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 importance of contract management and the true impact of investing in one.

What challenges might you face without a CLM?

Inefficient processes

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

Resource strain

An inefficient contract lifecycle management process 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 the importance of contract lifecycle management system lies in the fact that it removes a whole lot of errors. This means 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.”
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~ 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 the contract process 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.

Also read: How to Use Contract Analytics Software to Uncover Insights

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 execution 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.

Also read: What is Contract Compliance? The Ultimate Guide

Data silos

One of the great things a contract lifecycle management solution 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.

Missed autorenewals

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.

Also read: Automatic Renewal Clauses: How to Mitigate Risks and Protect Your Interests

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 contract renewal dates with manual reminders, even medium-sized companies will quickly find this cumbersome 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.

Why Is Contract Lifecycle Management Important?

Contracts are the backbone of every business, from service agreements to commercial deals. By streamlining contract management and embracing contract lifecycle management, you gain control over every stage - from risk assessment to renewal.

Mismanaged contracts can hurt your business, damaging both your reputation and finances. Hence, the importance of contract lifecycle management software cannot be denied.

Enhanced Efficiency

The more efficient your system, the less time and money it costs your business. A strong contract lifecycle management system boosts efficiency and productivity.

With clear workflows, you maintain control and quickly spot any issues. Effective contract management helps your business improve, speed up the contracting process, and streamline your system.

You'll see how much faster the initial contract cycle becomes with an efficient management system, maximizing both time and contract value.

Higher Revenue

A solid contract management software helps businesses reach their financial goals. Poor contract management can cost companies their annual revenue, making CLM essential for every business, regardless of size or industry.

Effective CLM provides a clear view of practices and workflows, leading to better financial control and lower operating costs. With transparency, audit trails, and streamlined workflows, expenses can be reduced.

Effective Compliance Management

As businesses tap into the vast potential of third-party ecosystems, managing risks becomes increasingly complex. CLM is needed to keep up with the growing number of contracts and the expanding network of third-party relationships.

It enhances your ability to manage and monitor risks. As your business processes grows, so do the number and value of contracts, which means the risks evolve, too.

With CLM, you can quickly access, understand, and act on any contract data, ensuring compliance with policies and regulations.

Regular contract audits are essential for business success and to avoid litigation and fines that could have severe financial impacts. A solid CLM system supports these audits, protecting your company and minimizing risk.

Be Transparent

Transparency is paramount when building relationships with clients and service providers. Being transparent with your contract management process enhances communication.

To keep contracts on track, it is vital to have easy access to information and clear communication with everyone involved. A solid framework for tracking and reporting progress helps manage expectations and ensures smooth operations.

By monitoring KPIs, contract reviews, and deadlines, all parties stay aligned, fostering strong working relationships. Transparency is critical—everyone should be accountable, and financial teams must keep tabs on contract performance and values.

This way, decisions are driven by real-time data, setting the stage for your business's success with a CLM tool on your side.

Supports Business Decision-Making

Legal departments can transform how they operate with the right CLM solution. Imagine creating self-service portals that let business users speed up contract processing while viewing your team as a valuable business driver, not just a cost center.

By fully leveraging a CLM system, your legal team can extract actionable insights from contracts, set clear goals, and track vital data throughout the contract lifecycle.

With a well-designed CLM, legal departments of any size can become more empowered. It becomes an intelligence system, enabling lawyers to evaluate contracts, leverage data, and analyze risks to drive better business decisions.

Helps Become More Responsive

Today, simplifying, automating, and digitizing processes is key. Relying on manual contract management leaves your legal team and organization in the dark about the status of your business contracts.

When contracts are scattered across shared drives and aren’t searchable or consistently formatted, it can take days to determine your company’s obligations to vendors, customers, and other third parties. 

Imagine answering, “Can we offshore our marketing department?” without a clear view of all your third-party obligations or data privacy agreements. You’d probably struggle to provide a complete answer.

Contract Lifecycle Management changes the game. It offers real-time visibility and automation that makes tracking documents through every stage—drafting, negotiation, approval, execution, compliance, and renewal—quick and easy. 

This automation helps the legal team respond faster and ensures that everyone involved—the lawyers, the business, and the customer—enjoys a smoother negotiation experience.

“Leveraging a CLM has been key because it has reduced a lot of friction from handoffs between legal and business. Rather than going back and forth over email, Slack, Word, Zoom, DocuSign, and a whole tech stack, the CLM acts as a single source of truth.”
~Jonathan Franz, Head of Legal, Crunchbase
Navigating Economic Turbulence and Thriving in Chaos

Does Your Business Need A Contract Lifecycle Management (CLM) System?

Today, contract lifecycle management (CLM) isn't just a nice-to-have; it's a must. With companies handling an increasing number of contracts, each with its level of complexity, effective contract lifecycle management is crucial. 

It streamlines everything from contract creation to execution, ensuring accuracy, compliance, and efficiency. Plus, it helps reduce the risks of contract mismanagement and supports smarter decisions with valuable insights. 

Simply put, if you want to stay competitive and maintain legal integrity, a CLM system is essential.

• As businesses grow, so does their contract load. A World Commerce & Contracting study reveals that Fortune 1000 companies juggle 20,000 to 40,000 contracts simultaneously. Without contract lifecycle management tools, keeping track is tough and error-prone.

• Adopting a CLM system can slash contract creation and finalization time. This efficiency cuts costs by minimizing the need for extensive legal and administrative work.

• Staying compliant is crucial with regulations constantly evolving. A CLM system helps manage risks by ensuring contracts meet current legal standards. Harvard Business Review notes that an efficient contract management system can lower legal fees and fines by up to 30%.

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.