Can Your CLM Be Useful For CFOs?

Chief financial officers (CFOs) have a broad interest in the outcomes of the contracting process, even if they’re not directly involved in primary negotiations.

Contracts inform important financial and risk management decisions that fall upon the office of the CFO. Consequently, CFOs need direct access to key contract data, preferably in an efficient manner.

This is where quality CLM software can come in to help. Contract intelligence pulls together key information, avoiding silos and allowing CFOs to make proactive decisions. Is a CLM useful for CFOs? Yes, and here’s why:

Contract intelligence for CFOs

Having visibility over key contract data helps CFOs to drive more value and optimize the business from a financial perspective. A good CLM prioritizes contract intelligence and pulls contract information to provide CFOs with a clear picture of where the company stands.

The data pulled from contracts can be a key leading indicator of the overall financial health of a company. For example, contract data reveals important information about costs, revenue, risks, and potential opportunities for the business. 

Kaitlynn Sommers, Senior Principal Analyst at Gartner wrote in their Market Guide to Contract Life Cycle Management; “CLM solutions are evolving from operational record-keeping systems used for legal auditing purposes into enterprise-level core systems for addressing business risks, costs and the pursuit of revenue maximization.”

Here are some examples of how contract intelligence is helpful for CFOs:

Maximize revenue

A key job of the CLM is to help accelerate contract velocity while improving cash flow and streamlining the onboarding process for suppliers or partners. An optimized contract lifecycle provides faster time to value and improved topline revenue. A CLM allows CFOs to visualize how much revenue is tied up in contract review and look for ways to improve velocity.

In another example, supply-side contracts hold important information that can determine the cash flow of the business, and visibility over these details is critical for CFOs.

Among the information CFOs need at their disposal is a clear understanding of guaranteed cash outflow versus probable cash outflow. Contracts with an opt-out fall under the probable category, whereas contracts with no opt-out fall under guarantee cash outflow. Clear visibility, including knowing when contracts come up for auto-renewal helps CFOs to proactively make changes based on their cash position.

Minimize risks

Legal departments need to be dynamic and agile about how they protect the business, especially in the face of shifting, and complex, legal requirements. From the CFO seat, minimizing contract risk makes sense in terms of maximizing company revenue, but that’s also balanced with the need to maintain efficiency across the contract lifecycle.

A CLM provides an agile system that ensures up-to-date compliance with regulations while keeping an efficient process. Compliance and efficiency don’t have to be mutually exclusive; it’s possible to have both and still minimize risks.

By staying in the loop, CFOs can also minimize risks from defaulting on key payments to vendors or late fines and penalties. They can ensure smooth operations by proactively managing suppliers and client contracts in advance.

Process automation

CFOs put a lot of focus into optimizing top and bottom-line performance. Automation can play a pivotal role in optimization as it allows for extra efficiencies in the contract lifecycle. A CLM is useful for automating processes such as:

  • Approval and signature processes. A CLM can virtually shoulder-tap the person who needs to give approval, helping to eliminate bottlenecks and improve productivity.
  • Reports and dashboards. It is a best practice of contract management to set up automated reports and dashboards so that information is quick and easy to find.
  • Reminders. Automated prompts help to avoid missed deadlines or milestones.
  • Validating invoices.
  • Data reconciliation for auditing purposes.

Why should CFOs invest in contract management software like SpotDraft?

The bottom-line question for CFOs is; will investing in contract management software bring me a decent return on investment? There are multiple benefits that a good CLM software can bring to the table that directly impacts the ROI, such as those listed below:

Transparency

CFOs need to have contract visibility across the whole company. Whether for sales, procurement, or finance, they need the “big picture,” a goal that is difficult if contract information for each of those functions is siloed. 

While suite software solutions for individual departments such as procurement often tack on contract functionality, these solutions are typically not robust enough to handle complex contracts. From a CFO perspective, suite solutions scatter contract data into departmental silos, where transparency becomes murky. 

A CLM brings together the key data for all contracts so that CFOs have a transparent view. This helps with easy communication across stakeholders regarding contract terms, as well as with tracking and reporting performance.

When CFOs can easily monitor contract KPIs, they have better information with which to make proactive decisions. They’re able to more easily hold team members accountable and parlay that accountability into improved results.

Informed financial decisions

Transparent CLM data helps finance teams to improve the quality of their financial decisions. With a Dynamic CLM like SpotDraft, the finance team will be able to:

  1. Project out outgoing expenses in real-time.
  2. Understand the milestones needed for payments.
  3. Understand why exactly certain non-standard payment terms were agreed to by reading through the contract notes. 
  4. Get crystal clear clarity on what contracts have auto-renewal clauses along with the required notice period to prevent the auto-renewal. 
  5. Quickly go back and get context on what makes certain clauses viable by going through the tamper-proof audit log associated with the contract. 

Optimize the sales cycle

Contracts are a vital part of the sales process, but can also be a key source of delays, or even tensions between sales and legal departments. While sales teams focus on speed to close, legal departments focus on minimizing risk to the organization, which can be at odds with speed.

A CLM optimizes the sales cycle by helping sales and legal teams work more efficiently together to achieve organizational goals. Achieve improved speed without sacrificing compliance or risk minimization. When the sales process is more efficient, it also increases speed-to-revenue, a KPI of key concern to CFOs.

Risk management

Contract risks can be a threat to an organization’s revenue. It’s important to handle the pre-execution stage with care to avoid onerous clauses that are costly to the company. A good CLM helps to keep more money with the company by helping to mitigate contract risks.

With SpotDraft, mitigate contract risks via these features:

  1. Templatized Agreements. Users can templatize their highest volume contracts on the platform. By doing this, a user can go on to create a fully compliant version of the agreement by just answering a few questions. 
  2. Storing standard language in the Clause Library. A customer can store multiple versions of the language for their standard clauses in their Clause Library. This also allows legal to use standard language when negotiating clauses, which helps greatly with making the process less error-prone. 
  3. Comparison on Demand. SpotDraft users can easily run a comparison between two different versions of an agreement to see what the changes are. A user can easily compare a version they have received from the customer versus their standard base version. Any changes are clearly highlighted and the user can choose to either agree or disagree with them. 
  4. Define Approval Requirements by Contract Types. Different contract types could have different approval requirements. For example, a vendor contract for a SaaS product may need to get approvals from the Procurement team and the finance team, along with the head of the department that is procuring the product. An MSA may need to get approval from the Head of Sales based on certain conditions set on the contract, such as the price being below a specific amount, etc. 

Negotiate effectively 

Which contract terms or clauses can help to win deals more quickly? This is where the data transparency of a quality CLM can help. CFOs can identify trends and analyze historical negotiation data to inform their current negotiations.

On the flip side, CFOs can also spot trends in contract terms that may hinder negotiations. CLM data can illuminate the terms to eliminate from future contract negotiations in order to speed up the process.

Conclusion

CLMs have an important role to play in helping organizations to be digitally agile. For CFOs, this means efficient access to key data, allowing for more effective decision-making.

In essence, this agility helps organizations to gain a competitive advantage, especially where they’re able to streamline their contract lifecycles. A CLM helps them to maintain both speed and compliance, improving topline revenue while managing risks.

CFOs need to help break down any and all barriers that can slow down contracts from faster execution. SpotDraft is here to help by:

  1. Enabling better collaboration between legal and sales. Review requests no longer need to happen through a multitude of other platforms like email, Slack, or phone calls. Streamline all requests through one platform.
  2. Integrating with the corresponding CRM, such as Salesforce, Hubspot, and more. This allows you, the sales team to make review requests and create contracts without having to leave a platform that you’re comfortable with. 
  3. Templatizing high-volume contracts. The highest volume contracts - often the sales contracts - are templatized on SpotDraft, which allows the sales team to create the first draft of the contract without actually involving the legal team in any way. 
  4. Pulling all contract data into a centralized, transparent platform.

SpotDraft is a #1 CLM software for fast-growing companies built to optimize your contract lifecycle. Get your free demo of SpotDraft here.