How Much Is Your Contract Approval Process Costing You?

Contracts tend to fall between functional lines and can require many, many ticks of approval before final signatures. And unfortunately, the more complex a contract, the more people get involved and the longer it takes before the whole thing is signed, sealed and delivered.

Once upon a time lawyers, assistants and bike couriers would run from desk to desk and office to office, chasing down approvals and signatures from multiple parties. In today’s remote-working world it’s more likely that contracts are nudged from bottleneck to bottleneck via email, in the hope that each approver responds quicker than the last.

Best case scenario the approval and signature process takes a few days, at worst you’re looking at a couple of weeks.

And herein lies the problem: Every extra minute a contract is stuck in an approval process is costing your business money.

The hidden cost of your traditional contract workflow

The faster agreements are approved and signed, the sooner your business can realise their value. Conversely, the dead time between approvals adds drag to the process and slows the business down. Sales deals drag on, new hires start later, and necessary purchases are delayed.

Let’s look at a real life example:

A real estate legal team approached us at Plexus seeking to improve their property leasing process through automation and process improvement.

Here’s how they justified their project to us:

• We can reduce headcount in the property team by an administrator, making a total saving of $80,000 per annum.
• We can reduce the reliance on external firms, saving $100,000 per annum.

These are good outcomes, but not particularly impactful to a CFO who deals with billions in revenue and a headcount of thousands.

When considering the impact on the broader business, it became clear that reducing the cycle time on leases from three months to one month means the company realises two months more revenue on every single lease.

In order to maintain competitive advantage, the case for accelerating the contract lifecycle is one for the entire business, not just legal. The good news is that many businesses have taken positive steps towards mitigating these dead spots and compressing their contract cycle times.

Out of the messenger bag and into the cloud

No doubt you know of in-house teams who have integrated easy-to-use contract management systems into their workflows to create a single source of truth for document storage. The best contract management software offerings in 2021, however, are much more than digital filing cabinets.

Leading contract lifecycle management platforms support contracts through their entire lifecycle; from creation, negotiation, approval and execution to storage.

Modern contract management systems, like Plexus, incorporate approval ​‘rounds’ that ensure approvals aren’t linear if they don’t have to be. The platform automatically notifies multiple approvers simultaneously, and makes it clear when there are hold-ups.

This parallel approval method also flows into the execution phase where it allows signatories at the same level to receive and sign a contract simultaneously.

The best contract management systems should also offer you the flexibility to keep up with the speed of work, allowing you to delegate authority for approvers and signers as required, and alter workflows as things change.

The way the world does business today means there’s no longer room for lengthy wait steps. Any unnecessary delay in contract execution is money down the drain, so how much is your contract approval and signature process costing your business?