Build a Business Case for Contract Lifecycle Management

No matter how beneficial any new system or software might be, it’s unlikely to get funded without a clear and compelling business case to justify the spend, complete with projected business outcomes. This is especially true for substantial investments in potentially complex environments, like contract lifecycle management (CLM) solutions. With multiple projects competing for the same funds, it’s essential to maximize the benefits of CLM—demonstrating exactly how the investment will help leadership achieve the objectives they’re accountable for—to gain swift and decisive buy-in.

Building Your CLM Business Case: The Key to Getting the Project Funded, one of four webinars in our Foundations for CLM Success series, outlines six business outcomes that every CLM business case should cover. While some are easier to quantify, such as accelerating time to revenue and increasing workforce productivity, there are also broader benefits worth highlighting.  

Minimize contract value leakage

While reducing contract value leakage isn’t usually the first benefit that comes to mind when people talk about CLM, it’s often one area where businesses experience the biggest difference after implementation. 

Contract value leakage occurs when parties sign contracts that contain suboptimal language, typically caused by a lack of optimization during the preparation and negotiation stations. Or, it may result from poor contract management after the contract is signed—often stemming from a lack of clarity about what’s in the contract and what terms could be acted upon. 

Whatever the root cause of contract value leakage, the result is the same: the contract winds up being worth less than anticipated, and potential revenue is lost through missed opportunities. For example, if the billing structure outlined in a contract is vague or complex, this may result in accounts receivable invoicing for a wrong amount, leaving money on the table. And if the language used hasn’t been pre-approved, this may open the business up to unnecessary risk.

CLM helps businesses combat contract value leakage in both their pre- and post-signature processes in three key ways. First, it improves the availability of information by creating a centralized, searchable repository. This can also lead to improvements in contract quality over time, since legal teams will often dig into this information to identify and adjust language that stalls negotiations. 

Secondly, CLM provides greater control and visibility. Workflows and permissions are pre-defined and version control automated, so employees can feel confident they’re taking the right steps and working in the most up-to-date version of the document. 

Event management is another major factor. Employees don’t have to worry about staying on top of crucial milestones and important dates like the renewal window because they know they’ll receive a reminder. The business benefits are reduced cost to maintain compliance (since fewer lawyers or employees are required) and a higher percentage of contract value realized over time. 

Streamline compliance

Companies often dedicate multiple resources to quality assurance when drafting contracts. These resources are expensive. CLM reduces the need for companies to spend so much money around compliance by creating a streamlined process that every contract must go through.

With a contract management system, every contract is routed a certain way through the organization, ensuring it ends up in front of all the right people at the moment each needs to review and execute. You can also be sure employees are using approved language because they have a clause library at their fingertips. 

Contract management software can also make it easier to resolve any disputes that arise. Many companies wind up paying disputed amounts without checking their contracts first, simply because they’re hard to locate. CLM allows businesses to quickly locate the relevant contract and language, so they can approach disputes from an informed standpoint.

Improve ease of doing business

Another less quantifiable but powerful outcome of adopting CLM is the corresponding ease in doing business. Companies that do measure this, either by tracking their net promoter score (NPS) or their own internal metrics, have reported that CLM creates a better experience both for internal users and customers. 

This is good in itself, but it also plays a role in customer and employee satisfaction and retention, so it must not be overlooked. 

Paint a compelling picture  

The team that gets their project funded is often the one that tells the best story. Since leaders may not know much about contract lifecycle management systems or their benefits, it’s doubly important to paint a compelling picture of the business outcomes this investment will deliver. 

For more tips that can help you craft a winning CLM business case, as well as an illustrative example business case that a real client delivered to their leadership, watch the full on-demand webinar today.

Austin Miller
CLM Expert