How CLM Software Streamlines Contract Negotiations
Everyone’s involved with a contract from time to time. For example: Purchasing a home; leasing a car; or starting a job. And your employer has definitely been involved with countless business contracts. Vendors, property, employment, sales, intellectual property…the list goes on. While every contract is unique, they all contain certain important elements. As we all know, a contract is a legally binding agreement between parties. One party makes a promise or an offer, which the other party either accepts or suggests a counter-offer. Once the terms are negotiated and agreed upon, the contract is signed and becomes a legally binding document. It’s crucial of course that the negotiations are done accurately but more importantly, correctly record the intended agreement between the parties. Where there’s an error or unintended ambiguity, the results can have devastating implications – financial, legal, and sometimes even personal.
According to Forrester, it takes an average of 3.4 weeks for a business to get a contract approved. But for companies using contract lifecycle management (CLM) software, they can reduce that time by an average of 82%. This is a combination of improving efficiency by having properly organized and automated workflows, but also by using a CLM tool to aid negotiation. And these things can’t be rushed. If errors are made, then the consequences can be significant and affect both a company’s bottom line and its reputation. CLM technology can significantly help with contract negotiations, whether they are simple or complex.
What is Contract Negotiation?
Companies negotiate contracts all the time – with suppliers, customers, employees, etc – but negotiation is needed to ensure that both parties reach an agreement on a set of legally binding terms to procure favorable terms and minimize financial, legal, and operational risk, ensuring long-term success for both parties.
Types of Negotiation:
High-level: This type of negotiation involves people making significant redlining and edits throughout the entire contract. It is very common within the business-to-business (B2B) world that each contract is unique and must be individually drafted depending on the situation. This could include going back and forth on contract terms, payment rates, non-compete language, and additional information that is subject to change. High-level negotiation likely has a lot of redlining, or collaborative edits, to ensure both parties agree upon the terms.
Mid-level: This type of negotiation involves people changing contracts by adding or removing clauses and relies heavily on standardized agreements. While these contracts may require less time, they still demand thorough review, analysis, and a collaborative effort. Full redlining typically isn’t necessary, but edits are still likely from both parties. Mid-level negotiation is more common with companies that work on a contract basis, such as creative firms or design agencies.
Low-level: This type of negotiation is usually fairly simple, dealing with bulk contracts, such as NDAs. Typically only a few small changes are made due to their more-common nature and standard language.
Negotiation-free: This type of negotiation means that the terms provided are entirely non-negotiable. This is most common with vendor agreements or terms of service.
How CLM Software Streamlines Contract Negotiations
Contract lifecycle management software provides intuitive, robust capabilities to streamline and improve the entire, end-to-end legal lifecycle, including negotiation processes. It makes it easier for legal teams to expedite issues and author and review contracts so they can add more strategic value and proactively protect the business.
CLM software provides a centralized repository to house every version of a contract, with all its relevant information. From one location, all key stakeholders can quickly and easily access the latest version and make changes that can be viewed by others in real-time. It also organizes key performance obligations (KPIs) and offers greater qualitative and quantative insight into negotiations allowing legal teams, general counsels, and contract management staff to proactively improve their negotiation processes and skills. Finally, with eSignature capability, getting signed approvals from both parties is automated, streamlined, and stored.
CLM capabilities that help streamline contract negotiations include:
Digging through files, searching through emails, or other exhausting methods of trying to locate contracts is no longer necessary. With a smart CLM platform, contracts are securely stored in one repository for easy, instant access. Leveraging filters, you can search and sort contracts by date, type, status, industry, and more.
And just as important, it allows you to view the latest version in real-time, rather than combing through multiple peoples’ edits and redlining – which can become highly confusing. Every contract iteration is stored and timestamped, so you know who worked on the contract and when. The ability to access the most up-to-date version helps decrease miscommunication, inaccuracies, and critical errors. And it saves valuable time.
Contracts can be simple or very complex with highly-specific terms and obligations that require extreme attention to detail. This obviously takes quite a bit of time, knowledge, and energy – and often multiple people. It can even turn into spending additional money on outside attorneys or firms. Managing all of this via phone calls and emails can turn into chaos – creating delays, missed deadlines, and even lost revenue.
Contract lifecycle management enables better contract authoring from the initial draft. You can add additional resources, both internal and external, during the redlining and negotiation phases so everyone is equally aware of the contract’s progress. All contributors can view their assignments and responsibilities, as well as be on the same timeline.
In addition, a CLM system stores a customizable library of clauses and document templates that can be referenced and used to draft a contract. Not only does this save you valuable time, but you are assured the language is accurate, compliant, and current with today’s laws and regulations.
Ensure Collaboration and Audit Trails
Accidentally-deleted emails, lost hardcopy notes, and endless voicemails are in the past. CLM software enables seamless collaboration and communication between invested parties, while storing and tracking every interaction. Lawyers, contract managers, or other stakeholders can easily review the contract’s history and get up-to-speed on the contract’s progress.
Learn how ContractPodAi’s CLM platform helps streamline contract negotiations to save you time, build better relationships, expedite important contracts, and improve overall CLM processes. Our team of experts offers best practice strategies for CLM success.
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