Contract Lifecycle Management

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Contract Lifecycle Management Perspective for Finance Executives

How Contract Lifecycle Management Helps Finance Executives Preserve Cash

As a CFO, you are always striving to gain control of spending, preserve cash, and reduce costs in an effort to improve your company’s bottom line.  Finance executives looking for a way to inject some vitality into revenues should start by examining their current contract management practices and tools. Efficient contract management is tied directly to profitability.

According to an Aberdeen Study, Contract Lifecycle Management and the CFO, companies that deploy contract lifecycle management systems realize a range of benefits including reducing revenue loss due to poor oversight of sales and supply contracts, and the ability to accurately manage cash and working capital.

By deploying a systematic approach to the development, approval, and execution of contracts you can:

Gain Visibility into Corporate Obligations
Contract lifecycle management creates transparency across the entire enterprise. It provides a clear view into how obligations are being met, where they are being met, and a means to measure and reduce the cost of meeting each contractual obligation. It gives financial executives the ability to trace the impact of a contractual obligation throughout the organization by policy definition and enforcement, cross-functional processes, and procedures.

Shorten Cycle Times
The timing of accounts payable and accounts receivable is a significant area in which cash leaks from the system.  Significant reductions in business cycle time preserves cash on hand. On average most companies wait 60 days to collect on receivables.  Putting an automated system in place allows for quicker, more efficient payment resulting from clarity of contract terms and minimizes the need for bank borrowing.

Mitigate Risk
Visibility into your active contract portfolio mitigates risk, ensuring the effective management of the process from initiation and negotiation to execution and expiration.  Contracts typically contain multiple terms and conditions that trigger cost penalties and potential liabilities, while Sarbanes-Oxley and other compliance initiatives have all but inserted government rules into contractual promises. An enterprise-wide contract lifecycle management system optimizes your internal and external relationships and protects your company in today’s changing regulatory environment.

How do you know if your company can benefit from a CLM Solution?

Answering the following questions will provide keen insight:

  1. Does your organization understand the rights and obligations of its contract portfolio?
  2. Can your organization put its finger on all outstanding contracts? If not, why?
  3. Have the inherent risks been identified and priced?
  4. Has your organization identified the potential uplift from automating its buy/sell side contract process?
  5. How are individual terms, conditions, clauses (TCC) being managed/controlled? Are there inherent risks?
  6. How is strategic contract data being entered into your ERP or accounting system?
  7. What is the time value of money for reducing your firm’s DSO?
  8. Where is the low hanging fruit/business pain for contract improvement? Buy side? Sell side?
  9. How will reducing the cycle time for the contracting process provide financial value to your firm?
  10. Does your organization have real-time visibility for all your contracts in the pipeline?

For more information on how CLM Matrix can help you improve your profitability and reduce overall business risks, please contact us.