How to Maximize Contract Visibility and Control with CLM Solutions

Contracting is a well-established process that businesses use to ensure agreements are legally binding, projects stay on track, and objectives are met efficiently. However, 50% of companies have reported losing business opportunities due to inconsistencies in their contract management practices. Consequently, over time, the process has become more sophisticated.

Poor contracting practices often lead to compliance issues, higher costs, delayed problem resolution, and damage to the organization’s reputation. Organizations use Contract Lifecycle Management (CLM) software to mitigate these risks. Contract management software helps them control their contract lifecycle and access contracts whenever needed. Here is why maintaining contract visibility and control is essential.

What is Contract Control & Visibility?

Contract control regulates all aspects of a contract, including compliance monitoring, contract tracking, clause amendments, and risk mitigation. A key element in maintaining contract control is contract visibility, which refers to locating, viewing, tracking, and accessing critical information within contracts. Organizations are increasingly adopting contract management software to enhance control and visibility. But why is this becoming a necessity in the first place?

1. Challenges Arising from Limited Contract Visibility and Control 

Poor contract control and visibility can directly lead to compliance issues, namely missed deadlines, difficulty managing contract obligations, inefficient workflows, the potential for duplicate agreements, poor vendor performance tracking, and a lack of ability to identify and mitigate potential legal issues due to unclear contract terms and conditions. 

Limited visibility and control over contracts can lead to significant issues for organizations. When contract management processes lack transparency and oversight, several problems may arise, including: 

• Increased Compliance Risks: Difficulty monitoring and ensuring adherence to contractual obligations can lead to legal and regulatory non-compliance. 
• Higher Costs: Inefficient tracking and management of contract terms and deadlines may result in unexpected expenses and penalties. 
• Reduced Efficiency: Ineffective contract management practices can cause delays and operational disruptions, affecting productivity. 
• Difficulty in Risk Management: Limited visibility can hinder identifying and mitigating potential risks associated with contractual agreements. 
• Inaccurate Reporting: Poor control can lead to errors and inaccuracies in contract reporting, which can impact decision-making and strategic planning. 

2. Addressing These Challenges with CLM Solutions 

A straightforward solution to these contracting challenges is integrating a new-age AI-powered Contract Lifecycle Management (CLM) system. CLMs typically offer advanced features designed to address the issues mentioned and provide additional support for effective contract management. Below are a few of these features that help with visibility and control. 

2.1 Centralized Repository for Transparency 

A CLM solution with central storage for all contracts and their versions is highly beneficial for maintaining transparency in the contract management cycle. This repository allows key stakeholders to track contracts by important details, maintain version control, and access the files from a fixed location whenever necessary. It also improves accessibility and ensures that contract information is consistently up-to-date.

2.2 Standardized Contract Templates for Consistency 

A standardized template with predefined terms and clauses ensures consistency across all contracts. Also, by adhering to a uniform format, organizations can efficiently draft and review contracts, reducing the risk of errors and omissions. Uniformity in the terms and clauses ensures the contracts are compliant, thus reducing legal risks. This way, the contract details are easier to locate, access, and understand, creating an excellent training and standard practice base. Ultimately, standardized templates provide improved control over the contract lifecycle, from creation to execution, supporting more effective contract management. 

2.3 Automated Workflows & Notifications for Efficiency 

Automated workflows are highly effective for streamlined contract processes, including approvals, renewals, and reminders for deadlines and important dates. These workflows ensure on-time task completion and reduce the likelihood of human error. By automating routine activities, organizations can enhance efficiency and focus on more strategic aspects of contract management. Additionally, automated reminders help prevent missed deadlines and ensure timely renewals, contributing to better contract compliance and management. 

2.4 Audit Trails & Version Control for Risk Mitigation 

Audit trails and version control are vital for effective risk mitigation in Contract Lifecycle Management (CLM). Audit trails offer a comprehensive record of all changes and activities related to a contract, enabling organizations to track amendments, approvals, and interactions throughout the contract’s life. This detailed visibility allows for prompt identification and resolution of potential issues, ensuring compliance and preventing unauthorized changes.  

 Version control maintains a thorough history of all contract versions, making accessing and reviewing previous iterations straightforward. By utilizing these CLM features, organizations can manage risks more effectively, uphold contractual obligations, and maintain accurate records of contract changes, contributing to better contract management and reduced liability risk.

Effective contract management is crucial for maintaining operational efficiency and mitigating risks. Implementing Contract Lifecycle Management (CLM) solutions can significantly improve contract visibility and control, ensuring your contracts are managed consistently and efficiently throughout their lifecycle. Centralized repositories, standardized templates, automated workflows, and audit trails are key features that address common challenges and support better contract oversight and compliance. 

 To support these needs and improve your contract management practices, Doqfy offers AI-backed, tailored CLM tools designed to meet your specific requirements. Book a demo with us today for the best Contract Management experience possible.

References:

1. Lynch, R. (2024, July 24). The Importance of Contract Visibility in your Procurement Process. SoftCo. https://softco.com/blog/contract-visibility-in-your-procurement-process/