‘Time is Money’ Part 1: Cutting Contract Costs During Legal Review

Topics: Workflow, Legal

Companies big and small are looking for ways to trim the fat and save money in their contract processes to increase their overall revenue.

When it comes to cutting the cost of contract management, one common denominator is time. Time affects everyone involved in the contract lifecycle, so this blog will be the first of three that will explain how companies can optimize their time and reduce the cost of contract management, beginning with one of the most expensive parts of the contract process: the legal review.

Expensive, but Necessary

We all know lawyers are expensive. Companies, especially larger companies, spend a lot of money paying attorneys to review contracts during the negotiation phase. Small companies, with fewer resources, sometimes forgo hiring a legal team. However, this is a critical part of the process, which I do not recommend taking lightly. We rely on lawyers to protect the company from risks within a contract. The key is to use the lawyer’s time wisely.

Like sales teams, legal teams get bogged down with tedious, repetitive tasks during the contract review, also known as the redlining process. Most of this has to do with how edits to the contract are communicated:

  • Email: Typically, lawyers use email to communicate revisions to a contract. While it seems efficient to limit human interaction, it can also cause confusion and miscommunication. Written words can be harder to understand than spoken words, since it leaves out emotion and emphasis. 
  • Contract Versions: When using email, each time a contract is edited and sent out for review, there is a new version of that contract being introduced. The more versions that are out there, the longer it can take the find the correct version. When contracts are stored on a desktop, it’s easy to accidently send out the wrong version.
  • Collaborating with Sales: It’s common for sales and legal teams to be at odds over their goals in the contract process. Sales teams want to keep the customer happy and informed, and deliver the contract in a timely manner. Meanwhile legal teams are focusing on the risks in the contract, needing the time to thoroughly vet the contract for risks.

Imagine, if a large company was paying a team of 10 lawyers $150,000 each to review contracts. You would be paying $1.5 million dollars for your legal team to do work that arguably doesn’t require legal expertise.

Limit your legal team to the fluid, important details within the contract, and cut out any repetitive tasks.

Automation

Introducing automation into your contract management process eliminates these time consuming, repetitive tasks while allowing reviewers to focus on the important details, saving your company money. Here are features to an automated contract management solution:

Tracking & Notifications: The ability to track the contract will immediately answer the questions; “Where is it? Who has it? What is the next step?” This gives legal teams visibility into the process and the ability to identify the bottleneck and address it. If it’s someone’s turn to take action on the contract, that person is notified to act. This increases accountability by providing an audit trail.

Document/Clause Generation: Rather than building each contract from the ground up, generating templates eliminates re-keying every clause. A clause library allows teams to use pre-approved legal language within the contract, allowing the legal team to focus on other parts of the deal.

Central Repository: The ability to have everyone involved in the process to access one document in one place eliminates the risks involved with having multiple versions of a contract getting exchanged. With a solution in the cloud, selected parties can have access to the document, increasing visibility while mitigating risks.

It’s expensive, but the redlining process is just a slice of the contract lifecycle. There is much more that can be done in other phases that can help cut the cost of contract management. Visit the SpringCM Blog next week to learn what sales teams can be doing to save money in contract management in part 2 of my “Time is Money” series.

We interviewed attorneys from across the country on contract management and how the process can be improved. To learn more about optimizing the legal review in the contract lifecycle, download our ebook, “Attorney Round Table: Managing the Contract Process for Optimal Results.”

attorney-roundtable-ebook-managing-contract-process

 

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