Contract Lifecycle Management Automation
From CPQ to CLM – The Next Step in the Manufacturing Sales Journey
My prior blog posts discussed CPQ software benefits and CPQ software best practices. I’m going to continue this manufacturing sales automation thread further with the next step in the journey which is Contract Lifecycle Management.
Configure Price Quote (CPQ) software can save sales people time and improve accuracy when creating highly configurable or complex quotes. But that's not where the complexity ends. Once the customer agrees to the quote the proposal or contracting process begins. Proposals for highly configured products often include or accompany Master Service Agreements (MSA), Statements of Work (SOW), specification documents, warranty documents and other terms and conditions that stand in the way of a completed sale.
Contract Lifecycle Management (CLM) software can bring the same automation, repeatability and speed to the contracting process as CPQ software brings to the quoting process. In fact, when CPQ software is integrated with CLM software it’s a smooth and continuous process.
Contract Lifecycle Management software generally performs a number of key functions.
- Document Generation. When CPQ software and CLM software are integrated, the quote automatically inserts into the right section(s) of the right contract(s). When quotes automatically feed the designated contracts, you eliminate the age old problem of sales people using non-current proposal or contracting documents. Quote and proposal document revisions are linked so that changes to any figures or shared language among documents stay in sync.
- Document Customization. Individual customer and quote variables can designate which contract templates should be used and pull just the right verbiage from libraries of content blocks. Using the right standardized language which may vary based on the customer or product lowers legal, financial and regulatory risk. Some contract management software also integrates with rich media such as catalogues of images and libraries of charts. This is an area where integration between CRM software and CLM software can add a lot of value. Flags or data values on the CRM customer record (such as customer type, location, industry or other attribute), opportunity or quote record (products, warranties, prices, discounts, dates, margins, etc.) or possibly the salesperson or reseller record can trigger certain content blocks and clauses to appear or not appear in contract documents.
- Approval Automation. After the sales person creates the sales agreements, those documents typically begin the review and approval process. This may include credit approval, management approval, legal approval and more. CLM software facilitates this with serial, conditional or parallel workflow-based routings, next-in-line review notifications, change management, revision or version controls, red lining controls/editing visibility, approval processing and electronic signatures. This streamlining is a significant benefit for sales managers who are often the first line of review, and who incur an extremely time consuming process in order to mitigate inherit risk to the company. Managers don’t want to be the bottlenecks in reviewing proposals, and more importantly don’t want an inaccurate or incomplete proposal that introduces post-sale risk or downstream consequences to the company.
- Negotiation Transparency. Contracts tend to get creative in sometimes unusual ways during the negotiation process. In fact, this is the time when many businesses unknowingly inherit risk which then becomes exposed further down the road because certain terms or language that were added or removed slid under the radar. CLM software improves negotiation transparency with revision controls, often by either highlighting all edits from standard language or prior versions, or by displaying contract versions in side by side comparisons. Workflow rules can be applied so that new changes to contracts automatically alert designated recipients.
- Lifecycle Management. Contact management software can help stay compliant with contract obligations, help mitigate contract exposures and monitor milestones, extensions, renewals, expirations and terminations. Common post-sale features include defining general and long-tail notification parameters based on renewal dates, expiration dates and other renegotiation opportunities. Events like renewals also offer an opportunity to review contract history in order to negotiate more favorable terms or terminate an unprofitable contract.
- Document Management. This type of technology brings visibility, traceability, audit history and management reporting to the entire quote to termination process. With a centralized document management system, you reduce document clutter, missing documents and multiple versions of documents residing in multiple places. This keeps the team in sync, communication with the customer accurate and gives the company document control assurance.
Contract Lifecycle Management software automates an otherwise largely manual and labor intensive paper process. With supporting technology, contracting documents are assembled in dramatically less time and approval processes are streamlined thereby decreasing sales cycle durations. This automation also enables repeatable processes which improve document accuracy and internal compliance measures in order to reduce risk and liability to the company.
The Point is This
Contract Lifecycle Management software benefits such as increased salesforce productivity and sales cycle acceleration are powerful capabilities for sure, but the two most strategic benefits are clearly the reduction of risk and the proven increase in revenue production.
In an Aberdeen report titled, Configure-Price-Quote: Best in Class Deployments that Speed the Sale, the research firm found that sales pros using contract management software out-performed those without this technology in terms of team attainment of sales quota (64% compared to 46%), percentage of sales reps achieving annual quota (62% compared to 46%), lead conversion rate (36% compared to 30%), proposal volume (18.2 compared to 16.6 proposals per rep per month) and sales cycle duration (3.46 compared to 4.56 months).