What is CLM? Why is it important?
Contracts are important as it acts as legal proof between the involved parties regarding the terms that have been agreed upon at the time of signing. They are especially more crucial for businesses, as it helps safeguard their various interests. The types and variety of contracts used by companies will vary according to their need. Yet still, whether it is protecting their intellectual property, partnering up with another business or simply signing on employees; the volume and task of getting it all managed is one that requires close attention and careful management.
When contracts are not well managed, various issues arise and it ultimately leads to a loss of revenue for the company. A smooth and well-managed contract management system ensures that your legal bolt is strong and secure, so you’re always on your A game. Apart from being time-consuming and draining, one of the biggest problems that contracting pitfalls can lead to has to be the loss of revenue.
Common Contracting Pitfalls:
Let us discuss a few common contracting pitfalls:
- Lack of Clarity: Oftentimes, the legal jargon in a contract can make the scope or the end goal of an agreement quite complex and unclear. Further, at times there is a lack of general understanding of what the contract’s end goal itself is.
- Equal participation: both parties in a contract must be on the same page to get a contract finalized. They should talk, negotiate, and finalize the document after they are certain about the terms and conditions, however, if the process is not managed well then there is an uneven level of involvement, and it could escalate to various issues. Further, if there is no transparency between the parties, one party could end up taking advantage of the other.
- Difficult handoffs: most contracts are usually drafted and prepared by legal teams but are again presented to another team to implement and finalize it. The gap between those drafting it and those who have to sign it can leave one party confused and curious while the other is on hold waiting for finalization. Ultimately it ends up delaying the process of finalizing the contract.
- Loss of Revenue: At the end of the day, the biggest problem has to be the loss of revenue that all of these drawbacks lead to as an unclear contract that has not been drafted in agreement and with equal participation will cause misunderstandings and delay the finalization of the document or in some cases, just cause a party to withdraw. Hence, having a Contract Lifecycle Management system in place is very important for businesses. For instance, a healthcare organization can benefit greatly from a Contract Lifecycle Management system that integrates with a healthcare revenue intelligence platform to ensure compliance and maximize revenue.
What is CLM? Why is it important?
Contract lifecycle management, also known as CLM involves automation and streamlining of the contract process for more efficient and effective contract management. It covers the process right from the initiation until the renewal. CLM is implemented by setting up general templates that have a common, consistent language. The documents are repeatable, and it improves the efficiency of the process and reduces administrative costs.
Further, one of the biggest advantages of having a CLM has to be that it allows one to receive notifications and alerts on the status of contracts. All contracts are drafted with a specific time in mind, and at times, they require timely updates, renewal, or revisions. When done manually, there is a higher risk of human errors for this. However, with a CLM all of this is automated and rather simple.
Modern CLM practices vs. traditional ones
The use of advanced technology is the biggest difference in CLM practices. New CLM practices, avert the losses caused by contracting pitfalls that are caused by traditional measures.
Automated CLM systems such as Zegal, help eliminate inefficiency completely by bringing people and documents together, at the same time, in the same place. The entire processes traditionally take longer as people need to plan to get together, review, edit, negotiate, change, and go back and forth and all these communications are expensive, time-consuming, and exhausting as all changes, need to be recorded manually. Modern CLM practices automate all communications. For instance, Zegal’s CLM allows all parties to edit, negotiate, comment, and make changes to the same document in real time. Forget expensive coffee meets or long call exchanges to finalize a document, just work on it and wrap it up with ease.
Singing is also much easier as modern practices stray away from ink and paper. Rather, they gravitate towards e-signatures which are again legally just as efficient. Another great save that modern CLM offer is on the front of the resource. Automated documents mean that it is easy, and you don’t need someone to repeatedly do the same thing again and again. Saving you precious human resources.
Conclusion
All in there are great reasons to move towards a more modern Contract Lifecycle Management practice and one of the most crucial ones has to be to mitigate human errors CLM also greatly encourages collaborative work and brings everyone to the same zone while also allowing for comments, reviews, and discussions with ease. All in all, it promotes effective communication reduces errors and helps make the loss of revenue due to contracting pitfalls.
