Let’s define the 5 Key Metrics for Evaluating the Effectiveness of your Contract Management Solution.
Contract Management solutions provide many benefits to organizations, such as increased efficiency, streamlined contract creation, and reduced risk. However, to ensure that the investment in a contract lifecycle management (CLM) system is worthwhile, knowing how to measure its success is essential.
Evaluating the effectiveness of a CLM solution requires identifying and assessing some of the critical metrics that can help determine whether the system is achieving its objectives. Key metrics may include the time it takes to create and execute contracts, the number of errors and disputes, and the cost savings associated with the solution. For a more comprehensive read on contract management solution benefits, see the Agiloft article.
To effectively measure the contract lifecycle management (CLM) solution, you must first understand what CLM aims to achieve. Contract Lifecycle Management (CLM) creates, manages, executes, and stores contracts. It is a critical component of any organization’s overall business operations, and its goal is to ensure that arrangements are completed efficiently, effectively, and in compliance with the organization’s policies and legal requirements.
It can, therefore, be said that the primary objective of contract management is to guarantee the execution of all contractual obligations by the organizational agreed-upon terms. When done correctly, this will help protect the organisation’s interests should a dispute arise.
Over the years, Contract lifecycle management (CLM) tools have gained popularity for improving the efficiency and effectiveness of the contract development process. By offering significant benefits at a relatively low cost of investment, it has become essential for most businesses.
As contracts are a critical aspect of a successful business, ensuring optimal value extraction from these agreements through proper storage, management, and utilization is crucial. A well-managed CLM system makes sharing and tracking information among organizations, vendors, suppliers, and customers easier. CLM solutions streamline the contract process, help organizations reduce risk, increase efficiency, and drive better results.
Determining the success of a contract lifecycle management tool can be challenging. However, five key metrics can be used when measuring the success of your CLM solution:
1. Time-Saving: One of the key benefits of contract management is that it can significantly reduce the time it takes to create, review, and approve contracts. Measuring the time savings can be done by comparing the average time it took to complete an agreement before and after the implementation of CLM.
2. Improved Contract Approval Rates: CLM helps improve contract approval rates by streamlining the review and approval process. Looking at previous contract approval rates before your CLM solution will provide you with the most insight.
3. Increased Contract Visibility: CLM provides a centralized repository for all contracts, making it easier for organizations to keep track of their contracts. This increased visibility can be measured by comparing the number of previously lost or missing agreements before and after the implementation of contract lifecycle management.
4. Decreased Contract Risks: CLM solutions help organizations reduce contract risks by providing automated contract management processes and improving the accuracy of contract data. The decrease in contract risks can be measured by comparing the number of contract disputes before and after the implementation of CLM.
5. Improved Contract Performance: CLM can also help improve contract performance by ensuring that contracts are executed according to their terms and conditions. This can be measured by comparing the number of contract breaches before and after the implementation of contract management.
By regularly tracking these metrics, many companies can gauge the effectiveness of their CLM solution and make adjustments as needed to maximize its benefits and identify areas for improvement. See our blog on contract analysis and how it can help you discover answers to your business challenges.
Investing in contract lifecycle management (CLM) brings significant benefits to organizations. Measuring the success of a CLM solution through the five metrics mentioned above can provide valuable insights for organizations to improve their contract management processes continuously.
Do you need to drive better results and achieve your desired outcomes? Get started with our agile contract lifecycle management solution. Visit our contract management product page or request a demo of Adaptive’s flexible contract management software solutions.