Managing your contracts is not just about making sure you’re on top of expiration dates and getting business done. Proper contract management is essential for any organization looking to minimize legal, financial, and brand risks. The benefits of using a contract lifecycle management solution go well beyond just administrative organization. With contract lifecycle management (CLM) software, you can dramatically decrease the amount of time and resources required to manage your contracts by tracking and automating each step in a contract’s lifecycle.
What Is Contract Lifecycle Management?
You’ll see “contract lifecycle management” go by “contract management software” and sometimes “digital contract management system.” It’s a software solution that gives a business the tools to manage its entire contract management process effectively. They can automate contract creation, negotiation, and approval. With CLM, businesses simplify the process that includes:
- Requesting a contract
- Tracking that request
- Making sure the request has appropriate data
- Merging that data into the contract
- Getting the document signed and approved
- Monitoring the entire process through a graphical dashboard from request to renewal
- Administration of expirations and renewals
How Does Contract Lifecycle Management Work?
There are three elements involved in CLM:
- Intake of contract requests, which includes drafting contracts and using clause and template libraries.
- Executing contracts that involve negotiation, redlining, approvals, and signatures.
- Workflow automation and governance of a defined process for contract creation and execution.
Intake and Drafting
The solution provides a simple contract request form that users can populate with basic data to create a new contract for requests from users with limited access, such as HR and sales. Using this system of request forms for intake prevents data leakage and mistakes. External user submissions (vendors or customers) also follow this limited-user protocol.
Contract requests by power users such as a contract manager or member of the legal team open up the ability to log in, open a new record, and enter the required data for that contract. This gives the user much more functionality than a basic user if required.
Contract requests can also be generated by another system. A couple examples can be:
- Your CRM system knows when a project or opportunity is in a certain stage.
- You create a new vendor in your ERP system that has a certain vendor type associated with it.
These systems have enough information where the CLM solution can look for triggers and automatically get the data to create a new contract request rather than a user manually creating the contract request. There may be an “Enhance” stage to start the process that makes sure any data or questions required that cannot be provided by the initiating system are provided by the appropriate user.
Once the required data has been captured throughout the contract request review and approval process, the draft contract can be created by dynamically populating data into the appropriate location of the pre-defined contract templates from the contract request.
The solution allows you to use a clause library so the contracts can be assembled faster, and you can eliminate deviations from the standard and required legal language. Business rules will determine which clauses to use under specific circumstances, and users can add clauses manually throughout the review and approval process. Roles-based security will regulate access to certain clauses and templates to ensure users can only do what is within their realm of authority.
Negotiate – Redline – Approve
This aspect of CLM allows users to review the contract draft, negotiate with involved parties, and approve the draft. The solution enables users to perform the negotiation in the software and to review and redline the contract externally with enterprise file sync and sharing.
eSignature technology within the solution or in conjunction with the solution (i.e. DocuSign integration) allows parties to securely and digitally sign documents which saves time compared to snail mail, scanning, email, or fax.
As documents are edited internally or externally, the system will store each revision as an audit trail. Major and minor revisions are kept so users can refer back to see what has been changed and at what stage in the process it was changed. A compare tool allows different revisions to be compared to show the differences between revisions.
This part of CLM is focused on processes that control and traffic a contract request throughout its lifecycle. You’ll be able to eliminate the need to manually track and facilitate each step, and workflows can differ by role, contract type, or data within a contract record. Other benefits include:
- Using task lists with calendar reminders and email notifications to accelerate the process.
- Building workflow stages and statuses with strict or ad-hoc approval chains using your business rules.
- Additional configurable actions that can be executed by users manually or automatically via system tasks.
- Ensuring governance and compliance of your contract lifecycle.
- Using reporting and dashboards to gain visibility into various stages of the lifecycle.
Subsequently, you’ll be able to track KPIs around how long each step in the workflow takes, pinpoint where process improvements can be made, and set expectations and timelines based on your benchmarks.
Graphically, the stages are easy to see when reviewing the contract request, including user names with data and time stamps. This graphical representation of the stages within the process shows where the contract request has been and where it is going.
If you have questions about how CLM can benefit your business, contact All Star Software. We provide contract lifecycle management to businesses of all sizes to save them massive money and time on their contract processes. Reach out to us today to learn more.