Contract utilization requirements and operational risk reduction guide the quest for contracting process optimization. Yet, multiple challenges loom in front of these professionals when it comes to maximization of value from contracts.
On an average, 26% of contracts underperform when it comes to fulfilling their purpose. This is due to issues with contract development and execution processes. All stakeholders must revise their perspectives toward contracts and their management to resolve these issues.
Adoption of Intelligent Contract Lifecycle Management (CLM) tools goes a long way on this front. These solutions improve organizational efficiency, collaboration, speed of execution, and risk management.
Here is a quick overview of common contract lifecycle management challenges and how CLM solutions can resolve those.
If you’d like to know which CLM solution suits your requirements, our CLM guide will answer all your questions.
The oft-protracted timelines till contract signoffs are often the root cause of sales and procurement delays. In fact, the average times for contract closure doubled between 2019 and 2021, according to research by World Commerce & Contracting (WCC).
Even if we discount recent setbacks due to pandemic-led disruptions, typical contract creation, negotiation, and approval processes create expensive delays. This is where standardization of contract templates and clauses reduces contracting times. Our experiences indicate increases in revenue growth if organizations can bring down contract authoring times by 40%.
CLM technology accelerates contract authoring with the creation of an intelligent template and clause library. Enterprise CLM platforms enable businesses with collaborative contract authoring capabilities. This guarantees contracts that meet established corporate standards.
Contract lifecycle management challenges include increased costs, signoffs, and risks. Many CLM tools include contract simplification capabilities that enhance each contract’s usability and functionality.
CLM tools allow businesses to redesign contracting workflows. It provides key stakeholders with centralized monitoring and dynamic approval capabilities.
Automation of repetitive tasks (like manual reviews for deviations) save hours for legal teams. For example, new age CLM tools suggest clause modifications on the go using Artificial Intelligence (AI) and Natural Language Processing (NLP). Automated deviation and version tracking features ensure rapid creation of compliant contracts.
Self-service options can significantly overcome contracting delays. Leading CLM solutions offer self-service wizards that enable business users to easily request and create fully compliant contracts.
Contracts typically involve coordination between multiple internal and external stakeholders. Lack of information sharing between these parties creates issues, especially during post award monitoring of contract obligations.
Traditional contract lifecycle management techniques create leakages like missed payments and skipped renewals. The scene gets murkier in matters like tracking of key obligations. Managers also end up spending an inordinate amount of time on reviews and amendments of existing contracts.
Automation of obligation management ensures early detection of issues for proactive management. These enterprise CLM solutions use AI-tracking of contractual obligations and personalized user dashboards to derive maximal value. Capabilities like SLA monitoring can prevent penalties or payments for unachieved deliverables. Timely escalations of lapses and reminders for upcoming deadlines ensure best value.
Seamless mid-term amendments are possible using CLM solutions. Capabilities like clause-level approvals and AI-based risk scoring ensure better negotiations at this stage. Stringent version control ensures that stakeholders have access to the right version every time.
Contract value erosion can be mitigated to a greater degree using end-to-end CLM platforms. For example, contract intelligence integrated in CLM tools can significantly increase procure-to-pay accuracy. This ensures automatic matching of invoice values against contract terms to avoid errors and fraud.
Organizations deal with multiple teams spread across the globe. Recent operational changes like hybrid work add to the complexity. In most cases, this can pose unique compliance challenges from a contract management standpoint.
Global business involves stakeholders who rely on different systems and processes. Standardization of contract processes, templates, and clauses can be a challenge due to local regulations. These compliance mandates can be tedious exercises for departments like Research, Development, and Sales.
For instance, a multinational which fulfils sustainable procurement requirements in Asia may find those insufficient in the US. Consolidation of contracts spread over different systems on to a centralized cloud repository using Intelligent CLM tools can help in such cases.
Advanced AI and NLP features of Intelligent CLM can capture contract information from disparate data sources like Microsoft Word documents, Excel files, and chats. Integration of CLM with ERP, CRM, and procurement systems further streamlines compliance mandates.
Legal teams across locations can access contract information using conversational or advanced search. Intelligent CLM capabilities enable contract managers to easily create compliance matrices to benchmark captured value vis a vis potential. These accelerate the contract management team’s evolution to that of a service provider which uses a global delivery model.
In their traditional filing cabinet avatars, contract management lacks robust audit trails. Digitization of the contract portfolio alleviates these challenges to an extent, but insufficient user controls persist. This leads to data and revenue leakages.
The ability to audit individual contracts from request to closure is another common issue. Intelligent contract lifecycle management solutions like SimpliContract enable MNCs to configure workflows at the entity or even clause levels. Chronological audit trails offered by CLM tools support detailed records of events, changes, comments, approvals, and actions across the lifecycle.
Featuring robust information security, Intelligent CLM incorporates the highest levels of access control. This ensures that only relevant stakeholders can access the data.
Version control ensures instant access to the latest contract, past versions, and amendments. Queries about key contractual data can be addressed instantly with the AI-based metadata extraction features of intelligent CLM. Audits can be streamlined using features like risk ratings and scoring, which creates proactive compliance.
Contractual insights power successful negotiations. Yet, access to contextual data is an Achilles heel for many contract management teams. The lack of contract performance metrics further weakens their stance.
Insufficient information hampers contract cycle times as well. It can create frequent clause changes and contract performance setbacks. CLM solutions can resolve these deficiencies with their highly customizable dashboards.
Analytical capabilities offered by CLM dashboards include measurement and comparison of clauses from the library. This helps businesses detect the scope for improvements, even as it improves compliance. It can highlight contractual risks due to payment term negotiations, exceptions, and non-compete clauses.
CLM tools enable in-depth monitoring of metrics for contract usage and scope optimization. A case in point can be the detailed vendor performance insights integrated into Intelligent CLM that correlate those with customer satisfaction levels. Or SLA fulfilment insights that can be mapped with the obligation matrix to gauge efficiency. Corrective actions and negotiations can be undertaken based on such insights.
Workload allocation dashboards give real-time visibility into personnel status. Many CLM dashboards can highlight strategic work by assessing the quality of work. Such information can detect tactical repetitive tasks fit for self-service, automation, or outsourcing.
Extensive CLM reporting features ensure access to every contractual detail. For example, comprehensive consumption reports about contract utilization empower decision making. Another case in point can be real time reports that cover insights like new MSAs signed or upcoming expiries.
Today’s contract managers contribute significantly to their respective business’s financial well-being. Going forward, the readiness to capitalize on emerging business opportunities and translate those into profits will set them apart.
Agile processes, metrics, tools, and risk management are essential to overcome contract management challenges of the future. It will call for ongoing contract management workflow monitoring and redesign based on business requirements. The use of Intelligent CLM tools alongside these exercises is the best way to power this journey onward.
Ready to break the barriers in your contract lifecycle? Sign up for a free demo to discover more about how an AI-powered CLM can unlock contract efficiency!