Sales teams across sectors are always trying to achieve many high-value sales deals as possible, close them fast, and ensure that the customer comes back for more. But their journey isn’t free from roadblocks; the biggest perhaps being - the delay in closing sales contracts.
On the other hand, legal teams take their time to read, rephrase, and read contract clauses repeatedly to ensure there are no loopholes, leaks, or risks. And, this is not just for new contracts. Even with the renewal of existing contracts, the process can be time-consuming – often resulting in lost opportunities and missed sales targets.
While both teams are simply doing their job, priority, and speed have always created rifts and contention between sales and legal teams. It’s a Catch-22 situation of sorts and a potential cause of reduced revenue and profits. The answer however, lies in a dedicated CLM (Contract Lifecycle Management) system.
Here’s how an efficient contract management system can generate value for sales and still safeguard business interests.
Reconciling the Goals of Legal and Sales Teams
Contention between sales and legal departments arises mainly because of speed. Speeding up the processes of contract approval and renewal alone can potentially help sales not only achieve their targets but also improve two of the most important sales metrics viz. customer acquisition and retention. And that’s just one of the many benefits of a contract management solution. An efficient and holistic CLM system can bridge the rift between sales and legal teams reconciling the needs and priorities of both - and drive value for sales by reducing the probability of human error and oversight significantly. This alone can help reduce revenue leaks, prevent tail-spend, and curb inadvertent losses. This, therefore, is among the top reasons why businesses are investing in automated CLM solutions.
Challenges to Contract Management
Contracts of yesteryear were simple documents that laid down reorder levels and quantities. When product inventory fell below a certain level, manufacturers and wholesalers usually had enough in stock to replenish it and sufficient raw material in stock to produce more. However, as JIT (Just in Time) raised its head, and supply chains became lean, the sales funnel disintegrated. Digitization and globalization became ubiquitous triggering evolution in regulations around the globe. Due to these changes contracts have evolved into complex documents covering a multitude of aspects spanning across departments and teams – both internal and external to the business. Tracking performance and compliance to name just a couple of elements of any contract, is difficult at best and can be disastrous at worst. In this scenario, serpentine processes pose a further challenge by increasing the probability of human error.
A Case in Point
Consider the case of Huntsman the well-known chemical manufacturer. The business was struggling with delayed approvals and lost opportunities. Internal audit traced back revenue loss (in part) directly to delays resulting from complex contract cycles and serpentine processes. Huntsman Corp. decided to standardize and automate its global contracting process and introduced technology such as mobile approvals. As a result, they experienced a 40% faster speed in processing contracts and reduced reporting time with authorities like SOX (Sarbanes-Oxley) and SEC (Securities and Exchange Commission). They also experienced greater visibility throughout the contract management process and involvement of all stakeholders and owners of the contract.
How CLM Solutions generate value for Sales
How did Huntsman achieve what they did? Technology speeded up silo processes. It also brought transparency and accountability across processes. Bottlenecks were identified and the underlying issues were addressed. Stakeholders were integrated thus reducing transition time. Automation reduced the probability of human error. With standardization came a repository of common terms and clauses that could be directly inserted into contracts thus reducing review and approval time as well as the burden on the legal team considerably. Differences in sales and legal perspectives were reconciled. All this culminated in a reduction of overall processing time, faster customer onboarding through speedy execution of contracts, reduction in instances of a breach, meeting of deadlines and targets, higher sales, and consequently higher revenue.
Streamlining contract management can not only help bridge the gap between legal and sales teams but also add value. Imagine the potential of integrating returning loyal customers into the system and the potential advantages if the entire supply chain could be integrated into a single CLM. The possibilities are virtually limitless.
CLM (Contract Lifecycle Management) systems – or contract management systems – as they are also called – can and do generate value not just for sales but for all areas of business. CLM solutions are therefore the future of every business don’t you think?