Every business strives to cut costs. The keyword is efficiency, and it must be applied to as many areas as possible. When every attention-grabbing idea has been tried, there are only pennies left to be squeezed out of the tasks that have already been automated.
Virtually all B2B transactions depend on contract lifecycle management (or CLM), yet it appears to be one of those less attractive ideas that keeps getting overlooked in the pursuit of efficiency. An independent study from International Association for Contract and Commercial Management (IACC) shows that implementing CLM can increase ROI up to 9% a year, yet the majority of companies have not even attempted to improve upon it.
Do you use an inefficient Contract Management System?
No manager would blatantly reject an obvious target for automation, leaving the savings, as well as other benefits on the table. Most businesses are still simply unaware of the perks, let alone the idea, after being distracted by too many other cost-saving ideas – or too caught up handling an archaic contract system to consider a better alternative.
We all know too well what an inefficient contract management system looks like. There is no better example than during crunch time at the end of the quarter. Employees neglect today’s tasks to compile all of the company’s working contracts – some new and others that have been hiding since last quarter – while trying to keep them organized. After their (often inconsistent) language is scrutinized and translated into reports, they go back into filing cabinets until needed again. The cycle continues to wreak havoc as it grows more complicated.
Where does that leave the business? With a loss of productivity, energy, focus, consistency, organization, and money – all of which can be partly recuperated by intelligently streamlining the process.
Effective Contract Management Can Recover Losses and Bring More Value
The typical contract process consists of nine stages:
- Initial requests
- Authoring of contracts
- Contract execution
- Obligation management
- Revisions and amendments
- Auditing and reporting
- Contract renewal
When the entire process is managed and organized electronically, the ease is noticed from the very beginning, which in turn simplifies each stage.
Some Benefits of Improving Your CLM Process
As the contract is being written, authors can resort to pre-designed templates utilized for uniformity across contracts. Not only are they easier to write, but easier to interpret when they are deciphered at a later date. The uniformity grants additional ease during negotiations. As each party nitpicks details, the ability to quickly refer to such terms and compare them against existing contracts is crucial to the well being of the firm. Contract approval can notoriously drag on for months, falling victim to corporate bureaucracy. A proper CLM will expedite its course and proceed to collect signatures quickly as well.
From this point forward, the contract may need to be referenced for any number of reasons up to the renewal stage. Automated consolidation makes it easier to do so, but also easier to maintain the terms of the contract and avoid costly mistakes. Contract lifecycle management is already at the backbone of B2B agreements. With companies often managing tens of thousands of contracts, the business world literally depends on it. After considering our sheer reliance upon its efficiency as well as the potential savings of both monetary and human resources, the case for improvement seems self-explanatory.
Establishing an efficient Contract Management System benefits the company at every level. Learn more finance and accounting skills through AMA's many tools and resources.