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Contract Lifecycle Management: What It Is and Why Your Business Needs It

Contract Lifecycle Management: What It Is and Why Your Business Needs It

Managing contracts is an essential operation in any organization, and it’s one that poses significant risk if left to manual methods. Businesses run almost every function based on contracts—from supplier arrangements to client work to leases, contractor agreements, and more. Keeping up with dozens of contracts’ renewal dates, ensuring you redline each accurately, and getting them all approved in a timely manner are just three contract-based tasks that can take time and introduce errors. To streamline contract work, organizations are relying on contract lifecycle management.

Contract lifecycle management (CLM) is a business practice that encompasses the creation, governance, and termination of contracts in an organization, and it often includes technology such as contract lifecycle management software. Below, we look at what exactly CLM entails and how CLM software supports successful, speedy contract management.

Understanding Contract Lifecycle Management

The contract lifecycle involves multiple stages, including:

  • Creation — generating documents, either from template or from scratch.
  • Negotiation — redlining, editing, and processing multiple versions.
  • Approval — obtaining signatures from all parties.
  • Storage — safekeeping in confidential databases.
  • Amendments — at any time in the process.
  • Renewal — re-negotiating if needed.
  • Termination or expiration — concluding the terms.
  • Analysis — reporting from CLM software that allows you to see how effective your CLM processes are.

Throughout all of these stages, organizations must preserve the integrity of contract documents with version tracking and history as well as security protocols to stay compliant. CLM software introduces automation to each of these lifecycle phases so organizations can remove human touches from certain points and reduce the risk of error. Automation also greatly speeds up each of these stages.

The Importance of Contract Lifecycle Management

Contract lifecycle management and CLM software are essential in any organization in order to:

Streamline Operations
If left solely to humans, contract management is error-prone and time-consuming. CLM software addresses this problem with automation. For example, in the negotiation process, CLM software allows parties involved in reviewing and redlining a contract to do so within the solution, so all edits update in real time. Users can then share the contract file with external parties through the software so all parties have the most updated version. CLM software also speeds up steps such as obtaining signatures, which can be done electronically through secure eSignature tools — saving tons of time by avoiding email, fax, or physical mail.

Mitigate Risk
It’s easy to miss important dates in the contract lifecycle process — such as renewals — if your CLM is done manually. But with CLM software, your team is automatically prompted to begin renewal processes and potential renegotiation. Aside from renewals, there are dozens of other date-based obligations in contracts that are vital to stay on top of, and CLM software ensures your team keeps up on any important dates to avoid financial and legal risks.

Ensure Compliance
Related to risk is the compliance factor. CLM software ensures organizations’ contract lifecycles adhere to their specific industry regulations and compliance laws. With complete version tracking and history, you can retrieve documents and their paper trails easily to demonstrate compliance, and you can ensure no inappropriate parties gain access to contracts.

Benefits of Implementing CLM in Your Business

Among the many benefits of integrating CLM into your organization are:

Cost Savings
CLM software allows you to offload much of the manual work involved in managing contracts from humans to technology. With your team freed from having to follow up on emails, physically retrieve contracts from filing cabinets, and address bottlenecks from mismatched draft versions, you’ll see savings in time, labor, and administration.

Improving Efficiency
With fewer human touches, you’ll also see an increase in efficiency. Automation can assist in generating contracts from templates, keeping track of multiple versions, prompting parties to provide signatures, properly storing contracts, and more. CLM software helps you avoid backups in processes as well by ensuring all parties have updated drafts and contract work is done internally through a single portal.

Enhancing Collaboration
One of the biggest roadblocks to speedy contract negotiation, approval, and execution is collaboration. When using paper and manual management methods, contracts have to physically move among parties, undergo laborious review processes, and risk getting damaged or lost. CLM ensures internal parties use a central hub to communicate about electronic contract documents, and you can streamline collaboration through the software. The solution also allows you to improve collaboration with external parties who have secure access to updated versions when you choose to share them.

Key Features to Look for in CLM Software

When investing in CLM software, be sure to prioritize the following components:

Automation and AI
As mentioned, automation is an essential feature of CLM software that introduces efficiency and accuracy across the entire contract lifecycle by offloading contract tasks from humans. Emerging technologies like artificial intelligence support automation and can generate reports so you can analyze your CLM processes and pinpoint areas for improvement.

Integration With Other Systems
You’ll want CLM software to play nice with your existing technologies so you don’t have to add another tool on top of your tech stack. Choose a solution that can seamlessly integrate with software you already know and love so your team can easily adopt CLM and start accessing its benefits quickly.

Scalability and Customization
No single organization is like another, which is why it’s important to be able to customize your CLM software. The same tools that work for one business might not work for yours, so inquire with the software provider or your technology consultant about how you can tailor your solution. You’ll also want to ensure the CLM software is easily scalable so it delivers flexibility as your organization grows into the future.

Implementing CLM in Your Business

The first steps to implementing CLM in your business are to identify the proper stakeholders who will make decisions about process and technology, followed by determining what implementation process your organization will follow. After that, it’s important to work with a technology consultant who can get to know your organization’s goals and help you select the right CLM software for your business.

Once you’ve decided to onboard a solution, that consultant should be able to walk your team through training and adoption best practices so you can hit the ground running with your solution. Be sure to choose a consultant who will work alongside your team after the sale so you have a partner for ensuring the success of your CLM software.

Transform Your Contract Processes Today

CLM can provide cost savings, improved efficiencies, and stronger compliance in your organization across the board, but it can also improve your contract-based relationships. When contract processes go smoothly, all parties are happier. If you’re curious about what CLM and CLM software can do for your organization, get in touch with All Star.

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