More and more businesses have started to make CLM tools part of their contract management. But what are the signs that your business should start looking for a CLM? And how do you know how to pick out the right tool from the hundreds currently available on the market? Read on to find out!
10 Signs Your Business Could Benefit from a CLM
If any of these scenarios sounds like your business, you would probably benefit from implementing a CLM tool.
1. Contract Volume and Complexity
Businesses dealing with a high volume of contracts or complex agreements often find it challenging to manage them manually. Without a centralized system, tracking and managing complex contracts that have diverse terms, multiple stakeholders, or varying compliance requirements can quickly become overwhelming. This may lead to problems like missed deadlines, overlooked clauses, non-compliance, and more.
A CLM system can help centralize and standardize even the most complex contracts and processes to help ensure that all contracts are systematically organized, easily accessible, and properly monitored.
2. Slow or Inefficient Contract Processes
Slow or inefficient contract processes are a major hindrance to the operation of any business. Even the most minor inefficiencies can add up to drag down cycle times, causing the company to miss out on revenue. Slow negotiations can also be frustrating for clients, sometimes making them less likely to see the agreement all the way through to signature.
Through standardized templates, approval routing, real-time status tracking, and more, a CLM tool can automate contract workflows. From drafting to signature, the right system can reduce the time needed to complete each stage of the contract lifecycle, leading to faster turnaround times and improved productivity across the board.
3. Compliance Issues
Manual contract management often results in compliance issues that expose the company to both legal and financial risks. Missed deadlines, overlooked mistakes in language, or even something as simple as failing to adhere to a corporate policy could land a business in hot water either internally or with clients.
With a CLM tool, contract professionals can ensure that compliance is enforced for every agreement that passes through. Embedded rules and alerts make it easy to keep track of important milestones for each agreement and check that all contracts adhere to the necessary standards. This can be especially useful for businesses in industries like healthcare where regulatory requirements change quite frequently.
4. Lack of Visibility
Many businesses struggle to provide visibility to the right stakeholders at every stage of the contract lifecycle. Details about a contract’s terms or status may be scattered across different files or systems, making it impossible for stakeholders to track down the information they need in a timely fashion. Even worse, they might end up surfacing outdated information from an older version of the agreement.
A CLM system acts as a centralized location for all contracts and contract data. Stakeholders can simply log in to find out the information they need about a given agreement, including its current status, performance metrics, obligations, and more. This level of transparency leads to more informed decision-making and better overall management of contracts.
5. Manual or Paper-Based Systems
Some companies still rely on manual or paper-based systems for certain aspects of contract management. But, these practices are extremely inefficient and often cause problems like poor version tracking and time-consuming retrieval of information. Some documents might even end up misplaced, especially as a company continues to grow in size and take on more agreements.
The digitization offered by a CLM tool is a complete game-changer. These systems provide secure, centralized storage for all contracts so employees never have to rely on manually searching through physical documents for information. Modernizing contract management with the right tool enhances both efficiency and data security across the entire contract lifecycle.
6. High Costs
Inefficient contract processes create unnecessary administrative tasks that take time away from contract professionals. The legal team in particular often winds up handling small administrative tasks that could easily be automated or delegated to another. With less time to complete the legal tasks on their plates, attorneys may then be forced to outsource legal work to an outside firm, racking up a substantial bill for tasks that could have been completed internally.
A CLM tool helps save both time and money by automating those repetitive tasks, thus minimizing the need for manual intervention and optimizing resource allocation. Legal teams and other contract professionals can then be free to focus their time on higher value work that contributes to larger business goals and strategies.
7. Reporting Difficulties
Businesses that don’t track their contract data are missing out on a goldmine of information. Manual contract management makes it difficult and time-consuming to generate insightful, accurate reports based on contract data. Without access to comprehensive reports, businesses may find it hard to track important metrics and pinpoint areas for improvement. Reports can come in handy in the case of an audit as well.
A CLM system, particularly those paired with AI, can tap into new and old contract data to generate a variety of insightful reports. Advanced reporting features even allow for customized reports, which can be used for strategic planning or a smoother auditing process.
8. No Ability to Scale
As businesses grow, their contract management processes need to grow with them to handle more complex and voluminous agreements. Manual contract systems often lack the scalability required to handle this growth without compromising efficiency or compliance.
A CLM system, on the other hand, does offer the scalability to manage an increasing number of contracts and more complex agreements seamlessly. It supports expansion with a robust base infrastructure that can then be adapted and customized over time to handle larger volumes of data. Even if a business starts small with a tool that has very basic features, many systems also have the ability to grow alongside a company, adding on new features as they become necessary.
9. Frequent Errors
From miscommunication to incorrect data entry, lots of errors can occur throughout the contract lifecycle. Some may be natural human errors while others are simply a product of inefficient contract processes. Either way, these errors can bring about financial losses and even damage customer relationships, sometimes resulting in legal action.
Businesses can cut back on the number of contract errors that occur by implementing a CLM tool. These tools are designed to pack more reliability and accountability into the contract lifecycle. They automate tasks like data entry, standardize contract language, and provide real-time alerts that help contract professionals stay on top of important tasks. These actions help safeguard the business from avoidable mistakes and their consequences..
10. Heavy Weight on Certain Teams
In many organizations, contract management tasks disproportionately burden specific teams, particularly the legal department. This concentration of responsibilities may cause lawyers to feel overworked or burnt out, leaving them with less time to complete the rest of the responsibilities that fall on their shoulders.
A CLM system can help balance out the distribution of tasks so every department contributes a proportionate amount of work to the contract process. Tools that have been stocked up with pre-approved templates and clauses from the legal team can even be used by commercial departments to create self-service contracts without needing to consult the legal team. This distribution lightens the load on any single team and greatly improves cross-functional collaboration and communication.
Know Your Business’s Contract Management Needs
As you search for a CLM tool, the most important thing to remember is that not every tool will fit your business’s needs. Different tools are naturally better at doing different tasks. So, to find the one that’s right for your business, you need to figure out what your top needs and priorities are when it comes to contract management.
Start by nailing down the current challenges in your contract processes. What are the pain points that most frequently get in the way of progress or slow things down? Are there too many tasks piled onto one specific department? Are negotiations taking too long? Talk to the other stakeholders involved in contract management at your organization and make a comprehensive list of challenges that includes all perspectives.
Then, think about the improvements you’d like to see. Create a clear definition of what a successful CLM implementation would look like for you and other stakeholders. For example, you may be interested in reducing the time it takes to reach an approval during negotiations. Be specific about the terms of success so that you can also be specific about the solutions that will take you there.
Finally, use your list of challenges and your qualifications for success to lay out the requirements for your ideal CLM tool. What features will help you accomplish your goals? Make a list and compare it to potential vendors. Remember that you may have to compromise on some aspects of the tool, so it would be a good idea to prioritize your list of requirements beforehand.
Here are a few examples of must-have features to look for in your business’s CLM system:
- Customization. A customizable tool can adapt with you as your business grows and changes without requiring heavy-duty coding or a switch to a new system.
- Integration. Make sure the tool you choose can integrate with other important business tools already existing in your organization like a CRM.
- User-friendly interface. CLM implementations aren’t cheap, so you need to make sure end users will be able to figure out how to navigate the new tool and actually take advantage of it.
- Security. Check that any CLM tool you choose offers robust security protocols and comprehensive protection for your contract data.
- Support. Implementations are ongoing processes that never really end, so it pays off to have a vendor who is willing to provide continuous support into the future.
If you need help finding the perfect CLM tool for your business, contact our team of experts at Koho Consulting for a consultation today.
