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Contract Automation – A Guide For Your Startup



contract automation for startups

When you’re immersed in building a startup, optimizing your limited time becomes crucial. Focus on tasks that truly impact your progress, and consider outsourcing or automating the rest. One area that often demands significant time is contract management, including contract drafting, contract redlining, and contract negotiation. Streamlining these processes through automation allows you to allocate more time to product development, marketing, and sales. However, the challenge lies in determining what aspects of the complex contracting process can be effectively automated.

Contract Automation – A Standardization Process

Like any automation endeavor, the first step is understanding that you can typically only automate standard processes. While tools like ChatGPT are advancing, attempting to automate non-standard processes, such as contract negotiation, carries inherent risks. For startups dealing with customer contracts, this risk could have detrimental long-term effects. Therefore, it’s crucial to identify what can and cannot be automated.

1. Contract Templates

Commence your contract automation journey by adopting a standard contract template. This allows you to break down the contracting process into manageable tasks, each suitable for automation. If you’re a startup novice, start by obtaining a base contract template. While these templates should be tailored to your business specifics, you can incorporate automation by using online templates and leveraging tools like ChatGPT for customization. Always seek legal review to ensure suitability for your use case, but these steps can significantly reduce workload and initiate the contract automation process.

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2. Automating Contract Negotiations

Automating contract negotiations is challenging due to the numerous variables involved in the process. Negotiating contracts requires a human touch to weigh multiple risk factors, ensuring a well-crafted sales contract and a satisfied customer. However, setting up for a level of automation involves defining negotiable and non-negotiable clauses in your contract. Creating a list of such clauses reduces the back-and-forth communication with your legal team. The next step involves setting parameters or guidelines for negotiating each negotiable clause and creating rules that streamline the negotiation process.

This may look like a set of rules. Here are some examples:

  1. Limitation of liability is negotiable between one and three times annual contract value. If the customer is deemed to be a strategic customer five times annual contract value is acceptable. Any amount higher than this must be approved by the CEO.
  2. Termination for convenience is only acceptable if a refund is not given in this case. Refund for termination for breach is acceptable.
  3. Thirty day payment terms are standard, any variation on this will require approval from the finance team.

By having rules like this in place you’ll be able to cut down on manual work and create some automation around these rules.

3. Contract Storage and Automation

Efficiency improvements can also be made in the contract storage phase of the contracting lifecycle. Whether you use Google Drive for contract storage or a fully-fledged contract management software, standardization is key. Implementing standardized file naming conventions facilitates seamless storage and later retrieval, optimizing the contract storage process.

4. Contract Data Extraction and Tracking

Automating contract data extraction is crucial for scalability. Extracting data from lengthy contracts manually becomes increasingly burdensome as your startup grows. Tools like Contract Sent are designed to capture information in structured data formats, freeing your team from the manual task of extracting details from contracts. Several legal operations tools are available to assist in these tasks.

Why Startups Should Invest in Contract Automation

Investing in contract automation offers several compelling advantages for startups. It significantly enhances operational efficiency by streamlining the contract creation and management process. Automation reduces the time and resources required for drafting, reviewing, and finalizing contracts, enabling startups to focus on core business activities. Moreover, it mitigates the risk of errors and inconsistencies, ensuring adherence to predefined templates and legal standards. This not only minimizes the likelihood of costly legal disputes but also enhances overall compliance. Additionally, automated contract workflows enable startups to scale their operations more effectively, accommodating a growing volume of agreements without proportional increases in administrative burden. Ultimately, by embracing contract automation, startups position themselves to navigate complex legal landscapes more efficiently, allocate resources judiciously, and foster a foundation for sustainable business growth.

Contract Sent is not a law firm, this post and subsequent pages on this website do not constitute or contain legal advice. To understand whether or not the ideas and guidance on the Contract Sent website is applicable to your business, you should consult with a licensed attorney. The use and accessing of any resources contained within the Contract Sent site do not create an attorney-client relationship between the user and Contract Sent.

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