Simplifying Contract Management: The Importance of CLM in Business

What is CLM?

Contract Lifecycle Management (CLM) is a process central to any field that relies on contracts. Effective contract management can help companies across several industries, including manufacturing, telecommunications, technology, healthcare, and finance.

It enables the client to track and manage contract performance, execution, and compliance while achieving milestones at every step. Thus, contract lifecycle management solutions help manage contracts end-to-end, starting from execution to expiration to renewal.

Stages of Contract Lifecycle Management Process

Importance of CLM in businesses

Industries must comply with stringent standards and regulations to avoid data and privacy breaches and cyber-security violations. It becomes even more essential when it comes to implementing digitization initiatives.

Another big issue is the lack of understanding of Service Level Agreements (SLAs), which leads to customer dissatisfaction. XaaS-based businesses further fuel this dissatisfaction due to heavy competition and fewer entry barriers.

Similarly, there’s a rise in businesses adopting the Direct-to-customer (D2C) business model, wherein products are delivered directly to the end customer by eliminating the intermediaries. These D2C enterprises have to concurrently manage a large volume of contracts as they scale up, which carries potential business risk if not handled carefully. Contract lifecycle management tools help such organizations efficiently manage contracts by ensuring the right terms, timelines, and regulatory compliance requirements.

The leading businesses across various sectors are realizing how essential contract lifecycle management solutions are in this circumstance.

Need for CLM

Businesses/enterprises across various industries face some challenges with the conventional form of contract management. Some commonly faced challenges are non-standardized legal language, excluding significant clauses, unaligned business processes, dependency on manual processes, inadequate visibility, absence of regulatory compliance processes, etc.

Contract lifecycle management tools automate and streamline the contract process throughout the different stages, including initiation, authoring, process and workflow, negotiation and approval, execution, and renewal. CLM product offers services like contracts analysis (manual/ digital), contracts centralization, contracts migration, e-signature setup, etc. There is also scope for defining responsibility, performance metrics, and business processes with automation.

Contract lifecycle management is significant and the backbone of any enterprise. Hence, using cloud-based CLM tools can help drastically improve an organization’s performance and efficiency.

Benefits of CLM to different teams

Legal: Legal teams are swamped with manual contract review, redlining, compliance checks, etc. This often leads to overworked lawyers making human errors. By adopting CLM solutions and automating the legal process, legal teams can maximize productivity and ensure compliance with the latest regulations.

Sales: Using a cloud-based CLM tool streamlines the entire contract creation and negotiation process, enabling the sales teams to close deals quickly and accelerate sales. By eliminating manual processes, the sales teams can focus on driving revenue, meeting sales targets, and reducing cycle times.

Procurement: The procurement team benefits from implementing the CLM tool as it simplifies the entire procurement process. It helps in the optimal management of vendors by analyzing and identifying the most reliable vendors. Further, it eases reorders from previously established vendors.

Application of CLM

Buy and sell side: In an organization’s buy and sell sides, CLM reduces variations and enables alignment in the legal and administrative processes. It integrates similar upstream or downstream like CRM or ERP systems by using simple links and terms that buyers and sellers can reuse in less time and more efficiently. Another example is that it allows easy access to several budgets simultaneously to cover the team’s implementation cost. The adoption of CLM solutions lessens time-to-sale, increases sales efficiency, and mitigates corporate threats.

Employment contracts: CLM automates workflows by breaking the contracts into metadata fields, such as name, date, and wage. These data fields make word searches easier. Records are conveniently accessible based on various parameters or search employees with non-standardized clauses. With automated workflows, employment contracts become easier for everyone to use and understand. This saves organizations from rogue contracts.

IP contracts: Creative works, such as patents, trademarks, copyrights, and other intangible creations, are referred to as Intellectual Property (IP). The formal process to gain IP rights includes IP registration, approval, and maintenance stage. The steps are complex and differ based on the type of IP that one is dealing with.

Implementing CLM solutions makes tracking such as fees, consulting, testing, trials, and certifications easier and more viable. The CLM solution offers reports to monitor the next steps, filings, and related obligations. It integrates with many other software systems, easily track the data fields necessary, store related documents in our IP record, search, workflows, and alerts, and make the legal duty of tracking IP much easier.

Corporate contracts: The contract template is an essential part of the CLM process. These are standardized formats of various contracts which are customizable as per need. This means that CLM incorporates facets of all kinds of corporate contracts in a ready-to-use manner. This allows for faster drafting and decreases human error.

Conclusion
LTM provides cloud-based CLM solutions that are designed to efficiently solve every part of a contract life cycle while aiding various teams of an enterprise. However, every organization’s unique challenges, requirements, and budgets require leaders to find CLM applications that meet their needs. Stay tuned for an upcoming blog on Contract Template: Prominent Element of CLM.