What Is Contract Lifecycle Management (CLM)?
CLM is the process of managing all stages of contracts — from the foundation of initial terms through negotiations with partners. CLM deals with everything it takes to seal the deal on a contract, down to the final eSignature. But there’s so much more to it than that.
Contract lifecycle management involves tracking the terms and conditions of a contract so all parties remain aware of their obligations.
Because technologies like artificial intelligence (AI) have improved, every participant in an agreement can glean valuable insights about performance tracking. Participants can also receive alerts about renewal dates and other actionable details from the right contract management platform. The importance of this software cannot be overstated — revenue cycles are directly impacted by your ability to access and share your data quickly and securely.
How Can CLM Software Accelerate Your Revenue Cycle?
Having software automate and organize your contracts is great (and, frankly, necessary), but things are still a bit confusing without a robust feature set. Keeping track of terms, clauses, and renewals takes time and expertise.
The longer it takes, the wider the gap between agreeing to terms and getting to work. That means your profits aren’t realized until you establish every contract detail. That wait only gets longer if you’ve overlooked errors or redundancies.
CLM software helps you accelerate your revenue cycle dramatically using AI that assists you with:
Creating pre-approved templates
Discovering risks and providing alerts
Expediting third-party negotiations
Increasing visibility and transparency for all participants
The contract lifecycle process starts with crafting the initial terms and continues through checking for errors and proofreading. This process passes through the hands of all parties until negotiations are complete. Manually (or assisted with basic automation software), this process can drag on for weeks or months.
So, here’s the problem: you can’t start earning until everything is in place.
Using AI ensures CLM software doesn’t skip any crucial steps in accelerating every piece of the puzzle, resulting in faster sales cycles and smoother transitions into renewals.
4 Ways Contract Lifecycle Management Is Essential for Revenue Cycle Acceleration
We’ve established that CLM directly correlates to your revenue cycle. That means, the faster you can generate, negotiate, and finalize an error-free contract, the sooner you can start earning — so it’s essential to know exactly how you can streamline these processes. Here are four ways AI-based CLM can shave hours off the contract management process.
Streamlining Contract Creation and Negotiation
Everyone wants to get the wheels of industry turning, because nobody makes money until they sign on the dotted line.
According to a report from Harvard Law: “Too often, we approach contract negotiation with a narrow mindset, assuming we will be fighting with our counterpart to grab as much as we can. Rather than looking for ways to expand the pie, we focus on carving it up. Rather than capitalizing on our different preferences, we accept impasse. By contrast, when parties can trade on their preferences across different issues, they reduce the need to haggle over price and percentages.”
Powerful, feature-rich CLM can help you design legally accurate starter templates personalized to your needs that easily integrate with clauses and specific terms. The same software can connect every party, eliminating the inefficiency of distributing documents, sending emails and texts, and waiting for phone calls or faxes.
Providing Better Visibility for Terms and Conditions
You’re no longer required to pass contracts around via mail, email, or shared across spreadsheets and separate online docs. Everyone connected to a contract can share the same critical data with insightful dashboards, alerts, notifications, and clearly outlined terms and conditions. Clarity, visibility, and transparency are the trifecta of faster contract negotiations.
Expediting Approvals and Execution
The binding terms of your contract are the crux of your connection to your suppliers and other contacts. Of course, you must ensure everything is accurate and set in place, but you gain nothing from wasted days and weeks awaiting the back and forth of input from other parties, negotiations, updates, and finalization.
Upon contract agreement, the real work begins. You must ensure everyone follows through with products and services. Your CLM provides a unifying platform where everyone has the same information. Notifications and reminders nudge stakeholders in the right direction for approvals and follow-through. CLM software takes the terms of your contract and turns them into actionable data to hold every entity accountable.
Improving Compliance and Monitoring
At every contract development stage, your CLM platform should search for potential risks in your agreements. A duplicate phrase might blur the meaning of an agreement, or vague language may not hold up under legal challenges. (Speaking of contract risk management, check out our recent blog post on the subject.)
Intelligent software is highly accurate in identifying discrepancies and potential compliance risks. Along the way, the software tracks changes, improvements, or items needing attention. Accuracy is essential for that all-important compliance, of course, but equally so when preparing for upcoming renewals. When it’s time, everyone can be alerted to get busy negotiating new terms. And as we’ve mentioned before, entrusting risk management to manual processes alone is a recipe for error and disaster.
Tips for Using CLM Software to Accelerate Your Revenue Cycle
CLM software can profoundly improve and optimize your vendor and supplier relationships, but it’s only effective if you fully utilize its features. Once you understand the power of tying together your contract management and revenue cycle, you’ll understand how new insights help you optimize every aspect of operations.
If you’re trying to figure out where to start, don’t worry. Simply follow these tips to ramp up the pace of your revenue cycle.
Establish Clear Contract Objectives
This might seem obvious, but this first tip eludes more organizations than you might think. Third parties can’t live up to high standards if your agreement uses vague terms or misses important details like due dates or other provisions. Your CLM helps by identifying problem areas and recording successful details.
Standardize Contract Templates and Language
Creating legally approved templates is a huge time-saver for renewed contracts. Templates also provide an excellent starting point for new partnerships. After all, why reinvent the wheel if you don’t have to?
CLM operating with AI uses that data to test the integrity of changes and additions in other clauses, helping eliminate errors and reduce risk. As time progresses, the firm foundation of clear, compliant, risk-free language continues to shorten the time between origination and earnings.
Automate Contract Workflow, Review, and Approvals
The great thing about AI-based CLM software is that automation isn’t just about managing redundant tasks. Using automation is an excellent time-saver for alerts and notifications, contract and process review, and managing approvals — all while AI keeps watch to avoid overlooking something important.
AI provides an intelligent safety net, ensuring you don’t overlook critical details like renewals, obligation due dates, and other management tasks. Using these optimizations to reduce communication delays delivers much more than just improved visibility; it’s contract and revenue management software rolled into one.
What Are Some Examples Where CLM Speeds up Revenue Cycles?
There’s ample documented evidence of the relationship between CLM and revenue cycles. To help drive this home, we’ve gone ahead and done a bit of research so you didn’t have to. The following three case studies demonstrate how CLM can help accelerate your revenue cycle.
Case Study 1: Lahti University of Applied Sciences
This Lahti University of Applied Sciences case study focuses on a prominent oil and gas firm. The case company logged their use of CLM software to test what improvements they could make. Specifically, they sought to increase their sales velocity using CLM to expedite the duration between creating new opportunities and resulting earnings.
Here’s what they used CLM for:
Automating document creation
Centralizing a document repository of stored and captured information
Connecting data to financing and auditing
Enabling their search abilities
Reducing manual work hours
Improving term visibility
Consolidating tenders and contracts
The results allowed the case company to improve its systems substantially, become more organized, and leverage the new technology for faster revenue cycles.
Case Study 2: Tech Startup — Pre-IPO
A pharma tech startup lost $4.5 million due to a missed contract renewal opportunity, accounting for a 7.5% waste on that year’s supplier spend. Their team couldn’t keep pace with growth, and their procurement and finance teams lacked access to specific contracts. They struggled with clauses, renewals, SKU management, and other contractual challenges.
Integrating their systems with ERP and P2P
Centralizing their vendor platform
Improving their team collaboration by providing complete visibility and insights
This collaboration resulted in a 420% ROI. Not to mention, that ROI was reached in under 12 months.
Case Study 3: Fortune 500 Retailer
This Fortune 500 retailer was developing a digital procurement transformation and integrating a post-merger acquisition. They needed a single management workflow to reduce the manual workload, standardize processes, and track contracts and goals. The retailer needed to eliminate their spreadsheet system and siloed teams.
Terzo delivered a smooth digital migration, no-code workflow, and optimizations to their entire system, including the following:
A scalable cloud solution
IT portfolio management
Contract renewal tracking
CLM Is Contract Revenue Management
Managing the lifecycle of your contracts has become synonymous with unlocking the limitations on your revenue stream. In some cases, it’s a problem you don’t even know you have. But the answer really is simple: a healthy revenue cycle depends on great contract management.
Terzo’s CLM solutions help you streamline and optimize your terms, clauses, and renewals to remain connected to third-party partners and reduce bottlenecks restricting your earning cycle.
If you’re ready to optimize your CLM process to accelerate your revenue cycle, we’d love to help you get started. Experience our free trial today!