4-11-2016 | by Ben Fleshman
Many companies overlook the basic need for effective contract management, but contract management should not be taken for granted. Improving efficiency in contract management is one of the best ways to increase overall efficiency and generate more growth for a company.
Consider the impact that contracts have on a company. Contracts bind suppliers and purchasers together. They create legal bonds between two entities which lead to a mutually profitable relationship. Generally speaking, the more active contracts a company has, the more revenue it can generate, but only if the contracts are managed well.
An inefficient contract management system is a system where contract managers spend more time searching through paperwork and filing cabinets than writing and monitoring contracts. Such systems often result in misplaced or inaccurate contracts, poorly allocated time, and stagnant contracts. If a company cannot manage more than a certain number of contracts, then the company’s growth is effectively capped at that moment. When a company starts making contract management system improvements however, their potential for growth also increases.
The absolute best method for improving efficiency in contract management is to implement an automated contract lifecycle management (CLM) system. This software system includes a central repository for your contracts that improves the capabilities of the contract manager, legal department, and all invited parties to draft, edit, negotiate, and renew contracts. This article will help you understand some of the difficulties that contract managers face when attempting to bolster efficiency, and the solutions that CLM software can provide for your company.
The Need for CLM Optimization
Right now, a contract manager who doesn’t have access to any CLM software has issues primarily with visibility, time management, accessibility, and efficiency. An easy solution to this is automation. Automating the contract management system brings new levels of visibility and efficiency to your company. Having contracts in the cloud allows multiple users to view, edit, and comment on a contract. This creates a more collaborative atmosphere, causing employee efficiency, accuracy, and production rates to increase.
Think about the most inefficient things that happen during the day for a contract manager. If the CFO were to ask for a simple report on the liability terms of a contract, the process for accomplishing this simple task is unnecessarily complicated. First, the contract manager needs to locate the contract in a filing cabinet. If the contract isn’t there, the next stop is to check the spreadsheets, but sometimes the spreadsheets also do not have the needed information.
Once the contract manager locates the contract, the information needs to be sifted through manually, and then transferred into a report. The entire process wastes valuable time tracking the contract down, manually entering data into a report, and then delivering that report via additional paper documents.
Consider the hassle involved in a larger project, such as compiling a report on any contract filed in the last 60 days. You now have to track down dozens of contracts, search out the required information, input all of that data manually, and then deliver the report. That could take days, or even weeks depending on the project’s scope.
With efficiency diminished in this way, visibility also decreases. It becomes increasingly difficult to manage contract compliance, monitor audit trails, and juggle deadlines as your company takes on more and more contracts. Employees get swamped, make more mistakes, miss opportunities and deadlines, and company potential stagnates.
Contract authoring and negotiations also tend to decrease in efficacy when done by hand, or with an outdated software program. Because the contracts are not visible, or in a central location, collaboration is more difficult, and often neglected altogether. Manual data entry increases the likelihood of mistyped or misallocated information, such as duplications or information that goes missing altogether.
Increasing Control, Visibility, and Efficiency Through Automation
An automated CLM system promotes collaboration, efficiency, and visibility in every phase of the contract lifecycle. Centralizing your contract storage in a cloud simplifies the process for your entire team, from the sales team to the legal department. It allows you to standardize contract language, formatting, communication, and compliance practices, which in turn increases efficiency.
When everyone is working on the same page, you can then make further alterations to generate new ideas and growth for the company. Your teams will consistently make their goals, because they are using their time efficiently and working together as a team. Increased visibility through the CLM process in turn brings improved contracts, new levels of compliance, and greater lifecycle rates for your contracts. The change is almost instantaneous, and you will see marked improvement in the following areas: contract quality, streamlining, faster approvals, more complete control, and the ability to search through archived data instantly. For a complete list on these five benefits to contract lifecycle management automation, see this article.