In today’s rapidly changing business environment, addressing the challenges of contract management has become more critical than ever. Legacy systems, often burdened with inefficiencies and manual processes, struggle to meet modern business needs. The post-war era has further accelerated the demand for innovation in contract management, calling for solutions that streamline processes, ensure compliance, and reduce risks.

In this article, we will delve into how modern Contract Lifecycle Management (CLM) systems can help resolve these challenges, enhance visibility, ensure compliance, and optimize business performance.

Understanding the Contract Management Lifecycle

Before exploring how technology can address key challenges, it’s essential to understand the contract management lifecycle. A well-structured lifecycle includes the following stages:

• Contract Request
• Authoring and Negotiation
• Approval
• Execution
• Storage and Retrieval
• Compliance Monitoring
• Renewal or Termination

Each of these stages can present unique challenges, especially when managed with outdated systems. Organizations today require automated, flexible, and scalable solutions to manage contracts efficiently and minimize risk.

Resolving Challenges of Contract Management:

Modern CLM systems offer a range of advanced features that enable businesses to overcome common obstacles in the contract lifecycle. Let’s explore some of the major challenges and how Zycus Contract Management Software can help resolve them.

Challenge 1: Low Visibility

Low visibility into contract terms and performance can result in missed opportunities, unaddressed risks, and revenue leakage. Many organizations struggle with the inability to track critical contract details and understand contract utilization.

A central contract repository is essential for ensuring high visibility across all contracts. By centralizing contract data, businesses can track essential contract terms, monitor performance, and receive timely alerts for critical milestones such as expiration dates and contract variations.

1. Tracking Key Terms: Identify essential contract terms such as expiry dates, auto-renewal clauses, and compliance requirements. Set up automated alerts to ensure timely renewals, renegotiations, or termination.
2. Utilization Analysis: By analyzing trends in contract utilization, businesses can assess whether the terms are being followed, and take corrective action if necessary.
3. Reviewing Evergreen Contracts: Evergreen contracts that renew automatically need special attention. Reviewing these contracts regularly allows organizations to renegotiate terms, ensuring they align with current business needs.

These functionalities offered by Zycus Contract Management Software empower businesses to stay ahead by optimizing contract performance management and minimizing the risks associated with poor visibility.

Challenge 2: Ensuring Compliance

Compliance is an essential part of contract management. Failure to comply with contractual obligations can result in financial penalties, legal disputes, and reputational damage. Legacy systems often lack the ability to track compliance effectively, making it difficult for organizations to ensure that contract terms are being adhered to.

Check out our process: Contractual Obligation and Compliance Management

One way to ensure compliance is by integrating contracts with an organization’s Enterprise Resource Planning (ERP) system. By doing so, businesses can:

1. Monitor Purchase Price Compliance: Regularly review contract terms against actual purchase data to ensure that pricing and rebate terms are being followed.
2. Track Utilization Metrics: With a centralized contract repository, organizations can track contract usage and monitor key compliance metrics, ensuring adherence to agreed-upon terms and conditions.
3. Automated Alerts for Compliance Risks: By leveraging automated alerts and tracking mechanisms, organizations can detect compliance risks early, allowing them to take preemptive actions.

Challenge 3: Lack of Standardization

One of the biggest challenges faced by procurement teams is the absence of standardized contracts and templates. Without standardized processes, teams spend excessive time negotiating terms, leading to inefficiencies and prolonged cycle times.

Modern CLM systems allow organizations to create and store standardized contract templates and define a clause hierarchy. This brings consistency across all contracts and ensures faster negotiation cycles.

1. Easy Access to Templates: By storing standardized templates in a central repository, sourcing managers can quickly access them, reducing the time spent drafting contracts from scratch.
2. Global Changes to Frequently Negotiated Terms: Organizations can track which contract terms are frequently negotiated and implement global changes to streamline future negotiations.
3. Clause Hierarchy for Regional Adaptation: A clause hierarchy allows businesses to tailor contracts to meet regional requirements, ensuring legal and regulatory compliance without deviating from the standard contract framework.

This standardization not only accelerates the contract creation process but also reduces errors and inconsistencies.

Challenge 4: Long Contract Cycle Times

Lengthy contract cycle times can delay business operations, reduce efficiency, and lead to missed opportunities. Traditional contract management processes, which rely heavily on manual signatures and approval hierarchies, are often slow and cumbersome.

The introduction of eSignatures and automated approval workflows can significantly reduce contract cycle times. By automating manual tasks, businesses can accelerate the entire contract management process.

1. eSignatures: With eSignatures, organizations can eliminate the need for physical signatures, reducing delays and enhancing security. This is particularly useful for global organizations that need to manage contracts across multiple geographies.
2. Automated Approval Hierarchies: Set predefined approval workflows based on contract categories, spend thresholds, and other criteria. This ensures that contracts move smoothly through the approval process without bottlenecks.
3. Clause-Level Approvals: Automating clause ownership and approval processes allows for faster reviews and feedback, ensuring that the contract moves forward efficiently.

These features help organizations shorten contract cycles, enabling faster decision-making and execution.

The Importance of Adapting to New Contract Management Technologies

As Andy Grove, co-founder of Intel, once said, “There is at least one point in the history of any company when you have to change dramatically to rise to the next level of performance. Miss that moment—and you start to decline.”

In the world of contract management, that moment has arrived. To remain competitive, organizations need to embrace modern Contract Lifecycle Management (CLM) systems that offer the flexibility, scalability, and automation necessary to manage contracts effectively in today’s dynamic business environment.

By investing in the right technology, businesses can:

• Improve contract visibility
• Ensure compliance with contractual obligations
• Standardize contract processes
• Shorten contract cycle times
• Reduce risks associated with non-compliance

Transitioning from Legacy to Modern CLM: Insights from Telekom Malaysia

Conclusion

In conclusion, modern technology offers powerful solutions to the common challenges posed by legacy contract management systems. By adopting a new-age CLM system like Zycus Contract Management Software, organizations can significantly improve their contract management processes, enhance compliance, and reduce cycle times, while ensuring a higher return on investment.

As your business evolves, so must your contract management practices. The ability to track, manage, and optimize contracts is essential for driving operational efficiency, reducing risk, and improving overall business performance.

Ready to transform your contract management processes? Learn more about how Zycus iContract can help your organization achieve efficiency and compliance. Schedule a demo with Zycus today.

Related Reads:

1. The Paradigm Shift in Contract Lifecycle Management: Why 2024 Demands a Rethink of Your CLM Strategy
2. Challenges in CLM Adoption and the Ways to Overcome them
3. Smarter Contract Management: Exploring Use Cases
4. Embracing Digital Transformation: How AI and Blockchain are Revolutionizing Contract Lifecycle Management
5. Ultimate Guide to Contract Management: Benefits & Best Practices
6. Press release: Change is the Only Constant: Zycus’ New Age UI
7. How AI Can Solve the Biggest Challenges in Procurement
8. The Powerhouse of Production: A Guide to Direct Procurement in the Digital Age