Key Contract Lifecycle Management Challenges And Their Solutions For 2022
There have been many developments in digital solutions for contract management over the past few years. The global CLM market could reach $ 3.84 billion in valuation by 2026. But contract lifecycle management hasn’t been without its problems. Understanding these challenges will help us find the right solutions to those issues and increase revenue and lower costs.
Why is it important to be aware of the key contract lifecycle management challenges?
Contracts are undoubtedly a crucial part of business and organization management. Up to 70-80% of business operations are governed by contracts. So the way leaders, managers, and employees handle contracts will greatly affect the company’s overall efficiency. There are a lot of steps that go into a contract lifecycle, namely:
- Contract creation
- Contract approval by all parties
- Contract revision
- Contract signing
- Contract execution
- Contract archiving
Many times, it takes one misplaced or poorly executed contract to create a ripple effect across the company. That’s why using contract lifecycle management software can be extremely helpful. Let’s look at some of the benefits of contract lifecycle management:
Legal protection — Having the right documents in place protects all parties from any misunderstandings or legal issues in the future. We’re past the age where handshake agreements are the best way to conduct any business, whether it’s a transaction, employment agreement, or anything of a legal nature— which is virtually a large majority of any person-to-person agreement.
Productivity — Using any technology that automates tasks and streamlines rollout can help save significant time and energy that could be reverted elsewhere. It’s no secret that professionals jump between different roles and responsibilities throughout a workday. By delegating contract management to technology, employees can focus on other work that could provide more results.
Streamlined operations — The productivity that contract lifecycle management brings doesn’t just affect the individual. It affects the organization. There are many issues that add unnecessary weight and burden to the organization. Companies operate in silos and have faulty systems that slow down tactical operations. By using technology, teams can speed up processes and achieve more together.
Collaboration and confidence — Because contracts can sometimes take so long to accomplish, some deals or collaborations tend to happen without them. But that can raise confidence issues as people often feel they have to “tiptoe” through a project or relationship. With a contract in place, people have more confidence given that boundaries and stipulations are better enumerated within an agreement.
The most common challenges contract lifecycle management is expected to face in 2022
Contract lifecycle management is nothing new. We’ve found better ways to do it over time too, but there’s still room for improvement. So what are the common contract management challenges and practical solutions to solve them with CLM software? Here are six key challenges in contract management and ways to solve them.
1. Balancing between speed and control of CLM
One of the most common contract lifecycle management challenges is balancing speed and control. There’s a constant tug of war between launching things fast and launching things right— and that applies across the business spectrum as well. But the pain points are more real with contract lifecycle management.
Using contract management solutions helps keep the equilibrium by ensuring that contracts get deployed faster and with fewer errors. Typical CLM software allows for template generation which cuts time on the contract development purposes. And because contracts get sent virtually instead of the traditional courier or messenger, the turnaround times on contract completion are faster too. In the end, companies finish contract lifecycles faster and have more control over quality and contract accuracy.
2. Lack of visibility into contract terms, obligations and value
Another of the common contract management challenges is a lack of visibility and transparency on contract terms, obligations, and value. Contract lifecycle management solutions provide a good balance between maximum shareability and security. The edge of a Saas solution for CLM over simply emailing contracts is the amount of security on contracts. That means only the eyes that need to see the contract actually see the content.
But even with better security measures, people can share contracts easier and give access to those who need to see the contract terms and values attached to them. Contract management softwares can also often integrate seamlessly with financial reporting software for accounting and legal teams to collaborate faster on financial decisions and reporting.
3. Gaps in standardized legal language
Looking at the goals and challenges in contract administration and in vendor management, companies might also face a lack of standardization in the legal language that people use. This problem is more true for companies that operate in various countries with differing legal systems.
But contract lifecycle management tools are starting to catch up with globalization and continue to come up with solutions for legal barriers. The rise of artificial intelligence in contract management also helps in translating contract compliance verification according to the country of the recipient. Meaning, systems can now check whether contracts are legally compliant with the contexts and parties they will cover.
4. No mechanism for managing contract changes over time
The next among the most common challenges facing contract management is contract revision management. Contracts could change over time and templates will need to be updated. That’s why having a contract repository will help streamline operations. That way, everyone consistently uses up-to-date contracts for client and company agreements, terms and conditions, and so on.
5. Lack of appropriate access
Things are changing in the world of work, especially when different people are working from home or other remote locations, or different departments work on contract. Another of the common procurement contract management challenges is adjusting contract management to remote or hybrid work setups.
What companies should start looking into is deploying cloud-based CLM software to provide more flexibility for remote or hybrid teams. Cloud storage and technology will process 94% of our workload in 2021. And there’s no reason to believe that contract lifecycle management isn’t a part of that mix.
6. Organizational and negotiation silos
Another of the challenges of contract management in public procurement is dealing with organizational silos. This problem can be bigger for large corporations with several staff members that don’t communicate regularly. Add to that a world shifting into a digital revolution where some people might not actually go to the office at the same time.
Contract management solutions provide staff with one centralized repository and database for all contract templates and archives to ensure that everyone can see the same documents as the next person in their organizational hierarchy.
There’s no denying that the role of overcoming CLM challenges and establishing an efficient contract lifecycle management in 2022 will be significant. As we learn more about the benefits and challenges of contract management and embed those learnings into our systems, we start experiencing better results in our business.