Document assembly solutions and contract management systems are both innovative and efficient solutions on their own. But when combined, they provide some of the most sophisticated and holistic contracting platforms available.
The definition of “synergy” is a combined effect that is greater than the sum of its parts. Synergistic effects are all around us; from honey bees gathering nectar and, in the process, pollinating flowers, to humans forming networked societies to create better living conditions.
In a similar way, a document assembly (also known as contract/document automation) solution and a contract management system can come together to create a positive effect far greater than that of their separate functionalities.
It’s important to understand the difference between document assembly solutions and contract management systems — a distinction which is covered in greater detail below. But at the outset, it must be noted that many contract management systems of today include document assembly solutions. But this is not a given.
In this blog post, we’ll dissect the ways in which these two separate features are so mutually reinforcing and why you should choose a solution that integrates both.
Document assembly & contract management systems
A good document assembly solution is one that takes raw contract data and, using digital tools, creates a document/contract which meets the users needs with a high level of efficiency, compliance and consistency.
This replaces the highly manual and error-prone process of a person (sometimes, but not always, a lawyer) drafting a bespoke contract from scratch or, as is more often the case, compiling a contract by copying, pasting and editing an assortment of templates and/or boilerplate clauses.
Contract creation — old vs. new
In commercial transactions, so-called “traditional” contract creation has historically been carried out with the use of pre-approved templates that have been developed and approved by the organization’s legal functions. The person creating the contract would access and amend the template in a text editor such as Word, potentially with the addition of fit-for-purpose extensions.
Of course, the use of such templates is less risky than simply allowing people with little or no legal background to produce contracts from scratch. But, there is absolutely no guarantee or control mechanism to ensure that the final product will be a compliant contract.
For example, when drafting in this way, one tends to rely on extensive copying and pasting of terms and clauses. So, what if something was accidentally deleted or unintentionally left out? Or, what if a non-lawyer simply deletes critical limitation of liability clause without understanding the importance of including this type of safeguard in a commercial contract?
Even if the template used in this traditional contract creation method is, in fact, the latest and up-to-date version (and version control is a whole other challenge), you can see why this is both highly inefficient and prone to human error.
So, you might be thinking, there has to be a better way of drafting — one that doesn’t involve a tug of war between the legal team with other departments for control over contracts.
You’re right. And it was on these premises that document assembly solutions first saw the light of day.
How does document assembly work?
Simply put, the most common approach to document assembly involves a user answering questions about key contractual terms. The answers then form the basis of an automatically generated contract.
There are a few different approaches, but the most common one is questionnaire-based drafting. Simply put, the most common approach to document assembly involves a user answering questions about key contractual terms. The answers then form the basis of an automatically generated contract.
In essence, automated document assembly provides a very low-maintenance solution to low-risk, decentralized contract creation. The basis of the automated contract is the legal function’s latest, up-to-date and compliant template. So there is no room for mistakes, oversights or unapproved amendments during the drafting process.
Rather, in a one-time setup, questions are created on the variable parts of the contract, such as names, dates and governing law. The user is then asked these questions when running the template through the automated drafting process.
Today’s more advanced document assembly solutions even allow conditional text. In practice, this means that certain clauses are included or excluded depending on the input from the user.
For instance, if the user selects mediation as the preferred dispute resolution process, a block of text outlining how the mediation is to be carried out would automatically be included. Similarly, the user could be asked to choose between a selection of clauses with varying levels of restrictiveness or favorability for one party or another. Then, only the selected clause would be included in the final agreement.
The benefits of automation
If you aren’t currently taking an automated approach to contract drafting, you’re probably aching to find out how such a solution could be implemented in your organization.
But, if you need to convince someone before jumping on the automation train (a CxO or the IT department, for instance), here are a few quick benefits of contract automation that should pique their interest:
- Creating a contract using a document assembly solution only takes a minute or two.
- Anyone, even without a legal background, is able to create risk-free contracts.
- Everyone will be able to produce compliant contracts in a consistent manner.
- No. More. Extensive. Proofreading. Hallelujah!
Last but definitely not least, document assembly allows for templates to be centrally managed to ensure that everyone is always using the latest version — completely removing frustrating and tedious version control issues.
A common example of how document assembly helps organizations become more efficient is by reducing the friction between legal and sales teams.
There is an inherent tension between the objectives of these two teams. On the one hand, salespeople are driven by closing more deals as fast as possible. While the legal team is focused on minimizing risk and legal exposure to the business. The former can often lead to unauthorized amendments and faulty contracts, causing severe headaches for the latter.
By using a document assembly solution, the salespeople are able to generate agreements in a minute or two, while the company’s legal functions can focus on high-level tasks that are of strategic and complex nature, instead of micromanaging outgoing contracts.
To put the benefits into further context, another example can be found in the commercial banking sector. This is a highly regulated industry where document accuracy is crucial. Contractual mistakes can be devastating, often leading to both fines and reputational damage.
By using a document assembly solution and thereby minimizing human involvement in contracting processes, banks are able to minimize risk and focus on delivering their services cheaper, better and faster.
The contract management system
Contract management is about managing contracts so as to maximize their value, all while reducing financial risk. This can be incredibly time-consuming and tedious but is important for maximizing operational and financial performance at an organization.
This is where a contract management system comes into play. Managing contracts is nothing new and neither are the systems. In fact, if being used to manage contracts, regular cloud storages or even filing cabinets could be referred to as “contract management systems” — albeit extremely rudimentary ones!
What is, however, fairly new and ever-evolving are the automated capacities of today’s digital, dedicated and purpose-built contract management systems.
For instance, such systems can offer end-user permission levels combined with automated approval workflows. This sort of functionality doesn’t just control who can make edits to contract terms and clauses but also ensures that the contract is approved by an authorized member of your organization before it’s issued.
Permission levels and access control tools can also ensure that your most important and sensitive documents can only be accessed by certain members of your organization, such as the C-suite, heads of departments or middle management.
Furthermore, a sophisticated contract management system can also include automated notification features. By automating notifications, you can rest assured that important events such as expiration and renewal dates never pass unnoticed.
Returning to the topic of this article, many, but far from all, contract management systems of today include document assembly solutions.
Solutions can be divided into two categories — point solutions and platforms. The point solutions address one or a pair of very closely related and very specific areas of contracting, such as document assembly, monitoring or even simply archiving.
On the other hand, software platforms include features that address multiple parts of the contract lifecycle. For instance, document assembly, control tools, e-signing, archiving and monitoring.
When all of these functionalities are combined, it’s called a contract lifecycle management platform — a platform for successfully managing contracts all the way from request to renewal or termination.
It may be tempting to choose a point solution that will solve the most crucial pain points of your contracting processes. To begin with, a point solution may appear to be far cheaper than a platform. However, there are a few factors that will probably make you lean towards a platform instead.
It’s particularly important to be aware that having multiple single-task point solutions can rack up a hefty fee quite quickly — especially if the licenses are user-based and you need to expand your contracting headcount. Often, a platform will be the cheaper option in the long run.
Second, usability could become an issue if you aren’t extremely thorough in your procurement process. Keep in mind that all of these point solutions will probably need to integrate with each other to provide a holistic and well-working system. If the point solutions don’t offer out-of-the-box integrations with one another, customized integration could leave you with a hefty development bill.
Finally, if your system consists of a handful of separate but integrated point solutions systems, support can become messy. Diagnosing, identifying and connecting the source of the error can become a difficult and often drawn-out process — and valuable time that could be spent on contract success is instead spent trying to get a hold of multiple support teams.
Wrapping up — 1+1=3
The benefits of combining a document assembly solution and a contract management system into one platform are many. In addition to the logistical issues which can be avoided, platforms inherently create significant synergies, leading to a result much more impactful than the functionality offered by the two solutions in isolation.
An end-to-end platform solution which incorporates by document creation and contact management can allow anyone to easily produce a compliant contract by simply answering a few questions. Then, the document can be routed to an authorized approver through an automated approval workflow.
When the contract has been created, approved and signed, platforms with sophisticated contract management capabilities can even allow for automated archiving. This means that the signed document is automatically archived in the correct place in the digital archive right away and is easily accessible by everyone with authority to view it.
Other benefits of using an advanced contracting platform include extensive metadata functions. Metadata points, such as a documents expiry date, can automatically be generated when producing the contract through the platform’s document assembly feature.
This means that the documents expiry date is automatically tracked in the contract management part of the platform without any additional effort or input from the end-user.
If you’d like to know more about how a document assembly solution, contract management system or contract lifecycle management platform work, don’t hesitate to contact us! We have the first-hand experience of handling contracts back in the dark ages when text editors and manual file management were the only tools available — which is why we built Precisely!
If you’d like to know more about Precisely, go ahead and book a demo or sign up for a 14-day free trial.