Contracts are crucial, but they should not slow down business deals. The business teams work hard on deals. It can be frustrating for them when the contract execution holds up the revenue or the other benefits the deal offers. That’s why every business understands and recognizes the need for fast and efficient execution of contracts. But how can that be achieved?
The answer lies in the fast-evolving Contract Lifecycle Management (CLM) technology. As per recent market reports, companies using an end-to-end contract management system like smartContract could cut the contract execution time up to 42%.
In this blog post, we explore three specific ideas to speed up contract execution using a CLM system:
- Self-Service Contract Creation
In an organization, every time a business team needs a contract, they send an email to the legal department. The Legal department goes back and forth with business, asks questions, and determine the terms and provisions to include in the contract.
With a CLM system, everything doesn’t need to go through Legal. For the most common contracts, the business users can go online, fill in the details of the deal, and answer a set of questions, and the CLM system can determine the best template to use and can automatically generate the first best draft. The business user can send this draft to the counterparty for negotiation. The legal department can only be involved if there are significant changes suggested by the counterparty.
This self-service model not only speeds up the contracting process but will also reduce the burden on the overworked legal department and will allow them to focus on more critical negotiations and legal matters.
- Workflow for Contract Approval
Depending on the magnitude and the complexity, a contract may require review and approval from multiple stakeholders. While that seems like a reasonable and straightforward thing to do, this is probably the biggest bottleneck in contract execution.
In most organizations, the request for review goes to the stakeholders in an email. But the email can very quickly get buried under the pile of other emails, or may not get immediate attention because of the conflicting or more urgent priorities on the stakeholder’s list.
The CLM system workflow capabilities can significantly cut the contract cycle time with the rules-based review and approval matrix. Depending on the nature of the contract, the system can identify the right stakeholders and create the review tasks for them. The system can enforce the timely review by setting the expected turnaround time and then using reminders, notifications, and escalation mechanisms to ensure the timely completion of the contract review and approval.
- Playbook-based Contract Negotiation
A playbook describes a company’s negotiation strategies. It outlines the company’s standard clauses and the negotiation boundaries in the form of alternative or fall-back clauses, as the variations that the company would accept if the counterparty wants to negotiate a standard clause. It also includes the non-negotiable positions where the company would walk away from the deal.
It is easy to assume that every company would have a playbook yet, surprisingly, a recent market survey indicates that the legal departments of only 29% of the surveyed companies use a playbook. One of the reasons for such a low use of the playbook is that it is not easy to develop, maintain, and make the playbook an integral part of the contracting process.
That is where a CLM system can help. The CLM’s machine learning capabilities can analyze the existing contracts and extract the positions the company has agreed to in the past. This information can identify the company’s standard terms and the accepted deviations and can be used to develop the playbook.
Once the playbook is ready, the CLM system can make the playbook readily available to all the stakeholders in the contracting process. With an easy-to-access playbook, every stakeholder develops a common understanding of the company’s standard position on specific contract clauses. This alignment among the internal stakeholders can help in faster decision-making on the conflicting terms proposed by the counterparty. It eliminates the bottlenecks and thus speeds up the negotiation and closure of the contracts.
With these concepts, a CLM system can surely enable the fast and efficient execution of contracts and allow the business teams to reap the benefits of their deals without delays. When implemented the right way, a CLM system can transform every stage of the contracting process. It allows more accurate and consistent contracts, reduces risks, and ensures greater compliance.