Why You Need Contract Lifecycle Management Solutions

Contract lifecycle management solutions: An introduction

Contracts underpin every commercial relationship and determine how you run your business. Organizations that don’t manage their contracts effectively are at a tremendous disadvantage. While it may not be apparent at first, it only starts to become visible when it fails. At this stage, costs mount and the company’s reputation may be jeopardized. Contract lifecycle management solutions are like an insurance policy. You are happy to have one when it covers disasters. The difference is that it also pads your bottom line. See how:

- - Poor contract management can lead to the loss of more than 9% of a company’s annual revenue
  - Errors and oversight in the contract management process by the legal team can mean a 40% loss in the contract’s value (KPMG Survey)

A company that doesn’t pay attention to the contract process pays too much attention to the things they buy, doesn’t collect all revenues, takes too long to negotiate, and wastes resources on routine admin. Businesses today are more complex, more diverse, more interdependent, increasingly multi-national, multi-currency, and cross-functional. The role of contracts in businesses is changing from systems of record to systems of intelligence. When it’s not properly managed, there’s a lot of money left on the table.

Real-world cases of poorly managed contracts

“Organisations will benefit if they recognize contracting as a ‘process.” IACCM

1. Regulation cycle and compliance systems: Businesses with compliance-heavy work. Especially the ones in health & safety, environmental protection, and corporate governance. 2. Hidden operational risks: Imagine a manufacturer with a history of litigation who is also afraid of commercial risks. 3. Non-compliance: A company that supplies product liability obligations must ensure corresponding liability is passed on to suppliers. All contract terms must be passed on to sub-contractors. Audit trails for third parties who demand visibility of contracts as part of risk management. 4. Contracts that roll over without re-examination: Contracts that are not reviewed properly, 1 in 4 times, represent a potential opportunity to reduce costs. Examples: equipment maintenance fees paid for discarded equipment or software seat licenses paid after employees have left. 5. Revenue leakage: on account of incorrect pricing, misapplied deductions, providing customers with more than they pay for, non-compliance with the sell side, failure to deliver the correct quantities on time, forced refunds, or further discounts to compensate for a poor customer experience. 6. Gross inefficiencies: Administrative inefficiencies relate to workflow, access to information, and the need to know what must be done and by whom. This rakes up admin costs, opportunity costs, and a bunch of dissatisfied customers. Sometimes, contracts go through multiple revisions before they are printed and executed. This costs the company two months’ cash flow with inefficiency in accessing information about what has happened so far.

Risks caused by poor contract management

- - Contracts without critical terms
  - Loss of contract documents or files
  - Missed contract deadlines and commitments
  - Undercharged customers
  - Overcharged vendors
  - Inefficiency in time and productivity
  - Uncontrolled impact of external events and new regulations
  - Lack of a competitive moat
  - Compromised customer loyalty
  - Gaps in knowledge when employees leave

The keys to streamlining the contracting process is to assign ownership, define the process, get a central repository, and get tech support.

Are contract lifecycle management solutions an expense or an asset?

Legal teams are generally perceived as cost centers rather than strategic thought partners. But there is no revenue without the legal process. Conversely, there is no revenue and no legal team. Senior executives and the board care about industry-standard metrics like gross renewal rate (GRR), net renewal rate (NRR), logo churn, annual recurring revenue (ARR), and quarterly bookings. All these metrics are derived from individual teams. Like:

- - HR: Candidate close rate
  - Marketing: Marketing engaged lead (MEL) or sales accepted opportunity (SAO) conversions
  - Finance: Bookings, revenues, dollars renewed or cash burn
  - Support: Health score across customer-based, customer churn, and renewal rates
  - Product: CTR, growth in usage, feature use case penetration, behavioral differences between segments

Each of the above teams has KPIs with watertight deadlines. And legal teams have to make sure that every contract signed is sound and free from red flags that could place the business at risk. To offer the best value to the wider business, it’s important to make sure your legal team is empowered to help other teams hit targets and close deals. Enter . It is a solution that helps businesses manage the entire contract lifecycle—starting from drafting and signing to extracting data from the contract—by completely automating and streamlining the contract workflows, resulting in:

- - More productivity for the legal team
  - Accurate, real-time data
  - Cost-effectiveness
  - Better ROI

Contract lifecycle management solutions reduce the workload of legal teams, giving them more bandwidth to focus on the strategic and analytical part of contract management rather than the time-consuming and often cumbersome data entry, tracking, and contract redlining processes.

Contract lifecycle management solutions: Nice-to-have or need-to-have

“Senior managers state that improvement from contract management would contribute to better risk management (69%) and reduced costs (89%)—both items high on the executive agenda. A smaller but still significant 23% believe that it would also lead to higher revenue.” IACCM

Contract lifecycle management solutions are no longer a “nice-to-have” tool in an organization’s tech stack. Data strongly suggests that it has become a crucial part of it, especially for businesses in these industries:

- - Tech companies (irrespective of whether they’re B2B/B2C, product/service)
  - Consulting service providers
  - Media and entertainment
  - Talent acquisition and employee management
  - Manufacturing

That said, every system you adopt, CRMs, SRMs, ERPs, or CLM, is crucial to how proactive you are. If these systems are too inflexible and do not cope with business realities, they can cause serious limitations to how you run your business. Your contract lifecycle management solutions should bridge the gaps between the above teams and systems. This allows you to relate purchase orders to original contractual specifications and payment terms specific to each stakeholder partner, like what to deliver, when, and what has to be paid. For companies looking to manage complex contracts involving the board, legal, finance, and specialty vendors, their CLM software needs a suite of flexible solutions with a wide range of features.

What has AI got to do with all this?

Several organizations are collaborating with CLM partners to catalyze the digital transformation process. Ineffective contract management can cause businesses to lose between 5 and 40% of the contract value on a given deal. Depending on the circumstances, businesses can forego rebates, volume-based discounts, and inflation-triggered pricing adjustments on the table. You can change all that with AI-powered contract intelligence. Data embedded in contracts can be used to automate business processes. A competitive contract lifecycle management solutions can tap into this data to offer CxOs the ability to unlock critical business insights around:

- - Cost savings
  - Revenue leaks
  - The delivery of ESG commitments
  - Compliance failures
  - Contract risks
  - Governance of entitlements and obligations

Here’s how.

Contract lifecycle management solutions post-execution

1. One source of truth: Ask, and it shall appear. That’s how it works with contract lifecycle management solutions. Legal teams no longer need to spend 30 minutes each time they are looking for a contract. This means a significant reduction of manual effort, instant access to well-organized contracts, secure storage, and a reliable, sustainable system of contract management. With HyperStart:

- - Establish one single source of truth through a centralized repository with one-click imports from multiple sources.
  - Leverage contract AI for metadata extraction, minimizing the need for manual data retrieval.
  - Effortlessly retrieve or filter contracts based on specific information like logo usage permissions, expiration dates, contract value, liability terms, termination for convenience, etc. within seconds.

2. Analytics to track renewals: All the impossible benefits we’ve been promised with AI and other emerging tech won’t take off the ground without robust data. Without analytics, it’s hard to prove you need these tools, how they work, and in which areas you’d use them. With HyperStart,

- - Never miss a renewal again with automated reminders to the relevant individuals. You prevent costly auto-renewals.
  - Access a comprehensive dashboard to analyze business risk and improve visibility across teams.

Contract lifecycle management solutions pre-execution

3. Create contracts in minutes: 69% of lawyers feel buried in low-value work. AI can speed up the contract drafting process with robust templates. Eliminating the need for lawyers to draft low-complexity, high-volume contracts from scratch. This offers consistency with default terms and low contractual risk. With HyperStart,

- - Empower business teams to self-serve contract creation with pre-approved templates.

4. Close contracts faster: Businesses can leverage contract AI to close deals faster with streamlined approval workflows for high-risk contracts. Automated reminders for important dates can also identify bottlenecks and blockers to fast-track the review process. With HyperStart,

- - Smart assist: Review counterparty drafts or redlined versions with AI for faster turnaround.
  - Track ongoing negotiations and open action items on one platform to enhance efficiency. Automate approvals, version control, and maintain detailed audit logs.
  - Execute contracts simply with one-click stamping and signing options. Track counterparty signatures effortlessly, Integrate seamlessly with DocuSign or AdobeSign.

5. Analytics to optimize contracting: Besides automated contract intelligence that helps legal teams understand where the bottlenecks are, pre-execution analytics identifies patterns and behaviors of stakeholders. The end of their strategic work isn’t to meet a deadline. This gives lawyers and contract owners a clear picture of what to focus on during the negotiation process. With HyperStart,

- - Track metrics like time spent in review, number of turns, etc., leading to refined negotiation strategies and improved review processes.
  - Configure workflows for faster contract turnaround times.

Learn more about HyperStart AI

HyperStart’s AI-enabled contract collaboration platform empowers your legal and non-legal teams to create, agree, manage, and close contracts faster and in one central space. Our cutting-edge AI models are trained on over 8 million documents. If you’re evaluating CLM vendors, read more here.