In my earlier blogs, I’ve talked about effective contract risk mitigation strategies, the top contract lifecycle management (CLM) KPIs to track, and CLM best practices that leading organizations are leveraging. There is clear evidence that managing contracts efficiently and effectively is critical to business success, but many legal departments will capture only 30% of the potential benefit of their contract lifecycle management (CLM) investments by 2025.
As we reach the end of 2021, it’s time to reexamine how your contracts are being managed today, and if you have a CLM system in place, how to make sure you’re getting the best value for your investment. Whether it’s improving supply chain issues, closing deals faster, or increasing regulatory compliance, CLM plays a foundational role.
But where do you begin and what questions should you be asking? Here is a start:
- Are you still relying on paper-based processes? Paper-based processes are insecure and inefficient. Storing contracts in a central, cloud-based location using a standardized format can be accomplished by uploading your agreements (in a digital format like PDF or Word) into a secure and centralized CLM repository. This greatly enhances security and appropriate accessibility while also enabling easier searching, reporting, and analysis of contract data. It also mitigates the risk of having legal agreements scattered across your organization in filing cabinets, shared drives, and individual hard drives.
- Is your contract management process document-centric or data-centric? Many organizations think that digitizing contracts is the end of modernizing CLM. While storing contracts electronically and organizing them by folder in a document-centric process is more efficient and secure than a paper-based process, it still limits what you can do with contract data. A data-centric approach, where contracts are structured around key data elements instead of conforming to the structure of folders, enables you to search, report on, and analyze all your contract data by any relationship such as contract types, organizations, contacts, language, dates, terms, and more.
- Do the right people have appropriate access to your contracts and other contractual information? When contracts are stored in multiple places, it’s impossible to govern tiers of access to them. Centralizing contracts in a data-driven repository allows organizations to set role-based and feature-based permissions for enhanced security and accessibility. It’s also important to leverage secure capabilities like e-signature and collaboration tools to carry digital records about who, when, and where a document was negotiated and signed to help with audit trails and ensure version control.
- Were all key stakeholders across your organization consulted on the design of your contract management process? According to a recent survey by EY Law, 59% of legal departments said they were the contract lead, 56% of contracting departments said they were the lead, and 39% of business development departments said they were the lead when asked about who owns contract management at their organization. Clearly there’s a disconnect. Siloing like this happens when not all stakeholders engage during the design of the contract management process. If you are revising your contract management processes, involve all individuals, departments, and branches (in-house legal, legal operations, sales and marketing, IT, finance, procurement, etc.) that touch contracts. If you have a system in place already and are struggling with siloed contracts, reach out to relevant business parts of the business to see ensure their contracting needs are being met, and revise processes to ensure efficient and accurate contract creation and fulfillment can take place.
- Is your contract management system integrated with other systems? Integrating a data-centric contract management process with major systems enables employees to work cross-platform without leaving one system to enter data in another. For example, integrating contract management with CRM systems allows organizations to pre-fill contracts with accurate customer information and feed information about contract obligations to customer accounts. It also helps with business intelligence and reporting accuracy since data can be sent, received, and synced between applications.
- When was the last time you reviewed your contract management process? Contracts and processes are flexible and living things that need to adapt to new outside factors like new and changing regulations, as well as any organizational changes. It cannot be “set it and forget it.” Review your process often to ensure that it is working at optimal efficiency and use the analysis features to adapt any contract management bottlenecks or glitches. This is an important area for benchmarking and tracking process KPIs.
- Are you using automation to help manage risk? Any process that relies on humans leaves your business open to more risk. Automating key pieces of the contract management processes improves efficiency and compliance, while leaving organizations with fewer errors and missed obligations, as well as lower costs. Automation also provides more actionable insights into your overall process and how well it is working.
Contracts are the lifeblood of your business, and contract-related mistakes can have serious repercussions. In addition, the need for digital transformation continues to accelerate and contract management represents an enormous DX ROI opportunity for most organizations. As you head into 2022, now is the time to develop and refine your contract management.
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