Extracting Highest Contract Value through CLM

Contracts are the bloodline of any business today, and effective management of the same can make or break the profitability of your business as well as give your company a competitive edge over others. 

The International Association for Contract & Commercial Management found that the average company loses 9.2 percent of its bottom line due to ineffective contract management. Over and above that, there is still a significant source of value foregone in terms of missed opportunities, better service provision to customers, better vendor management and relationships, etc. 

Contract Lifecycle Management ensures a perfect rhythm of the entire administration of contracts starting from drafting, workflows, post-contract analysis, etc. Though the benefits of CLM are well-known, once implemented, the job does not end there. The highest value from contracts still needs to be extracted through the correct usage of the solution and to make the most of the investment made in the CLM system. Here are some ways through which your company can do so:-

  1. Correct Process Inefficiencies: CLM saves time, effort, and money for the organization by reducing manual tasks. The central repository becomes a single source of truth and automation reduces the time taken to do business. Utilizing these functionalities correctly by ensuring there is no repetition of processes, and a clear understanding of the system among employees can go a long way.
  2. Creating KPIs and Analysing them: In order to measure the success of a contract it becomes necessary to have Key Performance Indicators clearly stated in the agreements made with suppliers. This ensures that what is negotiated is also delivered, and in order to review the same there are pre-stated KPIs. If the supplier falls short of the agreed-upon terms, it saves a company from incurring hidden costs. Further, it becomes easier to analyze through the CLM system, the value delivered by each supplier and compare the same with historical records as well as with market benchmarks.
  3. Clear Visibility and Consensus: From the very beginning of the contracting process, all the concerned stakeholders including procurement, sales, legal, etc should have a consensus about performance targets and business priorities. Integrative issues should be regularly reviewed in order to gain the highest value on both the procurement and sales side. This helps to exploit the full scope of the visibility of contracts provided by CLM solution, and appropriately reward or penalize vendors and buyers. 


Healthy collaboration between teams also helps to manage vendor performance more effectively and have a strong feedback loop, enabling the company to take corrective actions, identify gaps in vendor performance, and gauge the source of value gained and lost.


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