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Why you shouldn't use your CRM for contract management

Charles Brecque
October 23, 2021

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Customer relationship management platforms (CRMs) allow sales teams to manage prospects and keep track of their progression in a commercial pipeline. Whilst pipeline management can be achieved from a well organised spreadsheet, CRMs offer tools, metrics and dashboards to make the business development process more efficient. Contracts are core to any commercial agreement which is why CRM systems now offer contracting capabilities to generate and sign agreements with prospects directly from their CRM profile. Whilst this can accelerate the sales process by empowering the business development team to  create agreements, a CRM should not be used to organise and manage contracts. This article highlights the limitations of CRMs for dealing with contracts and how they can be overcome with the right contract management system.

What is the difference between contract management and CRM?

A contract management system acts as a repository for contracts whereas a CRM or customer relationship management system keeps track of commercial opportunities and client interactions. CRMs have a more established role to play in business processes whereas contract management systems have historically been used by large organisations with legal teams. CRMs will offer invoicing and pipeline forecasting capabilities and in time have added the ability to generate contracts for prospects. Contract management systems allow the legal team to store and search contracts and keep track of key contractual terms such as obligations, renewals and expiries. A contract management system would not be used to keep track of prospects so why would you use a CRM to manage your contracts?

Contract management software helps you make and keep track of contract variations

CRM software often offer contract signing capabilities based on pre-approved templates which automatically populates the terms based on the opportunity’s information and the customer’s details. Salespeople can send the contract to the client for signature in a couple of clicks with this approach but it doesn’t offer the option to make changes to the contract’s structure and key legal terms. It is not unreasonable or uncommon for clients to request changes which means that the business development team’s legal counsel will need to review the requests and act on them. A more efficient approach is to empower business development teams with a contract builder so that they can make changes themselves which are already pre-approved by the counsel. Legislate allows these changes to occur even after a contract has been sent to a client which means the whole process does not need to be restarted.

Contract management software helps you keep track of legal updates

Legal updates are infrequent but need to be monitored closely. CRMs are not built to keep track of legal updates and might not offer efficient versioning which makes it difficult to know when a template was approved by who or if it is out of date. Equally, CRMs are not equipped for keeping track of template variations and what the variations mean. Templates can be adapted to specific clients or opportunities which need to be tracked as non-generic terms can lead to additional rights or obligations you need to be aware of. Moreover, the additional obligations often apply to team members who don’t have access to the CRM which is why it is critical that they are aware of them. Contract management platforms allow all team members to know which percentage of your contracts have non-generic terms and how they impact your business.

Contract management software extracts key contract insights to help you make better decisions

Whilst a CRM like salesforce can report on the total value of your pipeline and the time it takes to close opportunities, these values might be contingent on contractual conditions such as trials or break clauses. A contract management platform like Legislate will indicate the actual total value of your active contracts which means that it will factor in break clauses and other conditions which could invalidate the monetary value of a contract. This ensures you are not over-reporting and helps you better understand the risks which could jeopardise deals.

Contract management software can handle complex contract lifecycle workflows

CRM solutions offer automation for basic contract workflows but they will struggle with complicated contract workflows. For example, contracts sometimes need to be witnessed by a person who is not always known in advance by the person creating the contract or the person receiving it. When this happens, the contract will need to be taken out of the CRM's process and emailed to the prospect which defeats the purpose of the CRM's contracting capabilities. Contract management software offers contract lifecycle management capabilities which can be tailored to complex contract situations and signing requirements.

Contract management solutions offer a great contracting experience to your customers

A pdf contract generated by a CRM is convenient to send for electronic signature but difficult to process and manage post signature for the invited parties. Contract management platforms like Legislate automatically create a vault for invited parties so that they can securely access their contracts from one place, pre and post signature. Legislate also offers different views of contracts to clearly represent key information such as rights and obligations so that they are understood without needing to sift through the actual contract. This offers a more complete contracting experience to your customers which establishes strong foundations for your commercial relationship.

This article has highlighted how the efficiencies unlocked by CRMs do not transfer well to contract management and can even create legal risk for your organisation. Using a contract management platform in parallel to your CRM addresses these problems whilst offering a better contracting experience to your customers. Legislate is a great platform for creating and managing lawyer-approved contracts in parallel with your CRM so that you can sign agreements faster. To create your first contract for free, watch a tutorial, book a demo or create your account now.

About Legislate

Legislate is an early stage legal technology startup which allows large landlords, letting agents and small businesses to easily create, sign and manage contracts that are prudent and fair. Legislate’s platform is built on its patented knowledge graph which streamlines the contracting process and aggregates contract statistics to quickly unlock valuable insights. Legislate’s team marries technical and legal expertise to create a painless, smart contracting experience for its users. Legislate is backed by Parkwalk Advisors, Perivoli Innovations and angel investors.

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