As the backbone of business transactions and relationships, contracts are key to overall business success. As a result, efficient contract management allows companies to do more business and maintain good standing with customers post-purchase.
Contract lifecycle management software (CLM) lets legal teams automate and streamline every part of the contract management process. Efficient contract management and a comprehensive CLM empower your legal team to access contract data and make data-driven decisions as part of your business strategy.
A smooth contract management process makes legal teams more productive. Even if you’re just getting started with contract management, you’re not too late. Here’s everything you need to know about contract management.
What is contract management?
Contract management is the process of organizing, centralizing, and streamlining every stage of the contract lifecycle. It’s the set of steps that businesses take to ensure their contracts are compliant with internal and external best practices.
Though these can differ depending on a company’s unique needs the contract management process typically has these eight stages:
- Creation
- Negotiation
- Review
- Approval
- Signing
- Storage
- Fulfillment
- Renewal
When done manually, each stage takes longer than necessary. But CLM software helps teams cut that time in half by automating processes and creating workflows around specific contracts. This reduces the amount of time legal has to spend on agreements and increases the efficiency of contract execution.
Why do you need contract management?
When implemented well, contract management strengthens your business —cutting contract costs, increasing team productivity, and improving collaboration across the company.
Without an organized process, companies face increased risk, revenue leakage, and drawn out sales cycles.
Here are three reasons your business needs contract management:
Reduce risk
A streamlined contract management process ensures your contracts are stored in a centralized and searchable repository for easy access. This allows you to find the contracts you need, prove contract and data privacy compliance, and make necessary updates. And with the right CLM tool, you can generate reports that highlight your risk profile.
Create repeatable processes
The contract process can be extremely manual if you duct tape a process together using different tools. A manual process still relies on human intervention to move the contract forward, making it easy for things to fall through the cracks. An automated, repeatable process reduces the chances (and costs) of human error.
Maintain and prove compliance
When your contracts just go with the flow of the day, it makes it hard to prove how well you adhere to internal processes and controls. With an efficient process for handling the contracts that come to your desk, you use an audit trail to prove you’re following the rules.
Contract management gives your business a leg up on the competition by helping legal to mitigate risks and sales to close deals faster.
Common contract management bottlenecks
Sometimes, even the best laid plans are thwarted by bottlenecks and process inefficiencies. Here are a few bottlenecks that can lead to an ineffective contract management process:
Disparate tooling
Too many tools spoil the broth — or however that saying goes. Many teams that piecemeal their contract management process often use tools that weren’t built for legal and don’t talk to each other. Even worse, some teams might have multiple tools for the same purpose. This means legal has to intervene manually to make changes and move the contract to the next stage.
Scattered storage
Improper contract storage puts your business at risk of cyberattacks, data breaches, and breach of contract. When contracts are scattered across your business, contract management becomes a guessing game. This leads to lawyers spending too much time trying to find the contracts they need and extract crucial contract data. It also causes lawyers to manage risk ad hoc and make guesses about things that should be informed by data.
Lack of visibility across functions
Contract management, while run by legal, impacts every business function. Finance, sales, procurement, and even marketing all have a stake in the contract management process, so it’s essential that they have visibility into the process and access to the contracts that are relevant to them.
How CLM enables efficient contract management
CLM software helps legal teams manage every stage of the process and get more done in less time by facilitating streamlined process that lets you get the most out of your contracts.
Here are more advantages of using CLM software for contract management:
Streamlined workflows
A comprehensive CLM solution can help legal teams create end-to-end workflows that automate the contract process from creation to renewal. This means every stage of the contract process happens in a single platform, giving legal more control over their agreements. Even better, LinkSquares Prioritize allows legal teams to manage intake and assign legal tasks in the same platform where you manage contracts.
Better collaboration
CLM helps legal play nice with the other departments. CLM tools that integrate well with other departments’ tech stacks not only gives everyone access to the data they need, but also gives stakeholders insight into a process that’s usually siloed. Plus, with automated alerts and notifications, everyone knows where the contract is and when it’s their turn to review or sign.
Provides analytics
Another major standout of using CLM is the access it provides to analytics and reporting. As a revenue-influencing business unit, legal needs to bring metrics and analytics to the table to participate in business discussions. CLM can turn contract data into actionable insights your team can use to make sound decisions.
Takeaways
Contract management is the secret sauce for successful businesses and legal teams. It turns an often time-consuming, ad hoc, and risky process into a competitive advantage that keeps the business safe and makes legal the hero. Without it, your team will spend its valuable time barely treading water and leaking revenue. Request a demo today to learn more.
