Contracts are a common sight in business today. But ignoring their challenges and problems won’t help you address the inefficiencies, primarily if your business deals with a high volume of them. Ineffective contract management costs businesses more than $153 billion yearly (Business Wire).
Common CLM Challenges
Contract Lifecycle Management (CLM) follows a contract throughout its entire lifecycle, from creation to execution to expiry. The process includes tracking key dates, obligations, and T&Cs, as well as ensuring legal and regulatory compliance.
CLM plays an essential role in the success of a company. It unlocks critical, crucial data within contracts making the information accessible and useable. Businesses with an effective CLM solution address their contract inefficiencies and see company-wide benefits. It can help companies to mitigate risk, improve compliance, and increase overall efficiency by digitising contract workflows into an automated, collaborative process.
But contracts span multiple departments, and managing a contract from pre-signature creation to post-signature renewal with various stakeholders can cause problems, especially when they don’t have access to one unified system.
To help businesses improve their contract lifecycle management process, we have provided the top five most common CLM challenges and methods to overcome them.
Contracts are documents full of rights, obligations, T&Cs, key dates, and deliverables for the contracting parties. Businesses rely on contracts to understand and fulfil their duties and to resolve any issues that may arise. But It’s not uncommon for companies to lose their contracts or not know where they’re stored.
90% of contracting professionals admitted they face difficulties finding their contracts (EY Law Survey). Companies often store their contracts in multiple locations - in filing cabinets, drawers, local drives, and the cloud. In fact, 55% of sales contracts are not searchable from a single user interface (DocuSign).
But storing them in one place doesn’t solve the challenge of knowing what’s in them. Businesses spend significant time searching for specific agreements, clauses, and dates.
For businesses to remain ahead, the contract must be managed effectively throughout its lifecycle to ensure party compliance. CLM software will address these inefficiencies. With a CLM solution, businesses get a central, searchable repository, allowing users to retrieve contracts and critical information seamlessly.
Summize’s CLM solution is no different. Businesses can easily manage their contract portfolio at the click of a button. The dynamic repository provides enhanced, instant summaries for every contract, providing intuitive insights into crucial data.
Lack of Standardisation
The need for contract standardisation can pose challenges for businesses. Standardising contracts involves creating and offering a consistent package of terms and conditions and replicating this across all agreements. But many legal teams find themselves buried in manual paperwork, leaving them little time to implement standardisation procedures. The nature of manually creating contracts is time-consuming, putting pressure on the already stretched legal resource.
A contract must be concise and clear for businesses to be able to comply with its terms. So, a lack of standardisation makes it more difficult for the parties to comply with the obligations and requirements, leading to friction and delays in the negotiation stage for the parties.
With a CLM tool, businesses can improve speed and compliance on pre-signature contracts by allowing the wider industry to self-serve contract creation from a library of legal content. And with Summize’s integrated CLM, the user interface is built within Microsoft Teams or Slack, meaning that even commercial users can ensure they’re using standardised contracts.
With Summize, users can create contracts in less than 2 minutes in a standardised format set by legal.
Legal teams have long struggled to improve the accessibility of their contract portfolio to the wider business. It’s proved problematic when every department has a set of unique systems they already use. And all departments face unique challenges regarding contract visibility and compliance.
Contract compliance has always been a business-wide issue, not just for the legal team. Marketing needs to track auto-renewals and expiry dates to ensure they are not surprised by unwanted purchases. Finance wants access to critical numerical data to produce accurate spending forecasts. Sales teams want to ensure their agreements contain the most up-to-date company terms and clauses. Legal teams want to ensure that every live contract is company ad legal-compliant.
Therefore, it's critical for all departments that work with contracts to have unparalleled access and visibility into their contracts. They then can carry out duties against a legal backdrop but with full accessibility into their contracts.
The first step in improving contract visibility involves creating a single source of truth where users can search for essential information. Contracts that can’t be located or searched make the data inside them of little value. CLM software will address these issues by creating a searchable and centralised repository for your contracts.
Many things can slow down contract processes, but nothing as much as reviews. Contracts are full of complex language, terms, and obligations, all of which need to be assessed and negotiated to mitigate risk and maximise opportunity.
Legal teams often must manually review countless agreements, page by page, line by line, to spot any risks within the contract. CLM solutions will accelerate your contract reviews, speeding up cycles and removing risk. Most modern solutions use Artificial Intelligence (AI) to speed up reviews, providing legal teams with accurate summaries and allowing them to make better-informed business decisions.
Contract security typically means protecting the contents of the contract from external threats. After all, contracts contain vast amounts, if not all, of your business's sensitive data – from salaries to payment details and termination rights. So, it’s crucial to ensure they are safeguarded.
Most businesses will have measures to protect access, such as firewalls on emails, password requirements and internal storage systems. But businesses need to pay more attention to contractual threats such as non-compliant contracts. Addressing these issues requires cross-department collaboration. It’s not as simple as merely limiting access to the individual. Clear responsibilities should be established for each step of the contract’s lifecycle.
Today, most modern CLM solutions have built-in automated workflows. This allows the contract to be tracked and accelerated across each stage of its lifecycle, with clearly defined responsibilities.
Approaches to Addressing CLM Challenges
Manual contract management has long been an overdue change – and for years, in-house legal departments and first-to-market legal vendors have had a different take on how to do this.
In-house house teams have put processes in place, such as a company playbook to improve standardisation and a shared inbox to deal with legal requests from the wider business. But these processes sit outside the contractual workflows, failing to gain momentum from the wider industry.
Legal tech vendors have flooded the market with contracting solutions, all with a different take on effectively managing contracts – with most either focusing on the pre-signature or post-signature stage of the lifecycle.
Many tech vendors focused on the post-signature stage of contract storage and the recording of crucial metadata, such as renewal dates and critical terms. Still, these contract management solutions didn’t address pre-signature challenges like standardisation. Whereas workflow and automation tools focused on pre-signature challenges, addressing issues such as contract creation, approvals, and e-signatures – disregarding the data altogether.
The Power of CLM Software in Overcoming Challenges
Contracts are complex business documents, and as time goes on and regulations and laws change, they will only become more challenging to manage. The integrated CLM from Summize takes a different approach to the end-to-end contract lifecycle management process.
Legacy CLM tools are challenging to implement and require a change in working habits, resulting in a lack of user adoption. Technology won’t solve your contracting challenges without user adoption across the business.
Summize implements the solution into your existing tech stack and workflows, using Microsoft Teams, Word and Slack as the user interface to ensure maximum user adoption and utilisation by legal and commercial users. This integration-first approach is designed for the most complex contracting challenges by creating an end-to-end collaborative workflow that makes contracts relevant to the entire business.
Benefits of the integrated CLM:
- Shorter contract cycles
- Accelerated contract reviews using AI
- A central and searchable repository
- Faster path to revenue
- Enhanced workflows
- Improved cross-departmental collaboration