What is Contract Lifecycle Management? Contract Lifecycle Management is the effective and efficient management of the entirety of a company’s contracts. Contracts are legally-binding documents that specifically stipulate all the responsibilities of each party towards each other in a business setting. Should a breach of the contract take place, concerned parties can be taken into court and face legal actions.
Properly speaking, Contract Lifecycle Management Software will make the process of managing contracts more efficient. The benefits of integrating CLM into the company’s operations are significant. Many of these benefits are for the long-term gain of the company.
One important benefit, for example, is that a Contract Lifecycle Management Software greatly reduces the time needed to complete the process which allows companies to enter more contracts and agreements without having to double on the resources they spend.
Here are the stages of Contract Lifecycle Management.
Contract Request
The entire process of Contract Lifecycle Management starts with two parties agreeing to start a mutual partnership with each other. Contracts came into existence to act as a governing body stating the specific actions expected from both parties. In a Contract Lifecycle Management system, the essential contract metadata like projected dates for the start, and end of the contract, the proposed KPIs, etc.
Creating Contract Templates
A company will deal with a lot of contracts. Because of the sheer amount of agreements that a company will make, it would be more efficient to create templates instead of going through the repetitive process of drafting contracts, which usually have similar terms.
As contracts are legally binding, it is crucial that the language used is as clear as possible to eliminate the chances of misinterpretation. This is exactly the reason why many companies use Contract templates with boilerplate language. Boilerplate language is the language used in making generic or standard contracts.
Contract Authoring
The next step to the process of the Contract Lifecycle Management System is to write the contract. Because a contract template is readily available, an individual can easily pullout a template and fill in the necessary details. This will serve as the first draft of the contract.
Contract Negotiation
Even the most amenable of Contract terms will be subjected to negotiation. It is common business practice to try to negotiate the clauses, terms, and conditions of a contract.
This phase usually requires constant back-and-forth communication. A Contract Management System reduces the possibility of a miscommunication happening as it offers one messaging platform where all concerned parties can talk with each other.
The negotiation process will also deal with many versions of the document as it gets repeatedly edited. To avoid confusion, all the parties will be able to see only one copy of the document with all the changes recorded. This feature ensures that everyone is working on the current document.
Contract Review
Before any contract is signed, it is a must to do a thorough review of the contract. This step guarantees that the contract does not have any missing details that might affect how the contract is understood. A document riddled with many typographical errors also gives out the impression that the company is unprofessional.
Contract Approval
Contract Signing
One of the best functions of a Contract Management Software is its built-in e-Signature feature. Having a contract physically signed is a costly endeavor in terms of money, manpower, and time. Digital contracts can be signed remotely making it easier to add international clients into your roster. Electronically signed contracts are still legally binding and may be used in court.
Contract Execution
Once a contract is signed, be it physical or through digital means, all parties involved must follow through with all the terms and agreements stipulated in the contract. Compliance is the most important step as a breach of contract opens the company to legal action.
Importance of Contract Lifecycle Management Software
Standardize the Contract Management Process
With software involved, the entire process of contract management goes through an efficient and systematic procedure. Normally, multiple applications are used to manage contracts. However, this is streamlined by consolidating all of the processes into one program. This way, it is much easier to track all of the contracts and their progress.
Reduce The Needs For Manual Tasks
The manual process of contract management is one that is filled with tedious and unnecessary tasks such as the repetitive action of printing and photocopying. With Contract Lifecycle Management Software, the approval, negotiation and renewal steps are automated and thus eliminates all redundant steps.
Provide Valuable Insights
The entire contract management process deals with an enormous amount of raw data. The software translates these data into valuable insights that can then be used to help companies with decision making. This is made possible with analytics. Companies, regardless of size, would always appreciate helpful insights that could provide them with an advantage against their competition.