Contract lifecycle management (CLM) software helps legal teams operate more efficiently, by automating tedious processes, eliminating friction with orchestrated workflows, and speeding the pace at which contracts can be negotiated and executed. That frees up your legal team to focus their attention on high-value activities. Contract analytics provide powerful reporting to measure, monitor, and improve the value your team offers to the organization as a whole. CLM also improves collaboration, making it easier to work across multiple time zones and regions.
Analyst firm IDC identifies Contract Lifecycle Management (CLM) as a critical factor in helping legal teams to drive digital transformation forward in their organizations.
The IDC MarketScape: Worldwide Contract Life-Cycle Management Software for Corporate Legal 2021 Vendor Assessment notes that CLM has proven its value by delivering positive ROI for legal departments, and enabling contract management teams to add value and measure their contributions across the entire organization.
In this article, we’ll explore five key ways in which comfort management software can benefit legal teams directly, – and by extension, can improve collaboration with other departments.
Contract management software improves workflows
By digitizing their business processes, organizations of all sizes are discovering the power of automated workflows. This trend began with highly structured transactional workflows such as purchasing and sales order processing. More recently automated workflows have been extended to include a range of new business processes, including many that fall outside the traditional parameters of transactional systems such as ERP or CRM.
Contract management processes can benefit greatly from automated workflows as well, though. Legal agreements typically require review and approval by various parties as they move through the contract lifecycle. A proposed sales contract, for example, might normally be sent to a prospective customer for initial review, only to be returned to the sales team with a list of requested changes.
If the nature and scope of the proposed changes is limited, then a revised contract might simply require approval from a Sales Manager. Higher discount levels or other fairly routine changes might need to be escalated to the VP of Sales. Requested changes that fall outside of predefined parameters might require further escalation, along with review and approval from the legal department.
Managing those kinds of details manually can be tedious, and it’s fairly likely that things will slip through the cracks at times, leading to errors or omissions. CLM software automates approval workflows using configurable rules, routing proposed contract changes to each approver in turn, and notifying other stakeholders when that person has taken action. If a designated approver is out of the office, or otherwise unable to respond promptly, automated workflows can route the decision to an alternate approver.
Simply put, CLM software removes friction from the contract management process by automating workflows. For a busy sales team struggling to close deals at the end of a quarter, the small efficiencies that result from this can be game-changing. For the legal team supporting them, it means less time spent scrambling to complete contract reviews during those all-important crunch times. CLM simply eliminates those stresses.
Sales contracts are simply one example, of course. CLM software enables legal teams to configure different workflows for different categories of contracts. High-volume contracts might not allow for any modification at all, but still benefit from workflows. New customer onboarding, for example, is a multistep process in many organizations. Executing legal agreements is often a small but very important part of that process. Automated workflows eliminate a lot of headaches.
CLM systems automate processes
CLM software provides automation that extends far beyond workflows, though. Consider what happens, for example, when a leader from the field services department requests a new contract for an important customer. Writing a new agreement from scratch can be a time-consuming process. Chances are, your legal team will begin with a template, then make changes as needed to deliver a draft agreement.
If your company operates in multiple countries, or perhaps even just in multiple states, your legal team may need to take great care in modifying boilerplate language to suit the needs of the specific request before them. That, too, can be very time-consuming.
CLM software can automate much of the process, delivering a draft agreement that draws from a standard library of preapproved clauses, tailoring the contract to the specific jurisdiction in which it will be executed. Naturally, it’s still important to involve skilled legal professionals in this process, – but automation can perform much of the legwork, producing faster results with greater accuracy.
Contract review processes can also be automated. The best CLM software includes optical character recognition (OCR) technology that can automatically read paper documents, convert images to text, and parse contractual language to extract key dates as well as important terms and conditions. Again, the objective is not to replace skilled legal professionals, but to relieve them of the tedious tasks that consume too much of their time.
Contract management software also adds value with respect to renewals and extensions, notifying members of the legal team when key dates are approaching. Automated alerts ensure that your organization does not miss out on potential opportunities to renegotiate important contracts or extend agreements that offer favorable terms.
Legal teams can focus on more valuable work
Naturally, CLM automation is a time-saver. It eliminates many of the most tedious jobs associated with contract management, and it shortens the overall time it takes to negotiate and execute agreements. In many respects, CLM serves as a kind of intelligent assistant that takes care of the more menial tasks, allowing legal professionals to focus on what they do best.
Historically, many legal teams have relied upon complicated spreadsheets or homegrown databases to keep track of the various tasks associated with the contracts they oversee. In fact, many organizations still use these methods today. Those kinds of manual processes can be very time-consuming in their own right, requiring painstaking attention to detail. Small errors or omissions can result in tasks slipping through the cracks. That can cost your organization money, and it reflects poorly on the legal team as a whole. CLM software manages the entire lifecycle automatically, increasing accuracy and reducing administrative burdens.
Like virtually any other business domain, contract management stands to benefit from accurate reporting. In order to improve something, you need to be able to measure it, gather information, and report on the results. This serves both internal (legal department) and external (C-suite) audiences, clearly communicating the value that the contract management function is adding to the firm, and its efficacy in performing its core responsibilities.
A good contract management solution should provide robust contract analytics; organizing, synthesizing, and summarizing contract data to deliver meaningful insights. If you’re still using manual systems to track legal agreements as they proceed through the contract lifecycle, reporting will necessarily be a tedious and cumbersome undertaking.
CLM software, in contrast, provides up-to-the-minute analytics to keep C-suite executives, and department leads, and other stakeholders informed about the most recent developments.
Improve interdepartmental collaboration
Collaboration tools have gained considerable popularity, especially since the onset of the COVID-19 pandemic, which prompted many employees to shift to remote or hybrid work. Even before that crisis, though, most legal teams were operating in an environment where employees were spread across multiple states, regions, or continents.
When it comes to complex, high-stakes legal agreements, collaboration can be especially challenging. Operating in different offices and different time zones often leads to limited channels of communication. Important discussions might be conducted via e-mail, telephone, or using online collaboration tools like Slack. While those kinds of tools are convenient, they can often lead to a situation in which communication is fragmented, and some parties may be left out of the loop.
If employees are sending red-lined contracts back and forth via e-mail, that can often lead to conflicting versions of the same document. One person’s important edits and comments might be overwritten by another user making changes to the same contract.
The best contract management software sophisticated collaboration capabilities that help to ensure everyone stays (literally) on the same page. Automated version control prevents many of the problems just described, offering a single source of truth for everyone to work from. By maintaining a clear record of comments and changes, it’s easy to go back after the fact and determine why and how certain decisions might have been made along the way.
Organizations of all sizes have been digitizing their business processes for years, beginning with transactional systems that handle highly structured data. Newer technologies are enabling digital transformation across a broader range of functions, including contract management.
As IDC notes, contract management software delivers proven ROI, enabling legal teams to perform their jobs more effectively and efficiently, collaborating more successfully across departmental boundaries.