When it comes to contract management, 'doing things the old way' comes with a price.
And it's not just about dollars and cents.
Without a CLM platform, your team faces:
- Inefficiencies that eat up valuable time
- Increased risk of human error
- Compliance and security challenges
- Risk of fewer future opportunities due to inexperience in legal technology
This article will guide you through the real costs – both visible and hidden – of not utilizing a CLM platform so you can understand the true impact of investing in one, cost-effective or otherwise.
What challenges might you face without a CLM?
One of the biggest functions a good CLM serves is making processes (such as approval workflows and the drafting of agreements) much more efficient.
Without a CLM, then, you’re undoubtedly working less efficiently than you could be.
Let’s consider the simple process of drafting a sales contract.
If you’re not working in a CLM tool, you won’t be able to use a contract template as a starting point, nor pull data from your CRM solution to populate fields like the customer name or the deal size.
Then, when it comes to getting that contract signed, you’ll have to send over a Microsoft Word or PDF document, and they’ll have to print and sign it because you don’t have eSignature capabilities.
Also read: A Quick Introduction to eSignatures
Inefficient processes inevitably require more manpower, as they are slow and labor-intensive. This puts an immense strain on resources that could be better used elsewhere.
Some organizations solve this problem by simply hiring more legal assistants, though this is clearly not ideal as it leads to bloated teams and is, in itself, yet another legal expense.
Potential for human error
When you’re not working in a CLM tool with AI and automation, you’re taking on a lot of unnecessary risk of additional human error.
That error might be something as small as an incorrectly spelled name or address. It could be a small error like missing a zero that leads to a bunch of lost revenue.
Or it could be something a whole lot more serious, like a data leak from agreements sent over email rather than through a secure platform.
Let’s be clear:
A contract lifecycle management platform doesn’t eliminate all errors.
Humans are still responsible for certain tasks, and even automated workflows need to be initially programmed by—you guessed it—a human being.
But a quality CLM helps remove a whole lot of errors, meaning working without one inevitably creates a more error-prone environment.
“The absence of contract templates leads to non-standardisation and makes contracts prone to errors. The legal team, therefore, is required to delve deep into contracts and proofread all clauses with a fine-tooth comb to identify and rectify the simplest of human errors.”
~ Igor Poroger, Director of Legal, EMEA, Vectra AI
How CLMs Empower Legal Teams in B2B SaaS Companies
No reporting and analysis
Without a CLM platform on board, it’s basically impossible to report on the efficacy of your contract management processes.
You can’t see the percentage of contracts that end up being renewed. You can’t track contract cycle times. You can’t see how long contract creation is taking. And you can’t monitor how many review requests your legal team is receiving each month to inform real-time workforce planning.
A CLM solution provides all of these reporting capabilities and more, often allowing you to see all of your most important legal metrics in a single customizable dashboard.
Longer contract cycle times
If you’re not using contract lifecycle management software, you’ll be forced to conduct manual contract reviews, a cumbersome and time-consuming undertaking.
Some agreements have hundreds of pages of contract data to comb through, something that a good contract management solution would be able to streamline for you using artificial intelligence.
All of this leads to contract cycle times that are longer than necessary, putting more pressure on legal ops.
Contract compliance issues
Not using a CLM software platform can lead to a whole host of compliance issues:
- Sales teams may fail to capture electronic signatures that comply with local regulations like Aadhaar eSign
- Procurement teams may fail to follow appropriate contract approval processes
- Department stakeholders may not be properly advised by in-house legal teams as to the contractual obligations they are required to fulfill
Such compliance issues can, at best, lead to lost productivity. At worst, they can result in legal proceedings and fines, harming profitability.
One of the great things a contract management system does is pull together data from multiple locations, uniting agreement information in a single location.
But if you’re not working in a CLM, it's much more likely that you’ve got contract data siloed and spread out across multiple locations.
You might have customer details stored in your CRM, some agreements in a Google Drive folder and others saved on your desktop (or in a physical storage facility), and contract negotiation playbooks saved in a workplace wiki owned by the procurement team.
This makes contract administration a nightmare, slows down legal ops, prohibits accurate reporting and analysis, and can even lead to issues like data leaks.
A good CLM system can be used to program automatic notifications in advance of contract renewals.
This has a flow-on effect of cost savings through renegotiation opportunities, as well as preventing unwanted renewals.
Without a quality CLM platform on your side, though, you run the risk of contracts renewing without your realization or without the ability to jump in and renegotiate a better deal first.
While it’s possible to manage renewal dates with manual reminders, even medium-sized companies will quickly find this to be a cumbersome process, as their calendars fill up with reminder activities.
Assumption-based business decisions
The final way that working without CLM software is harmful to legal teams is that, for the majority of teams without one, many business decisions end up being based on assumptions.
You don’t have data on, for example, risks associated with given vendors or how long a given sales deal is going to take to get across the line.
Because of this, you enter into agreements with third parties that you might prefer not to, had you had the full picture, or create inaccurate and unrealistic sales forecasts.
Contract lifecycle management solutions solve this challenge by centralizing data and providing a host of insights and reports.
Introducing SpotDraft: Your AI-powered, cost-effective CLM
Having the tools to properly and efficiently manage contracts can save organizations massive amounts of resources.
While many companies try to save on the cost of a CLM by managing processes manually, they generally end up paying more on the back end through additional risk, inefficiencies, and the ability to use data to inform strategic decision-making.
SpotDraft's automated, AI-powered contract management platform is cost-effective and includes an easy-to-use, hassle-free way to track contract dates and timelines.
Learn more about SpotDraft here, or discover how to choose the right CLM platform for you in our dedicated guide: How to Buy a Contract Lifecycle Management (CLM) Platform that Actually Works for you.