Every company manages their contracts differently.
Some companies manage dozens of contracts, while others manage thousands; and during negotiation, some may require multiple departmental approvals, while others only require one. However, they can all benefit from contract lifecycle management (CLM) solutions and the reduced risks and faster contract execution they offer.
But if no two companies manage contracts the same way, how do you know if a contract management solution is right for you?
Here are three warning signs that you may be overdue for a contract management solution:
Lost or Inaccessible Contracts
If you spend hours rummaging through filing cabinets, scouring hundreds of emails, or sifting through folders on a shared drive to locate contracts, consider this a contract management red flag — and a common one, too: 71 percent of companies misplace 10 percent of their contracts, according to the Journal of Contract Management. But why is this so problematic?
Contract inaccessibility is a challenge for numerous reasons:
- Compliance: Violating contract terms can have disastrous financial consequences for your business. And without a centralized contract storage system, it’s difficult to keep track of your contractual obligations and ensure you’re not overlooking any terms.
- Scalability: Antiquated storage systems might work if you only have to juggle a few contracts. But when you manage hundreds, or even thousands, of contracts, these systems are no longer sustainable. Manually searching for your contracts — if you can find them at all — will hinder productivity and consume valuable time.
- Version control. When you locate your contract, how can you be sure that you have the latest version? Redlining and revisions are inevitable during the contracting lifecycle, and without proper version control, you may be referencing inaccurate or outdated information.
How a contract management solution can help:
Modern CLM solutions offer centralized, cloud-based contract repositories so you can access the right information, at the right time, with just a few clicks. Some AI-based contract management solutions also offer powerful search functionality, so you can compare terms across your contracts, like payment terms, force majeure or termination clauses.
Revenue Leakage
Have you ever accidentally auto-renewed a contract you intended to cancel? Or missed a contract expiration date, leaving a gap in services? Have you missed opportunities to cross-sell, renew, or renegotiate better rates?
Ineffective contract management processes can cause companies to lose between 1 and 5% of EBITA, according to EY. The more contracts you manage, the easier it becomes to miss renewal deadlines, incur payment fees, and fall victim to human error.
Human error, in fact, was the center of a legal dispute between Rogers Communications and Bell Aliant in 2006, where both companies fought a legal battle worth $1 million (CAD) over a misplaced comma. While grammatical errors are unlikely to cost you millions, this example illustrates an important point: Your contracts are the lifeblood of your business, and mismanaging them can be financially devastating.
How a contract management solution can help:
With a CLM platform, you can set automatic alerts warning you when a contract is up for renewal or about to expire. You can also save searches for information you track regularly, ensuring you seize every opportunity to renegotiate and continue services. And, with the contract repository mentioned previously, you can search for attributes like Evergreen clauses to prevent unwanted autorenewals, or fee increases to renegotiate lower costs.
Slow Contract Execution
It takes approximately 20-30 days for a company to create, negotiate and execute a contract, according to Aberdeen Research. But if your contracts tend to get stalled during negotiation, or you simply have a hard time keeping pace with the volume, the lifecycle may be much longer — and this is a good indicator that it’s time to upgrade to a CLM solution.
Be critical about each stage of your contract lifecycle: When you receive a contract request, how long does it take before the requestor receives a first draft? Do your contracts tend to get stalled in a specific stage, and if so, what’s the bottleneck? When you send a contract out for signature, how long does it take to receive it?
Slow contracting processes have a domino effect: When a contract gets stalled in one stage, it pushes back the timeline for every subsequent stage. And the slower your process is, the more it jeopardizes your relationship with the other party and prevents you from bringing revenue in quickly.
How a contract management solution can help:
Intelligent contract management solutions can cut your contract lifecycle in half by introducing self-service capabilities, streamlining approval workflows, and integrating with tools you use every day. And with eSignatures, third parties can securely sign contracts from any device, all within the platform — no separate tool required.
While misplaced contracts, revenue leakage, and slow contract execution are three major indicators that you need a contract management solution, this is not a comprehensive list. Schedule a demo to learn how you can accelerate your contract management processes with a CLM solution.
