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Contracts can be an inordinately expensive part of doing business.
The process lumbers from drafting to working through approvals and executing different components. Overall, this is an inefficient process that can cost your enterprise millions. In an effort to smooth out that process, many organizations have turned to contract lifecycle management (CLM) tools.
CLM tools exist to create templates and workflows for sales teams to work through with prospective clients. It is billed as a catch-all solution that makes each step of the process more efficient, cutting costs at all stages of the contract lifecycle.
But the idea of using overly expensive systems that can be both inflexible and limiting in scope is outdated. CLM isn’t a panacea to your contracting problems. It slows you down at a time when you need to move faster, fails to address the true costs of the contracting process, and works in too linear a process to be effective.
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Contact lifecycle management doesn’t necessarily mean your sales team will be working through their processes faster. While sales may have a set of steps and software that ostensibly makes that process simpler, they will still have to wait for legal approval throughout the process.
Also, CLM doesn’t amply address issues with contracts with out of date iterations. It doesn’t simplify the redlining and editing of the contracting process. CLM is built using a linear model, in that one part of the process needs to be completed before moving forward with the others.
A true solution that enables speed is one that allows legal to work in a non-linear manner. While legal standardizes the terms, ensures that the agreements amply protects the company, and updates versions, the contracts can be presented for acceptance using digitally native agreements. With this solution, legal can be involved in the frontend without needing to be called in at every turn.
In the past six years, the costs of standard, low-risk contracts have increased by almost 40%. When you begin to look at why those costs remain high, it becomes clear that CLM isn’t attacking the core of the problem.
The real answer to why contracts can be so expensive is not about the negotiation of terms, nor is it about the time it takes to create contracts. It is in the time it takes to review and accept them.
CLM may smooth out many different parts of the contracting process, but it fails to address the wasted time that contract review and acceptance entails. If you are interested in meaningfully improving your contracting system, you need to make your contracts simpler in language and acceptance.
Time is money. When deals are delayed due to complicated contracts and redlining, you are functionally losing money every day.
All CLMs work under the same premise. That is, contracts must follow a set workflow: create, deliver, negotiate, review and approve, and store.
In theory, this makes sense, but in practice, it means that your team will be running into roadblocks that they don’t necessarily need to hit. Under such a linear system, you need to wait for each box to be checked before you move to the next step.
In reality, looking towards a non-linear approach can uncover efficiencies in the contracting system. Where CLM requires you to move from point to point, you should be looking for solutions that allow you to handle multiple parts of the process at once.
You need to find ways to remove time-intensive steps from the onboarding process. CLM isn’t built for that kind of mindset, which makes it an outdated solution.
CLM is a tempting one-stop-shop for fixing your inefficient contracting system. However, when you start digging into its capabilities, it falls short of what you need in a contracting solution.
Instead of linear, inefficient processes that do little to address the true source of the high cost of contracting that CLM provides, you must rethink the way your contracts are geared to be reviewed and accepted. Without addressing that step of the problem, you won’t fix your issues.
Learn more about how you can reduce the overall costs of your contracts and make them an integral part of your revenue strategy. Download our eBook, Making Contracts the Key to Unlocking Revenue Recovery.