Contract approval workflows

Although contract automation provides strong road signs for the business, open-ends, or issues-unaddressed, may still occur. Incomplete contracts with unidentified rights or obligations are useless. Even a basic contract approval workflow fails if this happens. If your people are not accurate or disciplined, the legal department should fill the gaps.

Contract approval workflows leave responsibility where it belongs, prevent that day-to-day affairs fly out of the bend too easily. Standard processes should be automated. Bespoke arrangements with material impact require approval. And may not be avoidable.

Some colleagues require more attention than others. Some ‘forget’ to complete the Q&A. Others accept any contracts received from the other party. Most people don’t break the rules intentionally, but some rules are simply not self-evident. There are vulnerabilities that are simply inescapable.

Automating a workflow speeds up the contracting cycle, eliminates bureaucracy and establishes proper risk management.

Advanced contract approval workflows

The queen stage of the Tour de France has never been without mountains. Sometimes, the financial stakes are really high, the assumed risks significant, is your company’s reputation potentially at stake, or the adherence to internal compliance programmes not beyond all doubt.

If your company depends on intellectual property, if any lending or credits must be within the defined funding structures and strategies, or if your business is highly regulated, senior management or executives want to be involved closely. More complex agreements require more attention.

Cyclists should probably not attack on the first mountain. And the Tour organisation must prevent that a cyclist takes the wrong turn of the road. Your company should never be exposed to irresponsible risks. Not without adequate coverage.

That’s a challenge: not everyone recognises all risks inherent to closing a deal, setting up a partnership or distribution channel. Risks may be of all kinds:

Commercial
Financial
Regulatory
Tax
Legal

…or ‘merely’ operational.

Internal controls and risk management

Lack of internal controls or failing risk management may lead to loss-making contracts or even “betting the company”. And even if business models and corporate policies are clearly defined, they are still challenged for a unique business opportunity and they continuously evolve. A contract approval workflow anchors internal controls and risk management in your business processes.

A Tour de France stage is a circus where everyone has their own role and place. Before the start, ahead of the peloton, during the race, at the finish line and afterwards outside the cyclists’ hotels.

Internal controls affect the entire contracting cycle. This means: multiple checks be carried out by various stakeholders.

Contracts are sometimes drafted or negotiated by one single person, too inexperienced to negotiate the right terms or too eager to close the deal.
It’s a challenge to have your people apply all business models, corporate policies, rules on ethical conduct, integrity and CSR consistently. You want to give your people as much responsibility and freedom as possible. But in compliance with the rules.
The larger your organisation, the more challenging it is to get everyone to appear in the race timely.
Executives – who are end-responsible – should be involved timely. But not too early.

A poor compliance programme may contain loopholes and does not prevent errors. It’s probably not simple, not self-explanatory, and may even be inefficient.

If contract approval workflows fail…

If rules are interpreted subjectively and enforced arbitrarily, your cyclists will go on strike. Rules and procedures take away efficiency. But also, if internal controls and risk management are not complied with smoothly and naturally, avoidance of rules is the result.

An entrepreneurial but inexperienced co-worker might award a contract under any terms because closing the deal quickly is good for his career.
An eager employee might jump at an exciting opportunity for a promising collaboration even though the partner’s track-record is patently unfit.
If contracts are signed without proper limitation of liability, your colleagues may ‘bet the company’ without even knowing it.

If processes are inadequate or poorly monitored, incidents become structural. Too many incidents expose the company’s reputation.

In an over-controlled organisation people feel oppressed and unfree to act. With lack of autonomy and flow, your people come to a halt. With too much freedom and failing controls, they might assume unacceptable risks.

Perfect contract approval workflows

You want the cyclists to use the best materials. The course should be on new roads – no gravel. Proper internal controls and effective risk management safeguard your company, should be automated and without obstacles.

A perfectly accelerated contracting flow is simple, self-explanatory, and exceptionally efficient:

Simple… because it is immediately crystal-clear who must approve a transaction or who gets involved after selecting a Q&A option.
Self-explanatory… because adopting and enforcing policies are inherent part of the process design and any approvable deviations are automatically highlighted.
Exceptionally efficient because all actions are automated, no unnecessary or untimely involvement of senior executives, and all communication is stored alongside the contracts. Communications among all stakeholders use state-of-the-art technology, not email.

Getting senior management involved in the transaction:

at the right moment,
to give feedback timely, not say what others could have said,
only to see what is relevant, to check what they must check.

An effective workflows accelerate your business.

minimises project management and coordination efforts,
automates manual work,
gives easy, one-click status overviews of pending transactions,
motivates employees,
reduces the contract cycle,
improves quality of work, and
minimises risks.

It facilitates developing business models and corporate policies, and creates awareness of rules on ethical conduct, integrity, and CSR.

We know why and how to solve this...

Where do these problems and their consequences come from? Not everyone can recital all business models and corporate policies, and not everyone is incentivised by rules on ethical conduct, integrity and CSR. Enforcing such rules and policies is impossible if they are not automated, interpreted subjectively, or enforced arbitrarily.

Errors are more likely to occur:

to the extent policies and rules are undefined, informal or subjective, or
if your organisation relies too much on an individual’s sense of responsibility.

Correcting errors requires a lot of energy. A flat tyre can break your chances of success.

Accelerated contracting means:

Automated contract approval workflows,
Internal controls that apply smoothly and are enforced naturally,
Risk management – to involve the right people at the right time, and
possibility to communicate easily about the transaction: why approve, or under which conditions, or why reject?