Legal vs Business CLM – Understanding the Distinction in their Contract Management Practices

Modern businesses are quickly moving towards digitization, especially since the advent of the Covid era. It has prompted businesses to move towards processes that only take a few hours from start to completion. Gone are the days when breaking a deal used to weeks from start to completion. In the digital age, this takes a few days or sometimes hours to finalize a deal. All this is possible with better tools and modern techniques available to analyze and implement a deal and the related contracts.

In the current scenario, contract management is not limited to legal teams as with improved contract management tools, other teams like business, sales, and IT are also adopting automated contract management solutions. Companies are quickly moving away from manual contract management as it is time taking and often leads to losses due to missed deadlines or incomplete deals.

Understandably, it is becoming important for contract administrators to understand the CLM (Contract Lifecycle Management) requirements of different teams to devise better contract management strategies. The idea is to increase the productivity of the teams working with specific contracts or general contracts with better coordination and role clarity.

In the following sections, we will look into the distinction between contract management practices of legal teams and business teams. We will understand how they are different and how understanding the distinction between them can help contract administrators in optimizing the CLM process for both teams to save time and increase efficiency.

Understanding Legal Team Requirements in CLM

Understanding the needs of the legal team as per their CLM requirements is an important part of optimizing the CLM system for the enterprise. There are various contract activities handled by the legal team of an organization. These include daily checking of vendor correspondence emails, routing and prioritizing business requests, inspection and verification of data integrity and accuracy, getting feedback from businesses and external parties, accomodating the corresponding changes, etc.

In all these day-to-day tasks, the legal team and corporate attorneys end up spending a lot of time that may otherwise be spent in real legal work. Thus, managing these tasks with technology, automation, and digitization should be the priority. Understanding other such requirements of legal teams will help in devising better CLM strategies and improve overall efficiency and productivity.

Following areas should be in focus while devising contract management plan for legal teams

When legal teams work with the business teams then it becomes their job to review legalities related to commercial contracts of business teams. If the administration monitoring the contract workflows of both the teams understand their requirement clearly then they will be able to improve the coordination between these teams. This will improve the turnaround time and productivity by saving important work hours lost in unnecessary hurdles due to lack of coordination.

How Business CLM is Different?

The business team’s contract management is more focused on the commercial aspects of the contracts. The agreements are more focussed on the financials like Pricing agreements, revenue sharing agreements, sales, procurements-related contracts, etc. The work of business teams related to contract management is to monitor the trail of financial transactions, financial planning based on contract revenue and spending, generating financial projection reports, among others.

Due to these requirements, business teams often need contract management systems that help them in deducing contract performance and dealing with commercial contracts. An efficient CLM system can significantly decrease the time spent in the analysis of contract performance by automating the generation of reports based on various parameters. The customized reports generated are easy to understand and help in devising suitable business strategies.

Advantages of Understanding the Differences

Contract administrators must understand the different requirements of business and legal teams as it will help them in devising roles and responsibilities of the individuals involved. Lack of role clarity may lead to mix-ups or unnecessary delays in workflows. If the roles and workflows are assigned as per the specialization and better coordination strategies then it presents unnecessary delays and hindrances.

Managing workflows like renewals, approvals, expirations, etc becomes speedier as the teams working on the contract will have clarity on assigning the workflow to the right individual. This also takes into account to whom the requests will be assigned in case of the non-availability of the assigned individual. This takes care of the workload management problem often faced by contract management teams across business areas.

Finally, a CLM strategy created after understanding the requirements of different teams helps in increased oversight over the contract management process. As multiple teams end up working on their respective part of the contract, there is less chance of any corruption or shady practices which could have been committed if a single team had all the control. This helps a lot to businesses sponsored or owned by governments or large-scale industries like power and energy.

The sheer volume along with the complexity of the contracts has prompted many organizations to work on improving their day-to-day contract management processes. From contract authoring to approval, all the companies are looking at ways to optimize these processes to save time so that their teams can focus on their specialized work.

With manual contract management leaving a lot of room for human errors and unnecessary delay, companies are looking at automated contract management tools that can reduce risk, simplify multiple teams working on contracts, and ensure contract consistency. With contract management tools being configured to the specific needs of organizations, it is inevitable that manual contract management will be done away with in the future, and only automated contract management will be considered for Legal, business, or any other team.