Contract management is one of the most important pieces of the procurement puzzle, and it can seem chaotic, as time and contractual agreements can pile up faster than you may expect. However, numerous organizations still rely on manual and time-consuming processes that result in errors, missed deadlines, and compliance risks.
Well, there is a solution: Use Contract Lifecycle Management (CLM) to save the day.
However, CLM is a revolutionary solution for the procurement team and provides everything you need to accomplish every phase of your contract lifecycle – contract creation, negotiation, execution, and all the way through renewals. In this blog, we delve into how procurement contracts can be revolutionized with CLM, its advantages, and its implementation.
Now, what exactly is Contract Lifecycle Management (CLM)?
Contract Lifecycle Management means that the flow of a contract is handled, usually by following the below steps:
- Design: Automate contracts from approved templates and clauses.
- Negotiation: Defining the terms in conjunction with appropriate stakeholders.
- Execution: Getting signatures and executing agreements.
- Storage: Archives signed contracts in one centralized location.
- Monitor Compliance and Performance: Meeting the terms of the contract by, continually tracking key obligations.
- Renew or Terminate: Whether it is a renewal, renegotiation, or closure of the contract.
Contract lifecycle management software expedites these processes for procurement teams to minimize delays and mistakes, while increasing visibility into all contract-related tasks.
Managing the Procurement Contracts is a Pain
If you haven’t set up a systematic and organized procurement contract management process, it can become really messy. What organizations struggle with is some of the following:
1.Manual Processes
- Spreadsheets and email chains are staples of an organization but are inefficient.
- Manually drafting and getting contracts approved takes time.
2.Lack of Standardization
- Legal and compliance risks are heightened with varying and inconsistent templates.
- Abnormal terms can lead to negative supplier contracts.
3.Poor Visibility
- Contracts being saved in various locations and systems make it difficult to monitor progress or even find a particular agreement.
- Financial losses from missing important deadlines, such as renewals
4. Compliance Risks
- Monitoring compliance with procurement regulations and internal policies is difficult to monitor.
- Higher chance of failing to comply with regulatory or legal requirements.
5.Limited Collaboration
- A lack of clarity in communication between procurement, legal, and suppliers delays negotiations.
- Working in silos among stakeholders leads to delayed decision making.
How CLM Can Streamline Procurement Contracts
CLM solutions also solve problems of this type, as they form a central point for managing contracts. Here’s how:
1.Centralized Contract Repository
Value Add: One searchable repository for all procurement contracts
How It Helps:
- Eliminates lost documents.
- Quick access to key information such as terms, obligation, and/or expiration.
2.Automation of Routine Tasks
Value Add: Automates repetitive use cases such as creation, approvals, and reminders.
How It Helps:
- It saves a lot of time on administrative work.
- Gives consistency by employing templates and clauses that have already been pre-approved
3.Enhanced Collaboration
Value Add: Gives procurement teams, legal departments, and suppliers a shared platform to collaborate on.
How It Helps:
- Track changes and version control for easy negotiation workflows.
- Enables real-time communication and accelerates decision-making.
4.Better Compliance and Risk Reduction
Value Add: Monitors adherence to procurement policies, supplier contracts, and regulatory guidelines.
How It Helps:
- Ensure that all contracts contain essential terms.
- Minimizes the chances of legal issues as it keeps relevant records.
5.Instantaneous Analysis and Reporting
Value Add: Information on contract performance and procurement trends
How It Helps:
- Monitors supplier performance and KPIs, cost savings, as well as compliance rates.
- Understand and track the roadblocks in the contract process to make it more efficient.
Top Advantages of CLM for Procurement
There are several benefits to procurement teams that come with adopting a CLM, including:
- Faster Contract Approvals: With faster turnaround times of contract reviews and approvals achieved through standardization and automation, companies spend less time reviewing and approving contracts.
- Reduced Costs: No penalties for late or non-compliant contracts. Supplier contracts can be optimized and may achieve better pricing and terms in the contracts.
- Better Supplier Relationships: Through open communication and transparency, trust and collaboration with suppliers will be fostered.
- Risk Management: CLM solutions allow for early identification and resolution of risks and can mitigate costs from non-compliance to contractual terms and conditions as well as regulatory requirements.
- Scalability: CLM systems will help you manage a larger number of contracts, as your organization expands without making it difficult.
Best Practices for Implementing CLM in Procurement
Here are some best practices to reap the maximum benefits of CLM:
1.Define Clear Objectives:
- Spotting the pain points in your existing contract management process
- Identify key measurable goals (e.g., improve approval times, increase contract visibility etc.)
2.Choose the Right CLM Platform:
- Choose a solution that will integrate with your existing procurement systems, such as ERP or CRM.
- Look for features such as AI analytics, work automation, and safe storage on the platform.
3.Standardize Templates:
- Build a library of templates and clauses that are pre-approved to ensure consistency and minimize legal risk.
- Systematically update templates to meet changing regulations.
4.Train Your Team:
- Train procurement, legal, and other stakeholders across the board.
- Market the value of CLM to get users to embrace it.
5.Monitor and Optimize:
- Maintain performance metrics using reporting tools for betterment
- Refine workflows further to improve efficiency.
Use Cases:CLM in Procurement
These are some of the apparent applications for CLM in Procurement:
- Vendor Contracts: Automate vendor contract creation, negotiations, and signing.
- Compliance audits: There are CLM reports that allow organizations to demonstrate compliance with procurement policies.
- Renewals Management: Automated reminders to renegotiate or renew expiring contracts
- Bulk Contracts: Process a large number of similar contracts (like NDAs or purchase orders) quickly.
Conclusion
In the competitive world of business today, streamlining procurement contracts with CLM is no longer a luxury, it has become a necessity. Automation of manual processes, better collaboration, and compliance, enable procurement teams to shift their focus from administrative tasks to strategic initiatives through CLM.
Investing in an enterprise-grade contract lifecycle management (CLM) platform is the best option if your organization is ready to elevate its contract management. Know your needs, choose a tool, and do best practices to use CLM to its fullest.
Want to simplify your procurement process? Learn how SutiCLM can change your contract management paradigm and help establish operational efficiency.
