Efficient contract approval workflows are essential for organizations seeking to simplify their contract approval process and ensure seamless contract management. With many stakeholders involved, including legal teams, finance departments, and business managers, achieving alignment is the essential component in avoiding costly errors and fewer mistakes in the approval workflow.
This guide explores the challenges, solutions, and best practices for streamlining the contract approval workflow process. It demonstrates how tools like contract automation software can revolutionize the way companies handle contract requests, reduce bottlenecks, and foster collaboration across teams.
The approval workflow encompasses various stages, from drafting and reviewing to obtaining the necessary approvals and finalizing the contract execution. For many organizations, these processes are often riddled with inefficiencies, leading to delays, error risks, and communication breakdowns.
Even with the best practices in place, some challenges may arise in the contract approval workflow:
By having a clearly established and communicated approval process that the company must follow, risk exposure is greatly reduced as individuals are informed which additional departments and customers must be involved in the contract process and when.
Establishing a contract approval workflow also simplifies the execution process as there is limited running around that contract owners must do to discover who they need to involve in the process before it can be finalised. This ensures that requests move through the approval workflow as quickly as possible and speeds up the time to execution.
A contract approval workflow process also brings clarity to a traditionally‘black-box’ process. When every contract owner has transparency to their approval workflow’s status, they feel more comfortable that their contract is not being left at the bottom of the pile by Legal. They also have visibility over who is next is the process and therefore can follow up with that person directly to move the contract along — rather than rely on Legal to move the non-Legal approver.
The steps will be unique to each contract and company but most include the same components:
Of course, this can vary depending on the size of the company and the value of the contract.
If a contract does not receive requisite approval from all relevant people in the workflow it will need to be sent back into negotiation stage. Although necessary, obtaining approvals can sometimes be a long and arduous process, and unfortunately, the longer the process, the greater the risk of the contract being abandoned and adding no value.
Incorporating an optimized contract approval workflow is essential. When organizations implement structured and automated approval workflows, they experience several key benefits:
Here are actionable strategies to build a robust approval workflow process that caters to the needs of modern companies:
Make approving contracts easy by ensuring your contracts live in a secure, and easy-to-access place. A single source of truth for contracts allows approvers to always know where the correct and most up-to-date version of the contract they need to review is and prevents them from doubling up requests.
Many companies take advantage of using contract management software as a document repository that also triages and allocates contract review rounds.
Fostering good contract organisational practices also means that the business will always be able to find contracts when they need them – even if the original contract owner moves on from the company.
Automation tools eliminate manual intervention, ensuring seamless handling of approval workflows. By using these tools, legal teams can set up predefined rules to route contract requests to the right people.
Example: A sales agreement triggers an automated workflow that sends it to the legal department for review, then forwards it to the finance team for budget validation, and finally routes it to the contract administrator for final approvals.
Clearly identify who needs to review and approve contracts at each stage. Assign responsibilities to specific employees such as legal staff, managers, or contract administrators to avoid confusion.
Tip: Use RACI charts (Responsible, Accountable, Consulted, Informed) to ensure all involved parties understand their role in the approval workflow.
Delegation of Authority in contract approval workflows
Delegation of Authority (DoA) is a critical aspect of efficient contract approval workflows, defining who is authorized to review and approve contracts at various levels of value or risk. A robust DoA framework ensures that contracts are escalated to the appropriate people, such as senior managers or legal counsel, when necessary. Automating DoA within contract software solutions streamlines this process by routing requests based on predefined rules, ensuring compliance and accountability. This eliminates bottlenecks, reduces approval times, and minimizes errors, enabling legal departments to maintain consistency and focus on strategic, high-value tasks.
Generating a set of contract templates is an easy way to‘scale’ the process. Legal often have a multitude of tasks requiring their support at any one time. By providing the company with templated contracts with all critical details and standard terms populated, the company can begin the process by themselves knowing they aren’t starting off with any missing values. They only need to add the unique contract details such as dates, contract value, and counterparty.
Using standardized templates ensures that all contracts comply with organizational policies. This reduces the time spent reviewing contract terms and makes it easier for approvals to move forward without unnecessary hurdles.
Using a standardised Contract Approval Workflow template also reduces the time the contract spends in the review and approval stage as Legal will likely need to make fewer amendments or recommendations.
Centralized storage for all agreements ensures that every user can access the most recent versions of contracts. This reduces errors from working on outdated versions and fosters alignment among teams.
A central repository is essential for optimizing contract approval workflows, providing a single source of truth for all documents. By consolidating contracts, agreements, and related files in one secure platform, organizations ensure easy access for all users, including legal teams, finance departments, and managers. This enhances collaboration, reduces confusion caused by working on outdated versions, and improves visibility into the process. Integrated search and categorization features further streamline the retrieval of specific terms or approvals, reducing delays. A centralized system also supports compliance by maintaining audit trails and ensuring secure, controlled access to critical information.
Establishing a contract approval workflow is futile if it’s not clearly communicated or consistently followed. To optimize the process, it’s vital to ensure that all employees understand how the contract process operates, where to locate approved contract templates, and which people are responsible for each review stage. Training sessions, clear documentation, and user-friendly guides are essential tools for reinforcing consistency. Additionally, integrating these workflows into an accessible contract management system ensures visibility and transparency. By fostering awareness and adherence, companies can reduce bottlenecks, enhance collaboration, and ensure that contracts progress smoothly from initiation to execution.
Many progressive companies are choosing to go one step further with their contract approval workflows and utilise legal technology that automates their workflow. Contract workflow automation is the natural next step once templates and processes are established for contracts as it allows anyone in the company to easily access the correct contract template and automatically send it to the correct approvers on any given occasion.
Through automating Powerco’s contract process with Plexus, Powerco Senior Legal Counsel Sharon Heighway says,“we’ve enabled our people to take responsibility for their own contracts, to create them where Legal input is the exception, not the rule, and also to follow our approval process without needing to know the requirements from the outset, they just need to know where to start.”
Modern contract systems provide powerful features that make contract approval workflows effortless. These solutions integrate tools for contract review, version control, compliance checks, and execution, all within a single platform.
More and more companies are leaning on contract workflow automation to help facilitate their contract workflows. The many advantages of contract workflow automation include:
With contract workflow automation, the organisation has greater clarity of which version of the contract is the most up-to-date and requires legal review. This means approvers, typically legal counsel, will avoid wasting time reviewing outdated contracts.
Version control is a critical component of effective contract approval workflows, ensuring that all users are working on the latest iteration of a contract. It eliminates confusion caused by multiple versions and reduces the risk of errors during legal review and approval. Robust approval process solutions track changes automatically, providing a clear audit trail and enabling easy comparison and legal review between versions. This fosters collaboration among legal teams, finance departments, and organisation units, ensuring that all parties stay aligned. By maintaining version control, organizations streamline the approval process and ensure contracts progress efficiently toward execution without unnecessary delays.
In the world of business, ‘time kills all deals’ so the quicker you can get a contract from draft to signing stage, the better. By automating the contract approval workflow, all approvers can be instantly alerted when it is their turn to review the contract, whether they are working from the office or remotely.
The automated approval workflow also extends to counterparties who can now be automatically alerted when they are required to review a contract during the negotiation or signing stage. This eliminates the need to courier a physical paper contract to their office.
Every company has its own unique rules as to when contracts require review, and by which parties. Of course, this includes determining who signs contracts. Contract workflow automation eliminates the need to search for the right approver for specific contract types and values. By allowing admins to configure which person is required to review various contracts, individuals in the organisation no longer need to run around to find who needs to make the next move as the workflow will automatically alert the right people when it is their turn.
A great advantage of automating the contract approval workflow is that it allows the organisation to self-serve their own contracts. Traditionally, the organisation would need to rely heavily on Legal to draft and manage much of the contract workflow which can lead to things dragging on among Legal’s various other priorities. Instead, contract workflow automation empowers the individuals within the organisation to take more ownership of their own contracts. They can begin the draft using templates configured by Legal and have clear oversight over the progress through the workflow.
An additional advantage is this frees legal counsel up from contract admin and gives them back more time to focus on high-value strategic work for the organisation.
Automated contract approval workflows are particularly beneficial in scenarios where speed, compliance, and collaboration are crucial:
For many organizations, the biggest hurdle in managing contract approval workflows is ensuring that all teams are on the same page. Alignment is vital for successful contract execution.
In today’s fast-paced business environment, organizations can no longer afford to rely on outdated contract approval processes. Adopting software is no longer optional — it’s a necessity for staying competitive.
Are you ready to transform your contract approval process and eliminate inefficiencies? Plexus offers cutting-edge contract management software designed to help companies streamline their approval workflows, enhance compliance, and foster collaboration.
Discover how Plexus can help your organization achieve faster, smarter, and more efficient contract work. Contact us today for a demo and take the first step toward revolutionizing your contract approval process.
Plexus' contract management software gives you everything you need to accelerate business productivity in one modular platform. Get contracts signed faster, streamline document workflows, collaborate in real-time and integrate with the apps you already rely on.
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