Contracts are essential for commerce, but they can be difficult to manage and sign efficiently. Luckily, there is Contract Lifecycle Management software.
CLM systems streamline contract management processes by centralizing digital data and creating a streamlined notification system. They also provide valuable analysis and reporting capabilities. They make it easy to track legal compliance and improve vendor management.
Requesting
Contracts are a staple of commerce, and they are critical to an organization’s ability to manage commercial risks. Despite their value, contracts can be time-consuming and expensive to create. Contract lifecycle management (CLM) is an approach to streamlined contract creation, review, approval and execution, saving organizations money and time along the way.
During this stage, the contract team will request a new contract and gather key details such as the goods or services being requested, the terms of the agreement, important milestone dates, adherence to regulatory compliance, and other contract requirements. The contract team will then draft the contract from a library of preapproved clauses and templates or from scratch.
The request handling stage also includes setting up robust, flexible automated contract workflows. Depending on the size of the organization, this may include holding virtual, productive system training sessions to support employee adoption and maximize user-engagement. This is a great way to ensure that users have the right knowledge and can access the features they need to be successful. It is also an effective way to support business processes, improve transparency and collaboration, and increase efficiency.
Authoring
When contracts aren’t properly written, it can result in poor communication and misunderstandings. Using a CLM solution ensures all parties are on the same page. A central repository of pre-approved contract templates makes it easy to speed up the process and maintain data consistency.
Often, contracting involves multiple stakeholders with differing needs and priorities. Using a CLM tool will enable teams to streamline the process by allowing them to set up automated workflows that will prompt all involved parties when their action is needed.
Once the contract is ready for signature, all departments and personnel need to review – and approve – the terms and conditions. This step can be a major bottleneck in the process, resulting in delays. Having a centralized process and the right tools can reduce the amount of time spent on contract approvals by eliminating the need to email documents back and forth. This allows for a faster turnaround and improved customer experience. A centralized contract repository will also make it easier to find contracts, clauses, and associated documentation when the need arises.
Negotiating
Contracts can have complex terms and obligations that require an immense amount of attention to detail. It is not uncommon for contracts to go through multiple rounds of redlining and edits before reaching an agreed upon final draft that can be signed. Managing this process via email, phone calls and meetings can be overwhelming for teams.
When evaluating CLM tools, it is important to look for a solution that offers seamless integration with all aspects of contract management including document generation, approval routing, eSignature and contract repository. This will help to streamline the process and ensure data accuracy.
The contract drafting and negotiating phases typically involve significant back and forth over contract terms, payment rates, delivery timelines and non-compete clauses. In the B2B world, this can be highly complex with people rewriting and redrafting the entire contract, sometimes using templates and other times starting from scratch. The ability to track each round of revisions and who is responsible for them is a must in the negotiation phase. It is also a good idea to prepare before negotiations begin by researching field standards, the other party and contract law.
Approval
Businesses deal with a high volume of contracts each day, and failing to manage them properly can result in legal trouble, monetary fines or excess manual labour. This is why CLM is essential to any business that uses contract agreements as part of their operations.
One of the key benefits of Contract Lifecycle Management is enabling teams to build compliant, professional contracts with speed and efficiency. With pre-approved clause libraries and contract templates, teams can establish formal processes that speed up the process and ensure contracts use the most up-to-date documents.
This is also where the power of automation comes into play - the ability to create flexible automated workflows that streamline and standardize every action and step a contract takes. This reduces time and effort, and it helps to eliminate potential errors that can occur when a team member edits or deletes the wrong document. In addition, version control means that the platform keeps a record of any changes that are made to contract drafts, so teams can quickly and easily find the right versions of documents at any time.
Execution
During the contract execution phase, legal and business teams work with signatory authorities to complete the final steps of legally binding contracts. This may include depositing down payments for services or drafting and exchange of documents for final delivery.
Throughout the 1990s and 2000s, vendors in the contract management market began to advertise capabilities that included everything from eSignature tools to document management solutions. As software-as-a-service (SaaS) became the norm, these specialized tools evolved to incorporate a range of contracting features and renamed themselves “Contract Lifecycle Management” tools.
As an added bonus, most digital contract management solutions also allow you to view your company’s performance with key contract data points. Using this insight, you can identify areas where your current strategy is failing to meet your KPIs and implement changes. To further maximize the benefit of your CLM solution, develop a team dedicated to implementing and maintaining the system. This team can assist other departments with questions and troubleshooting when needed. This can alleviate the strain on internal resources and ensure the adoption of the new solution.
