Contracts are the cornerstones of every business and every relationship associated with the business. This is because they describe each aspect of the company’s activities that include sales, procurement, marketing, legal, finance and human resources. Contracts establish the agreed service levels, pricing, and resources. The bigger the company, the greater the number of contracts, which adds to the complexity of managing active contracts.
Step 1: Understanding the Benefits of Automating Contract Management
Contract lifecycle management (CLM) software helps companies control expenditure, mitigates risk, enforces compliance, and identifies potential opportunities. CLM solutions provide insight and better controls in managing contracts and ensures the fulfilment of contractual obligations. The integrated contract lifecycle management software reduces the risk of human error by removing the several stages that a contract must undergo before getting processed.
Despite contracts being the foundation of any business, all too often, companies still endanger themselves by losing revenue, inadequate compliance, and increased risk of regulatory penalties. Without access to reliable information, executives cannot make informed and timely decisions, which is key to improving business operations and overall performance.
Identify Your Starting Point
Gaining an in-depth understanding over the current setup of your business’s contract management is the starting point to identify where improvements can be made. It is useful to detail the process, documents, bottlenecks, frustrations, and key resources to know what is needed to reach the company’s goals. Develop a vision for quicker contract cycles, reduce approval times, and improve compliance with standardized contract language.
What CLM Can Do For You
CLM software solutions can significantly improve on the quality of information available to decision makers and reduce exposure to legal and financial risk. By automating a contract management solution, contract information becomes available in real-time, giving a better understanding of contract performance and helps improve on the terms, obligations, and compliance, while freeing up resources. Relying on legal teams in-house or outsourcing legal expertise to create and manage contracts costs far more than using automated contract authoring software.
A CLM solution will be able to manage all aspects of a contract’s lifecycle that integrates with existing business systems to manage negotiation for external collaboration, contract initiation, compliance, monitoring, and renewals. It’s important to be able to import existing contracts, extract and analyze clauses, and create templates for standardization. And the implementation of an electronic workflow will promote internal collaboration, expedite contract creation and routing to the right people for instant approvals.
Step 2: Evaluating Contract Lifecycle Management Solutions
Realizing your business has a need for contract management automation is a great sign that you are aware of the current pitfalls and are now prepared to move from erratic to strategic decision making. The next big step in the process is taking the time to evaluate how to approach the selection process of a CLM vendor that can drive efficiency and streamline processes.
Some of the high-level criteria that your business needs to consider includes:
- Support all contract types (procurement, sales, HR, legal)
- Have a central repository with access defined for different user levels
- Compliance management
- Real-time notifications and alerts
- Advanced security
- Easy integration with current systems
- Automate contract creation with a flexible and user-friendly workflow
Central Repository for Contract Management
A central contract repository is the core of any CLM solution, which should offer secure access on multiple device types, audit trails, version control, and metadata management and searchability. You should be able to control access to searching, viewing, editing, and approving to specific people and prevent access to unauthorized teams.
Regulatory compliance is business critical as failure to adhere to industry laws can result in financial penalties as well as damage to a company’s reputation. Ensuring compliance is done through full version control of every contract and corporate policy inclusion for auditable governance.
Additionally, a good CLM will have monitoring features to verify if a supplier has valid insurance or other requirements needed to complete contractual obligations. An automated system will remind and notify the designated contract manager when it’s time to get the required documentation for a contract renewal.
A CLM application with flexible, user dashboards facilitates easy access to predefined reports and the setup of custom alerts, and calendar and milestone management. Real-time graphic displays to compare performance comparisons are must-have features to enhance decision-making capabilities. Having to depend on IT or accounting departments to create and deliver custom analyses on paper contracts lose the competitive advantage and waste time and costs on valuable human resources.
Integration and Deployment
A key indicator in the quality of any CLM solution is how easily it can be deployed and integrated with current company systems, for example Microsoft® Word as it is the standard in most legal departments. A CLM solution that is easy to maintain in-house without needing expensive and specialized consulting expertise gives your business better control and adaptability for custom requirements.
Step 3: Choosing The Best CLM Solution
After doing the hard work on evaluating your business needs and researching CLM vendor capabilities, it’s vital that any potential solution demonstrates the ability to meet your specific requirements. A live product demo that involves your teams will cover user buy-in and assess the CLM system’s competence.
Final Check Points
Before making a conclusive decision on selecting your CLM solution provider, assess these factors to ensure you’ve covered the foundations for a successful CLM partnership:
- Request a guarantee on services and fixing pricing to avoid unexpected costs during and after implementation.
- For better user adoption, prioritize vendors with solid and responsive support, and request extensive free trials.
- Flexibility, configurability, and scalability can be managed internally without dependence on the vendor.
It is possible to achieve CLM success without disruption when approached correctly. A phased approach is best with the proper components implemented in the right sequence. This way it is easier to consistently measure progress during implementation as well as after deployment.