Streamline the Contract Approval Process with Automation
Signing a contract brings a sense of satisfaction and relief to both parties. But the process leading to signing the contract is a tedious one involving numerous documents, policies, and compliance processes. Moreover, companies that engage with multiple vendors often deal with complex contract approval processes. Manual approval of contracts can consume a huge chunk of the productive time of the procurement team.
Components of Contract Approval
Contracts could be of many types: procurement or vendor contracts, promissory notes, sales contracts, employment contracts, lease contracts, licensing agreements, non-disclosure agreements, and indemnity agreements. When we talk about vendor contracts, the approval process is as simple or as complex as the policies and systems that are followed in the company.
Irrespective of the scale of the operations, the contract approval process entails the following steps.
1) Internal Contract Origination:
The paperwork for the contract is created by the salesperson, which includes all the terms negotiated by both parties. The contract is as per the policies specified by the organization. The final draft of the contract is then submitted to the reviewer.
2) Internal Contract Review:
The contract is either submitted to the manager or department head, or the COO for review and approval. The contract is reviewed and compliance with company policies is checked and approved or rejected based on the reviewer’s scrutiny. The contract may also be sent back for lack of details or errors.
3) Signatory Review:
Once the contract has been approved internally, it is sent to a signatory for review/approval. The contract is thoroughly checked for confidentiality terms, dispute resolution, timelines, etc., and approved or rejected based on the outcome of the review.
4) Contract Amendment:
Errors or issues raised by the signatory are addressed by modifying the contract. Once changes are made, another round of reviews and approvals ensue.
5) Contract Execution:
This is the last stage where all the stakeholders sign the contract. Although it sounds simple, this stage may take a long time to complete since there are multiple signatures required.
The steps of the contract approval process laid out in the above section seem very straightforward, but the reality is that it may take anything between days to months for closure.