Increasing Business Productivity by Utilizing CLM Automation

WHAT IS CONTRACT LIFECYCLE MANAGEMENT?

Contract lifecycle management refers to the management of each and every step in the life of an organisation’s contracts, starting from the initial request, continuing through the process of negotiation, execution, and ending finally at the expiration or renewal of the contract. Efficient utilization of CLM automation tool streamlines and optimises every step in a contract lifecycle, consequently increasing business productivity and leading to overall organisational growth.

Traditionally, legal teams and General Counsel have been responsible for the efficient and timely completion of the contract lifecycle, so much so that the management of contracts often ends up consuming a major chunk of their time. Until a decade ago, the entire process of execution of a contract, from the initial offer to the final signature, would take anywhere between a couple of weeks to over a month. Overseeing the drafting of contract templates, participating in series of negotiations, as well as managing performance obligations and timelines simultaneously, legal teams often found themselves unable to devote time to many other important tasks. Moreover, not only were lawyers juggling multiple tasks, most of these tasks were highly time taking and repetitive in nature. Thanks to technology enabled automation, this entire cycle has been reduced to a fraction, with a substantial increase in accuracy.

HOW CAN LEGAL TEAMS ADD TO A COMPANY’S PRODUCTIVITY?

Within an organization, the legal department is often referred to as the “fire-fighting division”, called in to reduce damage and efficiently resolve disputes by ensuring minimum financial loss to the company. However, in the last two decades, Legal Departments and General Counsel have been playing a more proactive role in the growth of the company by protecting against potential risk, reducing missed obligations in the execution of contracts and increasing compliance. This is at marked variance from the earlier reactive mode that used to be in prevalence amongst corporate legal departments.

01. Risk analysis and pre-contractual due diligence

As legally binding documents, every part of a contract must be thoroughly analysed for any loopholes or potential risk. For example, a loosely drafted indemnity clause can cost a company thousands of dollars in legal fees alone. Additionally, it also falls upon the legal department to secure the company’s interest by conducting a comprehensive background check of the opposite party and its credit rating, checking for instances of non-performance in the past. As such, the legal department plays the role of not just an advisor, but also that of a protector, saving the company from major losses.

02. Reducing contracting bottlenecks, facilitating transactions and aiding collaboration

Every contract requires the participation of multiple stakeholders across departments and organisations, and it falls on the legal team to ensure the smooth coordination amongst all these participants and bring a contract to fruition. Right from the initial request for contracting to template authoring, negotiation and version tracking, contract review, approval and contract execution, including real-time contract updates, it is the job of the General Counsel to ensure efficient communication between parties. In this regard, a cloud-enabled CLM platform is advantageous to streamline contract process by enabling teams to collaborate with external stakeholders, clients/suppliers and ensure that each team member knows about what is happening within the organization.

03. Efficient compliance and obligation management

The job of the legal team does not end with the execution of the contract; ensuring due contract performance and fulfilment of compliance obligations is an equally important aspect of the same. A company stands to lose millions of dollars on a single missed deadline, and it is the responsibility of the General Counsel to ensure that all contractual obligations are met timely and in due form. Needless to say, this requires a thorough system of auditing, regular compliance checks and a robust mechanism of follow up and timely updates from all departments. While all these tasks were performed manually in the traditional in-house set up, intuitive CLM solutions offer integrated audit trails and task management capabilities, enabling legal teams to stay on top of all contractual performance and compliance obligations.

UTILIZATION OF CLM FOR INCREASING BUSINESS PRODUCTIVITY

For any company, the efficient management of contracts helps in increasing the productivity in each stage of the contract lifecycle, by decreasing bottlenecks, reducing the turnaround time and minimising risk or potential loopholes. A comprehensive contract lifecycle management solution has the ability to significantly increase business productivity by streamlining each step of the contract lifecycle. Let us dive into a little detail about what this looks like in day-to-day functioning-

Standardising key terms and processes: A well rounded CLM solution enables legal teams to reduce the time spent in contracting by optimising contract creation through efficient template authoring. Regularly used contracts like NDAs, service agreements etc can be easily templatized and stored in a standard format, so that creating the same contract a second time is as simple as filling in the key dates and party information. Razor365 offers an exhaustive clause library and template manager, thus reducing the time spent in contract creation by more than half.

Quick turn around and execution time: One of the most time-consuming steps in the contract lifecycle is the negotiation-approval-execution stage, as it involves constant dialogue and multiple versions of the contract template. CLM automation cuts this down in a two-fold manner. First, it provides a common platform to the parties for carrying out negotiation and contract review in a streamlined manner, by tracking additions and deviations from the rulebook. Secondly, by integrating an E-signature tool into the workflow, it effectively reduces the time taken in contract execution.

Centralised contract repository: Containing key details, facts and figures of every single transaction of the company, its contracts are a goldmine of data that can be harnessed to provide valuable insights into opportunities for growth. CLM automation tools enable companies to store all executed contracts at a central, easily accessible place. Decision making becomes increasingly efficient, as all required information can be easily retrieved by using a simple metadata search or customisable filters.

Easier performance, reducing missed obligations: One of the biggest advantages of CLM automation is its seamless integration with various core business processes, relieving legal departments from the task of constantly sending reminders for performance or renewal before contract expiry. For example, Razor365 combines task management with a constantly updated workflow dashboard, so that legal teams have a strong grip on what has been accomplished, and what needs to be accomplished. Staying informed helps companies avoid potential risk and take proactive steps for any future issues.

The efficient utilization of CLM automation tools like Razor365 enables legal teams to reduce the contract turnaround time by integrating the various steps in a contract lifecycle on a single platform, while simultaneously reducing human effort and error. Today, end-to-end CLM solutions for legal department are streamlining and optimising the entire process of contracting, so that General Counsel and legal departments are able to add more value to the company’s growth and business productivity. Faster timelines, informed decision making, increasing compliance, and efficient risk mitigation when combined, this efficient management of contracts is bound to lead a company to greater productivity.