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Designing for contract automation - simplification and relational contract

Designing for contract automation – simplification and relational contract

on April 13, 2022

The reasons for automating contractual processes or workflows are many but even more numerous are the reasons for implementing simplified and relational contracts. 

New relational models, more effective and efficient performance require the adoption of innovative technologies. In an era where businesses increasingly have to depend on their suppliers to lower costs, improve quality, be compliant, and respond quickly to changes, traditional contracts don’t work. They don’t work for two reasons: 

1. they undermine the partner-like relationships and trust needed to cope with changes and external uncertainty; 

2. they are the outcome of a broken process. Many organizations have a mishmash of manual and digital systems that effectively trap information within functional silos, meaning that decision-making is hampered by an incomplete picture. 

The remedy is to adopt a simplified and relational contract that creates flexible governance designed to foster collaboration and communication over the long term. These contracts, specify mutual goals and establish a defined workflow to keep the parties’ expectations and interests aligned. 

Digitalization is not enough

Undertaking a contract management digitalization program does not mean just automating the status quo. The objective is to implement a new generation contractual lifecycle management system to achieve a smarter business. 

Simplified and relational contracts necessarily demand automation and businesses must leverage automation to solve issues in real-time, share data, enhance transparency, move swiftly when obstacles are presented, and respond quickly to change or challenge. 

Having in place: 

  • a proper and compliant onboarding structure
  • defined and automated workflow for sale and procurement agreements; 
  • e-signature; 
  • management reporting/dashboard; 
  • track reviews/approvals status/changes; 
  • monitor deadlines/renewals; 
  • post-signature monitoring of compliance with contract terms; 
  • automatic payments

means safe time, decrease human errors, risk, and loss; facilitates revenues, unlocks the value of the contract and strengthens relationships. 

If we stop wasting energies on worrying about processes, we can move our focus on relationships and the most important and valuable parts of a contract. 

Streamlining decision-making and freeing up time to pay more attention to the crucial aspects of the contracts is essential. Too often companies keep an eye just on payment terms and delivery times, neglecting IP implications, the fairness of warranties and responsibilities/liabilities limitations, and the like. Prior and parallel arrangements are overlooked and so implied terms. Clauses impact not only the relationship to be governed by a particular agreement, but wider business operations as well. It is imperative to pay close attention to exactly what you are signing.   

By transforming analog manual processes into a digital automated workflow can help companies not only be compliant but makes the difference in having proper channels for communicating and collaboration among internal and external parties of a business. The relationship acquires new value, is strengthened, and allows a company to thrive.  

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