The six (6) revenue-boosting strategies based on an effective contract lifecycle management system
A poor contract management process can put your business at risk. Business operations can be disrupted by missed contract expiration dates, poor governance, and unsaved drafts, resulting in revenue loss. Contract lifecycle management (CLM) software improves visibility, compliance, and security around the contract lifecycle. It can also lead to a faster contract management process, more closed deals, and more revenue.
Contracts are the universal language of business. Almost every cent that enters or exits an organization is predicated on a contract. Organizations of all sizes are moving toward contract management software. This system can automate requesting, approving, and maintaining a contract. It can also do much more to drive efficiency, support business relationships, and protect an organization’s interests.
The term “contract management” means different things to different people. For some, managing contracts means having contracts in a folder inside a desk drawer, and for others, it means one person managing contracts on a spreadsheet and attempting to keep pace with changes. A contract management system is an automated software solution that digitizes contract lifecycle management (CLM).
Many businesses have a contract management system to help accelerate contract reviews and approvals and ensure compliance while reducing risk. The system uses advanced document management to get the data they need when they need it. Contract lifecycle management (CLM) increases the visibility of information across the entire company. It allows for best practices in negotiating renewals and, sometimes, reduced spending. It will also give you the right enterprise-level tools to protect the most valuable assets.
Some companies operate without a clear view of their contracts and agreements that respective departments within the business execute and bring into the fold. Not having visibility of contracts increases risk and vulnerability by allowing multiple non-standard contracts to be entered while increasing the administrative workload to manage non-standard terms and conditions agreed to as a business. With a contract lifecycle management system, you can help your customers expedite their sourcing events whilst incorporating standard contract templates and processes to reduce risk and increase revenue.
Businesses today aim to employ the best contract management practices to maximize the value of their contracts, as with all process automation initiatives, standardization, cost and liability reduction are the goals. To understand how these best practices benefit your business, you must evaluate your current contract management process and technology to ensure maximum value creation. You will find that you already use some of the contract management practices, just not in their entirety. The compounding effects are substantially greater when a contract lifecycle management system is in place.
Below, we review the six main benefits of contract management that can help you improve your contract management processes:
Accelerating Contract Review and Execution
A contract management system can automate complex approval routings for contracts, so it consumes less time from start to finish. It also includes the combination of parallel and conditional approvals, resulting in improved collaboration across different departments.
You can use e-signature capabilities via email and SMS messaging to improve the process and save time by ensuring approvers have all they need. Many businesses go one step further and combine their contract management system with enterprise software, such as Salesforce, to generate proposals and agreements.
For some organizations, the delays start before the review and approval cycles, during contract creation. For these companies, contract management software can make available templates, standardized terms, and clause libraries selected by legal and recommended for specific use cases.
The team member who requests the contract can configure all customized fields specific to their company’s needs, such as the contract type, team, priority level, and any other unique elements. When the contract request is reviewed and approved by the company, all relevant elements are included. The overall experience has greatly improved, and the agreement is being implemented on schedule.
Reduce Business Risk and Improve Compliance
Contract management software reduces three main categories of risk. The first reduced risk category is compliance management, with an audit trail. You do not have to sift through emails looking for a missing confirmation or attachment. The system will do the work for you. The system’s automation provides a digital record of each action taken and a signature. The system will provide a complete audit report with just a few clicks.
The second category is contract compliance. The software can run analytics on the health of your business relationships. These reports can include the supplier’s regulatory compliance and their adherence to their service level agreements.
The final area of reduced risk is the contract templates and clause libraries mentioned above. When companies can ensure that contracts comply with corporate standards, they maintain better control over how they do business.
Expanding Contract Visibility with a Single Source of Truth
Contract management can mean a desk drawer or a spreadsheet, but contract management software provides an enterprise-level solution available to anyone with access. More team members can initiate contract requests and have visibility of the progress of their agreements. Teams that use the system have visibility on suppliers’ pricing and contractual obligations while increasing their negotiating power.
Some companies increase their suppliers’ and customers’ contract visibility by granting their partners access to the contract, which is the backbone of the business relationship. And with built-in prompts for vendors to complete forms and fulfil commitments, they accelerate supplier pre-qualification and onboarding.
Some other companies take it further by recognizing their contracts as a single source of transactional truth. By extracting and organizing data from their contracts, they inform their other commercial activities and better track their key performance indicators.
Negotiate Better Renewals in Less Time
Contract management software automatically recognizes the contract’s renewal date and sends an alert to the contract owner or legal team when the contract is about to expire. Knowing when this renewal will happen is only the start.
The software will also keep track of the party’s terms and conditions and other relevant contracts. If the contract is with a supplier, the information can help negotiate future contract rates, possibly lowering costs. It can also help with performance talks and incorporating future KPI metrics into the upcoming statements of work.
You can set the software to provide reports on performance obligations, contract end dates, renewals, correct invoicing, spending, and revenue-generating recommendations. When you’re on the selling end of a business, an email alert that a contract is set to renew in the near term allows the team to guarantee that all obligations are met and that the client or customer is satisfied.
Value-added Document Management
An improved filing system will help you find the information you need when you need it. A contract management system will help you find the precise word or figure, no matter where it is across the entire enterprise. It does not matter if that document is a PDF or a JPG. The contract management system converts it into fully searchable text, accessible from a desktop or mobile device anytime and anywhere.
Best Practices in Contract Protection and Privacy
For some businesses, a better-protected contract sits at the bottom of a drawer where only one person has the key. In such a scenario, there is no way of knowing if 100 or 1000 people can access the key and view the contract. The only way to protect a contract is by using stringent access controls and constant vigilance. Contract management software provides these benefits with privacy standards for the specific fields within a record and who can view those fields.
System administrators have the right tools to view who has accessed a file and even who has attempted to access a file. We found this article on the benefits of contract management to be interesting.
As business operations grow in complexity, looking at ways to streamline how work gets done is imperative. We also need to go beyond the basic referendum to ensure that our commercial activities’ most foundational elements do not slip through the cracks. Contract management systems were born out of this necessity, and they have continued to adapt in step with the global landscape, increasing demand for efficiency and advancing technology. See the Insight article on strategic approaches to contract management for a more in-depth look at how you might improve operations and cut costs.
Adaptive has extensive experience leveraging Agiloft’s capabilities to deliver the contract management benefits discussed above. Our expert team of consultants has successfully delivered several projects for both seasoned CLM users and new technology adopters. Let us evaluate your current contract lifecycle management processes and work with you to improve contract management efficiency.