem 3: Lags Due to Email Communication
How many emails do you send or receive in a given month that start with “Sorry for the delay”? The inbox deluge faced by employees has decreased the urgency of email – messages, including ones that contain important contracts, can languish as a result. According to research, as email drops lower in your inbox, the chance of getting a reply decreases: after 48 hours without a response, you may never hear back at all.
You can maintain a sense of timeliness during the contract approval process by using contract management software that allows you to automatically set up reminders and expiry dates for review, signing obligations, and other key tasks related to the approval process.
Problem 4: Signature Slowdowns
As you’re probably aware, a contract isn’t a done deal until all parties have signed on the dotted line. But no matter how eager everyone is to enter into a deal, the manual work of collecting signatures represents one final hurdle that can slow things down – or even kill a deal altogether. If the delay coincides with a strategy shift or the momentum simply fizzles out. From printing the document to sending a paper contract back and forth between parties, these tasks can add days (and also increase the costs and environmental footprint) to the contract approval process.
Using e-signatures to finalize a contract can help to eliminate this last roadblock. Executable from any connected device, e-signatures are both secure and legally binding under the Electronic Signatures in Global and National Commerce Act (E-Sign Act). Furthermore, they can help to ease some additional problems that can arise during the signing phase of contract approval and put your whole deal in jeopardy. Whether that’s missing a page that requires initialing or improperly ordering the pages of a long, complex agreement.