What Is Document Redlining and Why Is It so Important?

1 August, 2022

“A verbal contract isn’t worth the paper it’s written on.” — Samuel Goldwyn

One of the most complex aspects of negotiating a contract is the collaboration process. A lot of contracts and documents are sent back and forth between stakeholders before they are finalized. It’s this back and forth that we refer to as redlining and it’s crucial to co-authoring a document that everyone can agree on.

Fun History Fact

Redlining contracts is a practice that has existed for decades in the financial and legal services sector – long before computers and document editing software were around to make the process faster and easier. The term comes from the traditional, physical method of editing contracts which involved actual red pens and printed paper. One party would take the original document and add their edits or cross out words in red ink.

The reviewer would use a ruler and red pen to make lines that indicated addition or exclusion. Inserted text was marked with a double line while deleted words were marked with a single strike through. Each document may need to be sent to a second or third reviewer who would do the same thing.

Needless to say, the red ink made it easier to spot all changes. Ultimately, all parties involved would agree on a final version of the contract and move on to produce a clean document to serve as the final agreement.

Computers and Word Processing

These days, those manual notations have been replaced with double underline and strikethrough font attributes in standard word processing software like Microsoft Word, Apple Write, and other online editors. Yet, surprisingly it takes almost as long to co-author a document as it always did.

The birth of computers and word processors made document editing a cinch. But the review and collaboration side of things is still a clumsy hornet’s nest. People sending documents around in email has many downsides. It’s not secure, leaves a trail of copies everywhere, and the version control issues are a headache. Plus, there are lots of opportunities for mistakes when merging edits from multiple contributors.

Nevertheless, distribution by email followed by local editing is still how most documents are created today. You know: I send a doc to you or a few people, you open it, edit and comment, hopefully with track changes on, and then you save your edited copy and send it back. Then I absorb (some, or all of) your changes into a new version, and send it out again for another round.

This approach is almost as old as actually using red pens and paper. And it is fraught with problems, especially if someone forgets to track changes.

Another challenge is that once you accept or merge changes, you lose the history of the change. So it requires immense discipline to save the right versions at the right time unless you’re using document management software.

Long story short, co-editing complex documents, especially legal and compliance documents, needs to be done right. Take the wrong approach and you could lose out on contracts or face legal consequences.

So now, let’s take a closer look at everything you need to know about redlining so you can write more agreements with fewer disagreements.

Document Collaboration in the Cloud

We can all agree that old-school document editing by sending files around in email has its limitations and is not as secure as it could be.

Fortunately, the process can be far more efficient thanks to cloud-based contract management and document collaboration platforms. These solutions tools let you redline contracts within a secure environment in real time. This way, you can speed up the negotiation process by days or even weeks.

But as it is with everything else, not all document redlining software is created equal. The different types come with their own advantages depending on the project at hand. For instance, everyone knows you can upload a Word doc to Google Drive and co-edit it in Google Docs. But if you can’t stop different versions from being downloaded or shared with others, it is not secure enough for many purposes.

This is true for all of the general-purpose cloud-drive, file-sharing solutions out there like Box and SharePoint. They are extremely lacking when it comes to having tight user- and document-level security and audit trails. This makes them unsuitable for project managers who need high levels of control and accountability for their sensitive documents.

This is where CollabLoop comes into play. With CollabLoop, you get more granularity and full control over who can view, comment or edit different sections of a document. CollabLoop’s audit trail automatically maintains comment and change history for you in perpetuity, even after changes have been accepted. When multiple editors use CollabLoop to co-author a document, each editor’s redlined text appears in a unique color so that other reviewers can see all changes and easily distinguish everyone’s input.

CollabLoop also offers integration with ShareVault virtual data rooms so you can safely share documents with third parties under the protections of a data room once the documents are completed.

Cloud-based collaborative document editing solutions make document redlining faster and more convenient by enabling multiple parties to collaborate in real-time or asynchronously on the same document. All the while automatically keeping track of all changes and comments and maintaining version history too.

4 Steps to Effectively Redline Contracts

The redlining process is intended to dismiss the need for lengthy and inconvenient alignment meetings over every little difference in opinion or choice of words. Hopefully, the small stuff gets handled quickly — leaving only a few things that require a deeper conversation. After that, it’s just a matter of working things out to resolve them. Consider the following pointers if you want a smoother and more efficient redlining process.

1. Don’t Rush the Process

Even before the signing process can begin, you need to ensure that all the details are unimpeachable and in order. If you’re still using native applications like MS Word and not the cloud, make sure you go through the review tab one last time and address all changes and comments before moving on.

If not, you may have to restart the entire process all over again if someone demands changes halfway through the signing process. Remember, a signed document is still legally binding even if you later discover an overlooked error or miscommunication.

2. Get Everyone on the Same Page

All the parties involved need to know who will be contributing to the document. It’s the literal definition of keeping everyone on the same page. All the necessary parties need to align around a shared vision of what it is they are collaborating on.

Keep in mind that documents or contracts pertaining to transactions and agreements will have a very different focus than things like staff and employment documentation. For the most desirable outcome, take the time to understand what you’re redlining and with whom you’ll be sharing document ownership.

Similarly, consider who needs to contribute to which part of the document. It’s not always necessary for everyone to see the entire document, only the parts relevant to their contribution. Look for a document collaboration solution that provides security mechanisms that selectively allow viewing and editing at a section level, based on a collaborator’s security privileges. In CollabLoop, you can easily share redacted versions of a document or allow access to specific sections to protect sensitive information from prying eyes.

Working together on the document in the cloud literally keeps everyone on the same document — not their own versions, which gets increasingly complicated the more parties and contributors there are.

3. Know About and Stay Compliant

As with all legally binding documents, the first and most important thing to consider should be its adherence to functional and legal standards. Make absolutely sure that all language used is legally compliant and concise without any room for double interpretation.

Depending on the nature of your business, you may find many contract clauses and documents can be set up with boilerplate or standardized language which makes tracking any deviations much simpler.

4. Choose the Right Editing Software

Since you’ll be using document editing software to redline your contracts, it pays to know your software and its limitations. Naturally, not all redlining software is created equal. Software that is not cloud-based can come with quite a number of challenges.

Take MS Word for instance. While the software is enabled with redlining and change tracking capabilities, it really doesn’t automatically track and consolidate all changes made by multiple parties for you. No, each individual copy of the document can contain a whole new branch of changes that must be reeled in and triaged at some point.

Of course, this can get very tricky and frustrating, especially if you’re working with multiple reviewers. Lastly, you’ll also need to ensure any residual metadata is stripped out before sending the document back out for another round of editing.

Worst of all, once you start accepting changes in Word, you lose all trace of who originated the changes, why and what they replaced. So you are left with no audit trail, which is a recipe for disputes and conflict down the road.

Final Word - CollabLoop

No matter what type of contract you’re trying to finalize, document redlining will play a vital role. That’s why you have to establish a highly effective system to manage this process.

CollabLoop, ShareVault’s Word-compatible cloud-based editor, makes redlining fast, easy and intuitive while giving you a complete audit trail and full version control. And you don’t have to turn your life inside out to start using it.

With CollabLoop, you and your colleagues can streamline the revision process and get to work closing contracts and starting business. The tool offers collaborative review, editing, and co-authoring of documents in a secure real-time document editing environment.

Discover how quickly you can hammer out legal agreements and keep regulatory compliance documents up-to-date quickly when everyone is on the same page and you never lose track of changes. The best part is that the software does much more than just redlining. There are tons of other features to look forward to including searchable change history, 100% MS Word interoperability and ShareVault data room integration.

Try CollabLoop today and share your ideas at the speed of thought.

Sign up for a CollabLoop demo!