3 Process Metrics for the Contract Approval Stage
Contracts hold a business together and are the core of every company. In today’s fast-paced, digital world, they’re no longer static documents set to paper. Instead, all contracts—especially the high-asset kind—must go through many stages during their lifecycle, generating valuable client or customer information that benefits in-house legal teams and several other departments, from procurement, finance, and operations to marketing and human resources.
This information, also known as contract lifecycle data, is key to improving business operations. That’s why constantly improving upon the processes that glean this valuable data is very important. By tracking data through each stage of the lifecycle, you can improve process efficiencies at your company, particularly during the contract approval stage.
Understanding how process metrics can help you achieve these efficiencies—by contributing to a more effective contract management system, cutting costs, and generating a higher return on investment, for example—is the first step.
What are process metrics?
Process metrics are standardized criteria that evaluate a business’s performance. These measures give you a qualitative and quantitative analysis of your company’s contract lifecycle data to help you make in-depth and efficient improvements. This can save your company time and money in the long run, enhancing the overall contract lifecycle, especially during the contract approval stage.
Using process metrics can be particularly beneficial when used in tandem with the appropriate contract lifecycle management system—one that takes into account the unique needs of your company. CLM software makes it easy to reduce contract volume, reduce risk, and collaborate on a unified platform.
Here are three process metrics that can help you and your business further increase the efficiency of your contract management process.
Metric 1: Number of days for contract approval
The first process metric determines the ideal number of days it should take for a contract to be approved. The number itself varies by company and its business needs. Reaching it requires an in-depth analysis of data before, during, and after the contract approval stage, and this can often prove challenging because of the delays involved.
Whether these delays are caused by the inefficiencies of manual processing or outdated systems, many companies struggle with contract approval turnaround times due to the number of hurdles and bottlenecks they face. Most in-house legal teams, for example, face these issues when they are unable to analyze the appropriate metrics for contract approval.
This is why the approval stage tends to be among the most difficult during the contract management process. There are significant sticking points in an inefficient system, and this is when they’re most evident.
CLM software can analyze your company’s contract approval turnaround time and use this process metric to create efficiencies. During the contract approval stage, you’ll be able to:
- Run the contract by each business stakeholder for their review
- Reach an internal agreement to proceed with the contract
You can also perform an internal review and approve contracts within the same platform. The software will also allow you to automatically send information to the correct reviewers at the correct step in the process. Measuring contract approval metrics will further increase the efficiency of the overall process.
In a large company with many contracting needs, each area should have its own assessment of improvement metrics. Process-specific and department-specific analyses are possible in the contract approval stage with the use of the workflow designer and other unique tools. Unique aspects such as e-signing, routing, and many other functions can be critically analyzed within the platform to provide customized assessments for improvement. This will help legal and other business departments meet contract approval turnaround times and enhance cost optimization.
Manual contract management process gum up the contract approval stage. This inefficient model can slow the process significantly and lead to significant costs in both investments and employee work hours. By utilizing length-of-time metrics for contract approval turnaround in each department, you can utilize CLM to provide significant reductions in contract approval times.
Metric 2: Number of automated workflows
At most companies, contract processes require approval from their legal departments. Waiting for approval used to be a time-consuming and inefficient process in the pre-digital era, with an incredible number of work hours and individual attention required to avoid errors and avoid costly mistakes.
Contract lifestyle management has improved the overall contract lifecycle thanks to automated workflows.
Contract workflow automation uses software to run your contract workflows, moving the document along each stage of its lifecycle with ease. Automation allows a company’s legal team and other departments, such as human resources, marketing, sales, and procurement, to collaborate and make better business decisions. Tracking this metric brings several benefits to your contract management system, including:
- Improved collaboration and negotiation, with changes taking place on the same page
- Efficient contract drafting, with employees able to launch and access contracts, building their own workflows
- Access to real-time contract lifecycle data, which is captured automatically to measure the right information as it’s processed
With an increased number of automated workflows, the process can run much more smoothly. Legal teams are not bogged down in redundant and time-consuming tasks. They are only pulled in when necessary to empower the contract process—not waste valuable time and money on it.
Utilizing metrics to increase automated workflows
Automated workflows are useful throughout the contract management lifecycle. In the contract approval stage, this automation serves to further bolster the entire system. By the time approval is necessary, edits have been made and the parties have come to an agreement. Effective CLM software won’t just utilize standard automated workflows. It will also create new and customized automation that works for your specific processes.
Tracking the number of automated workflows can help your company understand how standardized agreements work in your contract management lifecycle and how to improve them drastically. Analyzing this metric can also help reveal where automated workflows may be added to better serve your overall needs. Business contacts can see a significant turnaround time reduction as more processes become automated. As each automation is added, the software continues to provide real-time metrics to further improve and modify these processes based on your individual needs.
Unlocking contract data with automation
When automated workflows are added to your contract lifecycle management, all data is kept centralized in a contract repository. The data in these contracts is searchable and always remains updated. With instant access to contract data, your company is ready to identify new opportunities and avoid potential risks. The use of these data metrics to continuously add and improve automation reduces the number of mistakes and helps to standardize your contract’s content.
With automation of your contract services, you can unlock usable contract data by:
- Identifying if any relationships exist between contracts
- Conducting full-text and structured initiative searches
- Implementing contract data and process metrics reporting services
Metric 3: Number of days for workflow completion
The third metric determines how long it takes for a contract to complete its lifecycle. This measure is important because it offers insight into how efficient your company is at processing contracts.
When a contract is requested, it must be created, revised, and approved. The longer it takes for this process to occur, the more time and money is wasted. Utilizing a central platform to handle each of the stages puts your company in a much better place to achieve the highest efficiency you can. Reduction of the number of days for workflow completion can save you valuable time and money.
The contract management lifecycle has three primary focuses that affect workflow completion:
- Contract Creation. With the start of a detailed request, you draw up a contract that meets your specifications. Automated contract management systems can reduce the workflow completion time during this beginning process.
- Negotiation. Negotiation of contract terms requires collaboration and review by all relevant parties. Efficient software creates a single space where it can all happen together. Negotiations can be quicker and more accurate when everyone is able to work in the same digital space.
- Approval. Once everyone agrees to the terms, it’s time for all parties to sign the contract. Automation of the approval process can reduce turnaround time and allow appropriate tracking of contract approvals.
A customizable contract management system can reduce the number of days it takes to move a contract from initiation to closing. The contract approval process is considerably faster when everything is handled in a central system.
Using centralized data to reduce workflow completion
Workflow completion times are an important metric at the contract approval stage. With a data repository at your disposal, the information is utilized to find problem areas where the system is redundant and slows the workflow completion speed. Businesses can use easy-to-read data in Ironclad’s CLM software, for example, to identify and rectify problems in their workflow.
To reduce the workflow time, businesses should generally:
- Analyze the data provided by the software
- Further automate systems with artificial intelligence
- Reduce contract approval time with centralized software
Use metrics to simplify your contract approval processes
Automation and the use of built-in metrics allow you to control and improve your processes throughout the contract lifecycle. By using the metrics provided with Ironclad’s CLM software, you can save time and money as well as improve efficiencies at your business. A well-designed and functional contract management system can optimize future contracts and streamline your business model. Try Ironclad to give your company’s contract approval processes the boost they need.