Did you know that on average, businesses lose about 9.2% of their revenue per year due to poor contract management?
As a business grows, so does the number of contracts that need to be managed. A mostly manual process for many organizations, contract management is a tedious and time-consuming task that can have a major negative impact if not done properly. Larger organizations tend to deal with more contracts, sometimes thousands yearly, each one with its own set of requirements, deadlines, and risks that can lead to cost and compliance issues.
Without full visibility into all of your contracts, it’s nearly impossible to effectively manage each one at every stage of its lifecycle, from initiation to execution and post-execution. To solve this problem, we have contract lifecycle management, or CLM. CLM refers to the streamlining of processes of an organization’s contracts in every stage—creation, execution, performance analysis, renewal, and/or expiry. Effective contract lifecycle management can be achieved through the use of a CLM tool. Not only can it provide actionable insights, but it also helps improve security, eliminate bottlenecks, and decrease the potential for errors.
According to Gartner, 90% of global enterprises and 50% of midsize organizations will have CLM solutions in place by 2023. Are you thinking about implementing one at your organization? Or perhaps you’re already using one but are looking to switch to a different one?
With the help of a couple of the Systematic community members, Steven Han, Sales Systems Architect at Pantheon, and Candice Gervase, Commercial Technology Manager at Metabolon, we’ve compiled a list of 6 important features to look for when choosing between CLM tools.
- Intelligent automation: To Han, having a CLM tool that has approval and escalation rule automation (for routing contracts to the right users at the right time) is very important. With an automation-powered CLM tool, you can easily streamline processes that would otherwise be laborious, like manually setting reminders for deadlines or upcoming tasks. This also allows for more visibility into each contract, which is crucial to Gervase: “Did the customer receive your email with the contract? Did they open it? Did they sign it? Having insights into the contract and signing process is a must not only for visibility but it can also shed days off the contract lifecycle because you know exactly where it stands so you can follow up if needed,” she said. With automation, you can expect a reduction in operational costs, shorter negotiation cycles, and less room for error.
- Centralized repository: A fundamental feature that every good CLM tool has is an easily accessible, highly secure, and scalable centralized database that stores contracts across all departments. Users both internal and external, depending on their roles and privileges, should have a way to easily search and report on contracts. According to a report called “Best-in-Class Performance in Contract Management” by Aberdeen Group, the best-managed companies have about 75% of their contracts in a searchable repository, compared to all others who only have about a third. This feature provides a single source of truth, which can help avoid the creation of duplicates, mixing of contract categories, and unnecessary extra time and effort spent on finding a specific contract.
- Third-party integrations: A CLM tool with no out-of-the-box integration capability cannot talk to other applications, which results in a higher risk of inconsistency across formats, timing, changes, and next-steps. An integrated tool can ensure seamless coordination between different processes. “Integrations with apps like MS Office, DocuSign, Salesforce, PDF, and more, can reduce time-to-value and provide scalability,” Han stated. Having integration with MS Word, for example, allows users to work with the same app they are familiar with, without ever having to leave the CLM platform. A word processing tool supports the tracking and recording of redlining and revisions (based on time and user) and shows version comparisons. Han also mentioned that a great CLM tool should have a “comprehensive public API document so that developers can customize and adjust additional features specific to their business.”
- eSignature: Without a doubt, in this hypermodern era of technology, the digital signature feature is an expected component of most CLM tools. According to Lunarpen, businesses see a 55%-78.6% in total savings in regards to contracts from adapting eSignature and decrease the average time it takes a document to get signed from 5 days to 37 minutes. Choose a tool that has a built-in eSignature feature or one that has partnered with industry-leading brands like DocuSign, HelloSign, or PandaDoc as their technology and integration partners for eSignature. With this attribute, you can get stakeholders’ consent on contracts and documents faster (and legally) and also benefit from robust security, as well as verification and audit capabilities.
- OCR technology: “We get a lot of third-party paper, so having something that could read different contracts as well as incorporate it into our technology and process was key to us,” answered Gervase when asked about one of the most difficult things she had to consider when choosing a CLM tool for her organization. Everything is pretty much digitized nowadays, but that doesn’t guarantee that you’ll never have to work with paper documents ever again. And even if the document is digitized, like in a PDF form, a subpar CLM tool won’t be able to provide you with automated notices when there are changes in clauses or divergence from pre-approved contract language. Best-in-class CLM tools must be able to automatically compare and track language changes throughout negotiations and make contracts searchable by text and verifiable against templates and clauses within your library. You can achieve these things by looking for a CLM tool that leverages OCR (Optical Character Recognition) technology.
- Ease of use: Last but not least, according to Gervase, “the best tools are user-friendly as well as admin-friendly and once set up, require very little maintenance.” Unless it’s easy to use, a tool will not see high adoption, no matter how advantageous or sophisticated the features are. Make sure your CLM tool is intuitive, easy-to-use (flattens the learning curve), increases compliance and adoption across the business, and is sustainable. You’ll also want your CLM tool to require low to no code when it comes to changing or configuring it to a new business process, to allow non-technical users to accomplish this task easily.
Want to know which CLM tools organizations similar to yours are using? Request to join the Systematic community now to have discussions with other BT professionals on topics like this and more!