Contracts can be both a blessing and a curse. They’re essential for making relationships run smoothly and protecting a business and, of course, create revenue opportunities. Yet when they aren’t managed properly, a domino effect can cause problems and risk to roll across the company. Deadlines can get missed, penalties follow, time and resources are wasted, and a reputation can take a significant hit with costly repercussions — not to mention the time taken up by reviews and redlines, as well as overwhelming requests from commercial teams.

What’s needed to help turn contracts into strategic assets is contract lifecycle management. CLM takes a contract from creation through close, with particular emphasis on execution, ongoing monitoring and renewal. This is critical when it comes to selecting and working with vendors and suppliers of all stripes. CLM is meant to drive greater efficiency, but it can get complex, causing the speed and quality of supplier decisions to be negatively impacted. 

From the outset, bottlenecks in onboarding suppliers can arise because you’re dealing with three distinct departments in the contract review process. Finance is needed for budgetary reasons; legal must iron out terms, and IT has to ensure security. Getting these departments to align with business stakeholders — and figuring out how things will work moving forward — isn’t easy because there are a lot of moving parts.

Strategies for Streamlining CLM

One of the best ways to gain greater efficiency is to have a contract approval policy in place, so the parameters within which each department are understood by all involved. This can also limit approvals to a set number of business stakeholders, greatly reducing the volume of reviews necessary. 

To shepherd processes, appoint supplier relationship managers and champion those individuals. Be sure they’re trained in, and thoroughly understand, the contract approval process. Further, give them the responsibility and authority to police the realm, and make sure their role is understood company-wide. Finally, train them on the CLM tool you use, because they’re ultimately the ones who will send reviews through. 

The beginning of any supplier relationship is about fact-finding. You have to be clear on purpose, total cost, and a host of details in between. To facilitate this, put your questions into a single questionnaire, then use your CLM tool to handle it in an automated way. This could be done with a communications app like Slack, and using your CLM to pull the right details. This reduces internal back and forth to help smooth the process, making supplier decisions faster and a lot more efficient. 

Finally, be sure there’s clear communication and collaboration across the three groups. When aligned properly, each will know what the other is doing, reducing complexity and getting everyone on the same page.

Technology's Role in CLM

The foremost benefit of CLM software is that it establishes an actual repository for all contracts. This might seem simple, but oftentimes, documents can be hidden away in personal drives and never be looked at again. When you've got a repository, CLM can pull out key points that you can give to the active owner of a contract. There should be no need to sort through hundreds of 50-page contracts for information. 

The right CLM system should tell you exactly what you need at a glance. It will provide details on renewals and support your decision-making when deciding if you want to keep the relationship past its term. On an ongoing basis, it should allow you to deftly manage relationships with hundreds of suppliers efficiently — in ways that are fair to both organizations — which builds relationships with these valuable partners.

What’s more, the right CLM application will provide the insight to negotiate preferential fees and discounts. It gives a business the space to step back, objectively review what has and hasn’t worked, and address any issues when renewing. Simply put, having the right CLM system enables you to have the right conversations at the right points of time. Without it, you could sleepwalk into a contract review, then have to explain to leadership why you missed an auto renewal with an inefficient supplier, at great cost to the business.

A CLM application must also be able to harness new developments such as artificial intelligence. In the process, it can drive automation and productivity, increase efficiency, and speed processes. However, you need to balance the adoption of AI with legal issues in mind, making sure that it never replaces a human's final check.

The most powerful CLM or AI application will come up short if an organization doesn’t put in the necessary time in up front to assure its success. When it comes to suppliers, failure to prioritize onboarding can turn what should be a straightforward, short implementation into an extended period of frustration and lackluster results. 

This can undermine confidence in a CLM system, causing users to become resentful of the very tools that are supposed to help them, stalling adoption, and bringing progress to a crawl. Effective CLM is all about greater efficiency, so be sure you first focus on tackling its complexities in order to fully benefit from supplier relationships.

Alena Kararic is head of legal at FundApps.