Designing a contract approval workflow by contract type, amount and business line

Different contract types need different reviewers. Purchase contracts go through procurement and finance; sales contracts through the sales lead and legal; employment, confidentiality and IP contracts through HR or legal. List the contract types your company uses most, give each a base workflow, and write down the steps every contract of that type must pass.

Keep the list short. Five to eight types is usually enough; with dozens, people drafting a contract no longer know which type to pick.

Within one type, larger amounts need more senior approval. A common pattern is three or four amount tiers per type: a department head approves small contracts, finance or legal joins for mid-size ones, and a division head or the CEO signs off on the largest.

Take the tiers straight from your delegation of authority. If that table says who can approve how much, copy its thresholds into the workflow instead of inventing new numbers. If it has not been written down yet, start with the delegation chapter described in how to write a group contract management policy.

Contracts of the same type and tier may still need different approvers if they belong to different business lines or signing entities: line A's sales contracts go to line A's head, line B's to line B's. Add business line as a third dimension so each contract reaches the right approver.

Groups with several entities also need matching permissions: what an approver can see should match what they can approve. Common pitfalls are covered in seven traps in multi-entity contract permissions.

A matrix on paper is only the first step. Each contract should pick its approval path automatically from its type, amount and business line when it is created, rather than the requester choosing approvers. Two more things to settle in advance:

• When someone leaves or changes role, contracts waiting for their approval should move automatically to their successor instead of stalling.
• Workflows change over time. Contracts already in progress should finish on the old version, new ones should use the new version, and each change should be versioned.

Design contract approval by type first, then amount tiers, then business line where needed, and combine them into an approval matrix. Take the tiers from your delegation of authority, reassign approvals automatically when people move, and version every workflow change.

For reference, the Zico contract management system supports tiered approval by contract type, amount and business line, automatic reassignment when an employee leaves, and versioned approval workflows.