CLM Solution: 5 Ways It Can Help Reduce Costs

The average cost of managing a basic business contract is 6900 USD says research by IACCM (International Association for Contract & Commercial Management). Investing in CLM can help you reduce these expenses.


Umashankar Natarajan


1 min read

The average cost of managing a basic business contract is 6900 USD, says research by the International Association for Contract & Commercial Management. That’s a huge expense considering the number of contracts a business enters into. Yet, small and large organizations alike, shy away from investing in a contract management solutions, primarily because of budget constraints. But they fail to realize the potential ROI of CLM solutions. Here’s a look at some of the hidden costs of contract management and how CLM can mitigate them.

Hidden costs in Contract Management

A contract must comply with the laws and regulations apart from formalizing an agreement between two or more parties.  In the pre-globalization days, this was a simple matter of listing down the terms of the contract and executing the document. With globalization, however, contracts now involve diverse and often geographically distant parties. On another front, while digitization has speeded up most business processes, contract creation remains tedious and serpentine. 

Consequently, the gap between the legal and other teams has widened, and bridging it is expensive. 

How CLM can save costs

Some of the hidden costs of contract management include:

  • Cost of lost opportunities

  • Cost of amendments and updates

  • Cost of undocumented trade

  • Cost of underperformance

  • Cost of non-compliance

  • Cost of renewal or termination without review

Each of these costs can be significantly high to cause concern and cumulatively they can be potentially disastrous. Here’s how an efficient CLM can help you trim these costs:

Accelerate Creation

There are no two opinions that the contract creation process is painfully slow often resulting in missed opportunities. But that’s not the only cost of creation. Think of the operational cost. Consider the cost of reviewing standard clauses that appear in almost every contract repeatedly. All of this results in escalating costs.

A technology-driven CLM solution can help reduce time to execution significantly with the help of standardized templates, a clause library, and an enterprise playbook - all of which make contract authoring smarter and quicker. The use of digital signatures also facilitates delegation of responsibility and authority thus speeding up the process further.

Plugging Revenue Leaks

During the life of any contract, there are plenty of possibilities for errors. For instance, a missed milestone or due date, non-compliance, delayed renewals, or non-recovery of penalty can all potentially drain revenue – and the list is not exhaustive. 

With the right CLM, you can reduce payment errors by as much as 90% says Goldman Sachs, and enhance your revenue by 30%. A good part of that is through the reduction of human error. While humans can show up to 92% accuracy, AI can enhance it to 98%. 


Traditional contract management systems were disintegrated. Stakeholders operated in silos and aligning their goals was challenging. The challenge multiplied manifold with globalization and the need to integrate diverse and sometimes conflicting laws, practices, and regulations. 

With an integrated CLM all business contracts are stored in a single repository. This gives the legal team complete oversight over all contracts. It also facilitates benchmarking, analytics, and insights. Another big advantage is accountability by generating a clear audit trail. In short, using an automated contract management framework helps you optimize your process and thus save costs.

Timely Compliance

Henry Paulson said, “History says it’s very difficult for policy to keep up with innovation,” and we couldn’t. Ubiquitous digitization and globalization have put traditional laws and regulations in a state of flux. But the converse is also true. Businesses must leverage emerging technologies to keep up with evolving regulatory reforms. Automation can help track regulatory changes, alert stakeholders, and integrate the changes into contracts and workflows thus ensuring timely compliance, reducing penalties, and preventing incidental loss of revenue. All this is possible through an integrated contract management system that leverages emerging technologies.


Not all stakeholders in a contract understand legalese. This causes confusion and wasted time explaining various clauses and terms to non-legal contract owners. Automated CLM solutions that use intuitive UI can facilitate creation and updating by non-legal stakeholders across regions. This not only avoids friction between stakeholders but also allows the legal team time to review and integrate the needs of all stakeholders speedily. You can also align the goals of all stakeholders easily in record time. By granting permissions strategically, businesses can also control and monitor accountability.

Implementing technology-driven CLM can significantly reduce expenses and increase revenue. In the contemporary data-driven world cutting costs is of prime importance. So don’t hesitate. Get your CLM now.