As we navigate the current economic downturn, there are a few changes many organizations are already preparing for, such as budget cuts and resource restructuring. Although the unpredictability of a recession can be daunting, it also presents newfound opportunities to optimize spending and improve processes that have a large impact on revenue.
We know that securing budget is often one of the main barriers to purchasing new enterprise tools, and it can become even more of an obstacle in the midst of a recession. However, a CLM solution is one of the few tools that can actually help you identify where revenue is being eroded and potentially recovered. Let’s put some numbers to that.
In a recent study, the World Commerce and Contract Association determined that the average company loses 9% of revenue annually on mismanaged contracts. And the percentage is even higher, up to 15%, for larger organizations. Where is that money lost, you might ask? Well, that income is eroded through contracting pitfalls like slow negotiations and missed milestones.
But it isn’t just lost revenue at stake when contracts aren’t properly managed. The Journal of Contract Management found that up to 71% of companies aren’t able to find 10% or more of their contracts. When you can’t locate the agreements that memorialize your legal obligations, you open yourself up to significant risk and exposure. You may miss obligations, contract renewals, payment milestones, and other important deliverables.
So if these are some of the most common contract management problems, how can a CLM help you avoid them when it matters most? Here are three ways a CLM can equip your organization to overcome economic challenges:
#1 Improve contract collaboration to accelerate cycle times
Taking a self-service approach to contract drafting can save valuable time and minimize friction between teams. When business users across the organization can seamlessly access pre-approved contract templates and clause language based on their role and security permissions, there’s no guesswork or reliance on other teams to slow down the process. These features play a large role in speeding up both the drafting and review stages of the contract lifecycle by standardizing common agreement types for your business. If time is money, then accelerating contract cycle times is key, as this process alone will save money and time to revenue.
#2 Automate obligation tracking to recover revenue & unwanted costs
Keeping up with contract milestones manually can be daunting if not impossible. A CLM solution can help you automatically extract key milestones and events from all of your agreements and trigger notifications to the appropriate people ahead of time. Bonus points if the solution will also let you add in your own reminders and events along the way as needed. If you’ve been a victim of a surprise auto-renewal before, then you know how frustrating it can be when you lose your chance to negotiate more favorable terms and pricing before the agreement begins again.
#3 Reduce manual contract review
In the average organization, one legal resource supports $250 million in sales. What does this mean? Sales teams relying on legal for getting agreements drafted and approved can feel like legal is a bottleneck. But on the other hand, legal feels like the amount of work placed on them is unreasonable, and the tedious, manual review tasks they are involved in limit the amount of time they can spend on larger, more strategic initiatives. Creating a scalable contract review process is not the same as creating a flawless process that accounts for all scenarios. Perfection is not the goal. The objective for organizations to focus on is assuming smart risks and minimizing unwanted exposure by standardizing the processes that are more predictable and consuming too much of the legal team’s time. The truth is, if an organization cannot or will not assume smart risks, the business will be directly impacted, sometimes even by avoiding legal and managing contracts without proper guidance. In a world where we are all being asked to do more with less, a CLM solution can provide much-needed relief without increasing headcount.
We hope this has provided you with a greater understanding of how investing in a CLM can support your organization by protecting margins, optimizing revenue, and making contract management processes more efficient. Learn more about how our customers are using Malbek to save valuable time, reduce risk, and accelerate revenue in this infographic.