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Contract Automation – A Guide For Your Startup



contract automation for startups

When you’re building a startup you should look to put your limited time into the things that move the needle. For everything else you look to outsource or automate. Easier said than done. Contract automation is something a lot of startups look into. Mostly because contract drafting, contract redlining and contract negotiation can be very time consuming tasks. Automating as much as you can here will let you spend more time in product, marketing and sales. But with a complex process like contracting with customers the question is ‘what can I actually automate?’.

Contract Automation – A Standardization Process

As with anything that you’re looking to automate one of the core things to understand is that you can generally only automate the standard processes that you have. Although tools like ChatGPT are starting to make inroads into this assumption the reality is that looking to automate not standard processes have a risk associated with them. If a tool is looking to fully automate a non-standard process like contract negotiation you’ll likely get results that have risk attached to them. In the field of customer contracts that risk can cause a high level of damage to your startup in the long run. So we need to understand what can. and can’t be automated.

Contract Templates

Starting with a standard contract template is a great way to cut your contracting process into separate tasks, each of which you can look to apply contract automation to on an appropriate level. If you’re just starting out on your startup journey a great way is to get a base contract template in place. Although these are required to be very business specific you can build some automation into this by starting with a template you find online and using a tool like ChatGPT to re-write it for your purpose. You should always have a lawyer review this to ensure it is appropriate for your use case but taking these steps can cut down on the amount of work needed and start the contract automation process.

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Automating Contract Negotiations

Contract negotiations are notoriously difficult to automate. Mostly because there are a huge number of variables around the way you will negotiation contracts. They are a very human process of weighing up multiple risk factors to ensure you have both a well-written sales contract but also a happy customer.

One key task you can do to get set up for a level of automation is by defining the clauses in your contract that you’re willing to negotiate and the clauses that you’re not willing to negotiate. Simply having this list in place will reduce the amount of back and forward you need to have with your legal team exponentially.

The next step is taking each of the clauses that you are willing to negotiate and setting parameters or guidelines around how you’d like to negotiate. 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.

Contract Storage And Automation

Contract storage is another place in the contracting lifecycle where you can put process in place to make huge efficiency improvements. Whether you’re using a tool like Google Drive for contract storage or a fully fledged contract management software the key here is, again, standardization.

Just like any process that requires storage for later retrieval the key to making this process seamless is having standardized file naming conventions.

Contract Data Extraction And Tracking

Perhaps the area of automation that will help your company scale more than anything else is the ability to extract contract data from your contracts. Having data trapped inside long form contracts will slow your team down more and more as you scale. Contract debt means that the more customers you bring on board the more you’ll spend manual time digging the details out of contracts to give your team the data they need to do their jobs.

Tools like Contract Sent have been specifically design to capture this information in structured data formats so that as you scale you’re not trapped in the manual re-reading of contracts. There are a number of great legal operations tools that will help you with these tasks.

What Should My Startup Invest In Contract Automation?

Startups should invest in contract automation for several compelling reasons. Firstly, it significantly enhances operational efficiency by streamlining the contract creation and management process. Automation reduces the time and resources required to draft, review, and finalize contracts, allowing startups to focus on core business activities. Moreover, contract automation mitigates the risk of errors and inconsistencies, as it ensures 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

A contract management system built for startups to manage, negotiate and report on their SaaS contracts.

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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