Understanding your company's competitive advantage or advantages is critical in today's fast moving economy. When one contemplates competitive advantage, they do so in the context of greater sales or improved margins. Rarely does one consider how your contract management processes can contribute to your company's competitive advantage from a sales perspective. And while contract management extends across all contract types, the focus of this post is all about sales contracts and the impact that they have on your business. Consider this: IACCM, the International Association for Contract and Commercial Management, cites that almost 10% of gross revenue is lost on poor contracting processes. For the disbelievers out there, cut this figure in half, and if you feel compelled, cut it in half again. The impact to both your top and bottom line is staggering.
IACCM also notes that contract automation can accelerate negotiation cycles by 50%, reduce erroneous payments by 75 to 90%, and cut operating and processing costs associated with managing contracts by 10 to 30%. Given that contracts are the vehicle by which we all do business, improving efficiencies in this area is something to seriously consider.
For those unfamiliar with the topic or Contract Lifecycle Management (CLM) software, it is a solution which addresses all aspects of a contract's lifecycle – including contract creation, contract negotiation, contract signature and compliance and obligation management as well as reporting, alerting, and escalations. With proper contract management processes and automation solutions in place, sales teams can close deals faster, contract opportunities can be readily identified and pursued, and what has become the strategic tasks of managing your contracts can take place automatically and with more efficiency.
Close Deals Faster
The process of having a customer select you, beating out your competition and ensuring that the deal actually closes - as opposed to the dreaded no decision - is a significant challenge. Adding internal inefficiencies around your contract process is an unnecessary addition to an already arduous process. You need not provide your competition with even the smallest opportunity to derail your deal.
A system which provides automated contract assembly and pre-approved templates can reduce your sales cycle substantially. The ability to source fall back language provisions which have already been approved by management and to track where and with whom the contract is in the approval cycle also contributes to a more efficient and effective sales cycle. Further improvements can be made to this process through the use of electronic signature. This single improvement alone can significantly impact deal closure time – both internally and for your customer. According to Bryan Ball, a Research Director for the Aberdeen Group, a technology research and analysis leader, "The task of tracking down and securing necessary signatures causes delays with the contract management process. 'V' and 'C-level' approval or authorization is often required before execution can begin." Delivering a contract to an executive's inbox with concise signature directions and a simple click and point interface is far more efficient than printing a contract, scheduling time or tracking down the appropriate executive for signature, scanning and filing the contract, electronically or otherwise.
A key element to closing deals faster and to ensuring that your sales team leverages the efficiencies made available to them through a CLM system is to provide this functionality where they "live". Sales teams tend to live in their CRM systems – Salesforce.com being a prime and perhaps a leading example of a CRM system. IACCM notes that "Those who leverage an integrated holistic sales automation platform consisting of CRM and contract management rated their capabilities higher than their counterparts who leverage stand-alone contract management solutions. The key observation from these results is that contract management automation solutions that integrate with broader sales automation tools allow superior levels of empowerment and visibility, removing many inter-functional frustrations and enabling the growth of collaboration between those on whom sales success depends."
We've all faced end of quarter crunch – it's critical to have a system which facilitates efficient deal closure. Cash can be collected more quickly, revenue can be recognized faster, and overall performance can be improved.
Readily Identify Opportunities
Whether you are a buyer or seller, a CLM system can be leveraged to identify new opportunities. On the sales side, opportunities present themselves in the form of product upsell, solution expansion, met performance guarantees, and contractually agreed to price increases. Closure of the initial client engagement – prior to the establishment of a trusted relationship – is generally far more challenging than contracting additional opportunities downstream. Given the investment made into these initial activities, downstream opportunity follow up and footprint expansion are straightforward strategies for attaining sales goals. With inevitable organizational change, it is critical to keep site of this organizational knowledge and opportunity. Contract dashboards readily lend themselves to a full 360 degree review of clients from a contract, solution, renewal and obligation perspective.
On the buy side, such opportunities exist in the form of leveraged buying and volume discounts, pro-active renewals or terminations, and assurances that you are, in fact, receiving what you've contracted the other party to deliver within the time frames and quality parameters promised. A tremendous amount of time and effort were likely expended to negotiate these terms and conditions into your contracts. It's of critical importance to ensure that your organization is receiving the benefit of these investments.
Obligation management, a key element of robust CLM systems, paired with the proper alerting, reporting and escalation mechanisms allows these opportunities to be identified, quantified, and managed to resolution. On the buy side – and also the sell side – these systems can be paired with a variety of back end systems including financial systems to also accurately monitor and manage contract spend.
Manage More Effectively and Efficiently
A CLM system, properly implemented and managed – can have a significant impact on your company's margins. From a top line perspective, the strategies noted above directly impact revenue generation. From a bottom line perspective, introducing process efficiencies also provides material impact. With a CLM system, the right resource can focus on the right problem – and do so efficiently. Highly paid legal counsel no longer be employed for less strategic purposes, sales processes can proceed more efficiently and the contract management team has easy access to all of the resources necessary to effectively manage their contracts. Effective contract management processes directly contribute to both greater sales and improved margins – and directly contribute to your competitive advantage.