Contract Lifecycle Management. The three words are used a lot but really, what is a contract lifecycle. Here we break down each step of that lifecycle and how a CLM smooths out that process.
Businesses and firms spanning many key industries must effectively manage the life cycles of their contracts or face increased risk, lost revenue, and damaged reputations. The most effective way to achieve this is through a process called Contract Lifecycle Management (CLM).
Contracts go through multiple stages and will be handled by several departments such as sales, procurement, and legal departments. Managing the workflow between different personnel and other parties can be a complex process. CLM systems help organizations manage multiple contracts through every stage of their lifecycle, from the initial request to completion and potential renewal.
Managing contracts across an organization’s departments can potentially take a lot of time and energy. However, the right enterprise-level CLM software solution can streamline contract management at each stage of the contract lifecycle, including:
The right CLM solution can help an organization better meet its contract management goals, including risk mitigation and data security, improved compliance, better workflow efficiency, and even increased revenue.
As mentioned, contracts go through multiple stages during their lifecycles. Organizations must meet certain benchmarks in order to manage them efficiently. CLM is the process by which this is achieved through the following stages.
When a contract is initially requested, this is the point at which an organization authors a draft of the contract. This draft includes the main obligations of the agreement, important milestone dates, adherence to regulatory compliance, and other terms. The details of the contract will then be negotiated between all concerned parties. Once negotiations are agreed upon, the contract will be reviewed and approved internally. Parties will then sign the contract.
CLM provides the ability to use standardized contract templates and clause libraries to manage language across multiple contracts. It also allows parties to securely sign legal documents and automate and manage workflows across all versions of a contract. That way nothing is lost in the process, and decisions can be later reviewed.
Once a contract is agreed upon and signed, this is only the beginning of its lifecycle. Ensuring a contract’s terms are met, that it performs well, and that compliance standards are adhered to means contracts must be effectively stored and organized. This is also crucial to inter-departmental workflow management.
CLM software allows for the digital storage and organization of contracts. A customizable contract repository will provide quick access, making it easy to search for individual contracts or clauses and view customized charts, dashboards, reports, and saved views.
Contracts can undergo multiple changes when negotiated or renegotiated, and they need to strictly comply with global and domestic regulations that may change over time. It’s crucial to avoid mistakes that can lead to increased risks, which is why the ability to track all drafts, changes, and collaborative notes for a given document can be crucial in managing milestone dates, compliance, and important deliverables and terms of a contract.
Every contract’s performance must be assessed based on how it impacts an organization’s expectations and KPIs, as well as to protect against non-compliance and issues such as vendor fraud. A CLM software tool can produce customizable reports to help analyze performance in terms of quality, efficiency, timeliness, and cost savings, eliminating bottlenecks to boost workflow efficiency and productivity.
CLM’s nuanced approach to monitoring performance across departments, including automated alerts, escalations, and assignments via integrated messaging, allows users to better target underperforming contracts and make better decisions when renegotiating.
Security is often one of the top priorities of contract management. Data breaches can be costly not only in terms of financial losses, but also damaged reputations and unhappy stakeholders. Sensitive information such as intellectual property, pricing data, or confidential customer and employee data must be protected.
CLM software can provide high-level data security with multi-level access and permission controls. It can also give you the infrastructure to host third-party audits and provide disaster protection to mitigate the risk of potential data breaches. When investing in a CLM platform, security should always be a paramount consideration.
Analyzing contracts can provide crucial insights in how they perform over time. It’s important to analyze both individual contracts at the end of their lifecycle and overarching trends in how contracts perform. In addition, contracts also can become obsolete for various reasons. The language of regulatory compliance, for instance, evolves over time. Contracts may also face other issues such as breaches, issues with the language of clauses, and missed outcomes.
A disorganized system for managing contracts without a centralized repository and streamlined workflow can lead to subpar analysis outcomes. CLM software provides the tools to efficiently analyze contracts for better outcomes across your entire enterprise. Both post-analyses of completed contracts and an analysis of your entire portfolio are possible with the right tools.
Being able to quickly access contracts and clauses according to customized categories, as well as the ability to view a contract’s entire history across workflows, translates to more effective and compliant contracts across departments.
Ineffective contract management can lead to bad business outcomes in both the short and long term. Analyzing contracts using a centralized repository, such as CLM platforms provide, allows organizations to:
In addition, CLM programs drive more revenue toward a business by reducing costs associated with contract management. By analyzing the internal workflows of a contract’s lifecycle, all departments can benefit from shorter turn-around times, better negotiations, and less risk.
CLM software helps your organization achieve this via AI-driven systems such as workflow automation and streamlining, quality control management, and overall faster authoring, approval, execution, and post-execution contract management. This leads to team members spending less time on processing and executing contracts, less legal spend on contracts, and faster turnaround times.
Using a CLM can also reduce management costs by helping maintain compliance and secure data, avoiding costly legal action, as well as allowing increased spend control through automated workflows and other tools for sales and procurement departments. By investing in an enterprise-level CLM system like Agiloft, your organization can ensure your contracts are efficient, compliant and secure, perform to optimized standards, and are managed in a streamlined and centralized system that significantly reduces costs.
To explore how a CLM system can benefit your organization, schedule your free custom demo here or contact us at +1 650 459 5637 or [email protected].
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