For most marketplaces, contracting is a roadblock to maximizing profit. With the time it takes to draft and redraft contracts, go through review and approval internally and externally, you’re losing money.
According to a recent IACCM study, the cost of enterprise contracts have increased nearly 40% over the last 6 years. Also, contracts of mid-complexity can cost over $20,000, and highly complex contracts can cost in the hundreds of thousands of dollars. Even more, contractual inefficiencies can cost enterprises up to $5 million per day.
A simple rethink could have a huge effect on the way you do business. Moving contracting to a digital space using clickwrap can help your team find an edge and, just as important, save money. You will be working faster, saving money on the front end, and in a more secure way, saving money on the back end.
VIDEO: The Economics of Contract Design
Contracts cost money to create, negotiate, and maintain.
The most commonly thought of cost of a contract is the liability it can incur. The more contracts that are agreed to, the more chances there are for that contract’s legality to be challenged. This is the major reason why contracts take so long to produce and negotiate. Organizations want to be sure that they are amply protected and do their best to cover all their bases.
But there are other concerns here as well. The time it takes to review and accept a contract is proven to be the most costly part of the whole process. The hours of administrating a contract need to be considered as well.
eBook Download: Making Contracts the Key to Unlocking Revenue Recovery
Even as digital contracting is becoming more and more popular, the cost of those contracts are not coming down.
In order to reduce the high costs of contracts listed above, Legal has turned to contract lifecycle management (CLM) tools. But are they delivering on their promises of bringing down costs?
CLM tools struggle to assist in managing contracts because of how unwieldy they are to use.
CLM tools tend to try to code in every possible contingency for a contract. What this often results in is a system that is clunky to operate and incredibly difficult to implement correctly. This leads to frustration from the sales team that has to work with it.
Related: Three Reasons Contract Lifecycle Management Tools Aren't Enough
Additionally, CLM tools are for internal use. In a marketplace that is moving more towards online buying, CLM doesn’t work cleanly with that kind of self-service workflow.
What you’re left with is an inordinately expensive piece of software that is underutilized and underperforming. CLM is becoming more and more a relic of an old system of sales because of these inefficiencies.
Clickwrap is built to address the major pain points of contracting.
At its core, clickwrap’s value add is rapid acceptance of secure contracts. By creating standardized and simple contracts that can be agreed to with a simple click with clickwrap and by automating the review of those contracts, the savings can be exponential.
See How PactSafe Powers Secure Customer-Facing Contracts
Contracts built to be securely agreed to in a few clicks, obviously, shave time spent on repetitive tasks from your internal teams. With less time spent going through the contracting process, Sales spend their time working with other prospective clients. Legal can focus on making contracts standardized and use their time to be forward-thinking and innovative rather than having to work through redlining on every contract.
Additionally, finalizing contracts quicker puts the money in your organization’s pocket faster, which has enormous downstream effects. If your customer experiences deal fatigue through a contracting process, you could lose the sale altogether. But even a delay in accepting a contract costs you a proportion of that sale. Finalizing deals allows for further capital investment, the financial effects of which can multiply.
When you think about the costs of your contracting process, you need to think beyond the liability they incur and the negotiations of those contracts. Instead, consider the cost of the time a slow agreement process incurs. That’s where finding efficiencies can make the most difference.
A move to clickwrap will eliminate your need for expensive CLM tools and can reduce the cost of enterprise contracts daily. For more on how you can effect efficient cost savings in your enterprise contracts, download our eBook, How Contracts Are the Key to Unlocking Revenue Recovery.
