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Contracts are the lifeblood of business relationships, but managing them can be a monumental task if done traditionally. From creation to signing and follow-up, each legal document involves a process that can be time-consuming, complex and error-prone. In this article, you'll find out why Contract Lifecycle Management (CLM) and contract automation are key to optimising each stage of the contract lifecycle for leaner, cleaner processes. Let's get started!
This article is also available in Spanish.
In this article you will find:
- What is CLM and how does it automate contracts?
- Benefits of automating contracts with CLM
- Main challenges vs. strategies when implementing CLM
- CLM as a strategic pillar for innovative companies
What is CLM and how does it automate contract creation?
CLM is a technology designed to manage the entire contract lifecycle. From the contract request, it covers all tasks related to the contract. However, one of the biggest benefits of this legal tech lies in the automation of legal contract creation. This process transforms a manual, repetitive and error-prone task into a fast and accurate operation, allowing professionals to focus on higher-value tasks rather than hand-writing and proofreading hundreds and hundreds of similar contracts.
Automated contract creation with CLM
Automation in contract creation begins with the use of pre-approved templates, customised to meet the legal and regulatory needs of each organisation. These templates include standard clauses and pre-validated terms, ensuring that contracts are consistent and aligned with internal policies.
CLM allows contracts to be generated automatically from data entered into intuitive forms. For example:
- In a supply contract, the user can select a pre-defined template and enter details such as supplier name, dates and payment terms, and the CLM will automatically generate a contract ready for review.
- For Non-Disclosure Agreements (NDAs), the system can generate multiple customised contracts for different counterparties in a matter of minutes, eliminating repetitive manual work.
What are the benefits of automation in contract creation?
- Time savings: what used to take hours or days is now completed in minutes, allowing the legal team to focus on more strategic tasks.
- Reduced errors: automated templates and processes minimise the risk of inconsistencies and omissions.
- Regulatory compliance: pre-approved clauses ensure that contracts comply with current regulations.
- Scalability: it is much easier to generate contracts in large volumes, such as in mass procurement processes or standardised agreements (although a state-of-the-art CLM can automate the most complex templates possible).
What is the impact of contract automation in daily practice?
Contract automation with CLM not only speeds up the workflow. It also facilitates cross-departmental collaboration. For example, a commercial team can request a contract through CLM or obtain it directly through an automated document template, so that the department can review and approve it in record time. One of the main impacts of this technology for businesses is that in addition to simplifying their processes, they ensure that each contract created is a robust, accurate document that is ready to fulfil its strategic purpose.
Practical example:
A logistics company implemented a CLM to automate the creation of contracts with its suppliers. A process that previously took days and even weeks due to manual reviews and duplicate versions is now much more streamlined and easier thanks to the CLM, which allows them to generate and approve contracts in a matter of hours, with greater accuracy and tighter closing times.
What is CLM? Discover the Power of Contract Lifecycle Management
Benefits of automating contracts with CLM
The impact of CLM on business is wide-ranging. Let's look at some of the most immediate key benefits of implementing this type of software:
- Time and resource savings. By automating repetitive tasks, such as drafting and reviewing contracts, CLM frees the legal team to focus on strategic activities.
- Increased accuracy and reduced risk. CLM's document automation allows documents to be created from pre-approved templates, eliminating human errors that lead to all kinds of legal problems and penalties, as well as critical security breaches.
- Regulatory compliance. CLM can be used to ensure that all contracts comply with local and international regulations, protecting the company from legal sanctions.
- Total visibility and control. With a CLM, companies can access all their contracts from a centralised platform, extending control and ensuring access to reports to maximise the legal department's record of Key Performance Indicators (KPIs).
Practical example:
A multinational pharmaceutical company used a CLM to centralise its distribution contracts across multiple countries. This not only reduced compliance errors and facilitated regulatory adaptation to various jurisdictions, but also provided a bird's eye view of key terms and maturities.
Main challenges vs. strategies when implementing CLM
While contract automation with a CLM offers numerous benefits, its implementation can present some challenges that the drivers of this technology must address strategically to ensure its successful implementation in the enterprise. Let's look at the most common obstacles and practical strategies for overcoming them.
Resistance to change: overcoming cultural barriers within teams
Introducing a new technology often generates resistance, especially in teams accustomed to traditional ways of working. This challenge is most pronounced in legal departments, where reliance on manual processes was deeply ingrained until recently.
Strategy:
- Clear communication: explain how CLM will reduce workload and improve accuracy in contract management.
- Active participation: involve teams from the early stages of selection and customisation of the system, so that they feel their opinion counts.
- Change ambassadors: identify leaders within the team who are enthusiastic adopters of technology and can motivate others.
Technology adaptation: integrating CLM with existing tools
A CLM system is integrable with other business tools, such as databases, ERP or document management platforms. However, lack of compatibility or poorly executed integration can lead to frustration and limit its potential, so pay particular attention to the choice of suppliers.
Strategy:
- Initial assessment: Conduct an analysis of existing systems and ensure that the CLM vendor offers pre-configured or customisable integrations.
- Technical support: Work with an internal or external Information Technology (IT) team to facilitate implementation and ensure the system runs smoothly.
- Tailoring phase: Before a major project goes live, test the integration with a group to identify and resolve technical issues.
Initial cost: justifying the investment in the long term
The cost of acquiring and implementing a CLM may seem high at first, especially for companies with tight budgets. However, the long-term return on investment (ROI) is often significant, thanks to time savings, reduced errors and improved efficiency.
Strategy:
- Calculating ROI: Present an analysis that compares the initial cost with projected benefits, such as time saved per contract or legal risks avoided.
- Success stories: Share examples of similar companies that have achieved positive results after implementing a CLM.
- Scalability: Select a CLM that allows you to start with basic functionalities and expand its scope according to future needs.
Team training: ensuring the correct use of the system
The best CLM system will be useless if users do not know how to get the most out of it. Lack of proper training can lead to errors and under-utilisation of the system.
Strategy:
- Customised training: Organise training sessions tailored to the specific functions of each team (legal, commercial, IT, etc.).
- Ongoing resources: Provide tutorials, guides and technical support to resolve queries as they arise.
- Periodic assessments: Conduct audits to identify areas where the team may need additional support.
Ebook: Learn about the key features of a CLM and how they will benefit your company.
CLM as a strategic pillar for innovative companies
Contract automation provided by a CLM simplifies manual and complex contract processes to transform the way professionals work with contracts on a day-to-day basis. We have seen how, with the right strategy, its implementation is a doorway to benefits of various kinds, making it a key strategic pillar for corporations.
If your company is looking to optimise its contract management and improve its overall performance, CLM is a must-have tool. Are you ready to take the step towards smarter and more efficient contract management? The future of contracts starts here!
