Contracts are the life of a business and they determine to a large degree the success of any business. Hence, the art of managing contracts must be mastered by all who seek to thrive in business. The need is ever more pertinent given the situation of the business world in light of the Covid-19 pandemic. Have a look at what is contract lifecycle management and its stages.
The use of a paper-based approach in this era of digitized automated business in every department is a big sign of business failure. Therefore, employing the use of contract lifecycle management is something that anyone who is serious about their business must do.
Contract Lifecycle Management – What it is
Contract lifecycle management (CLM) is the process whereby the contracts of an organization are being managed beginning from its initiation stage to its execution and expiry or renewal stage to ensure the maximization of the organization’s performance and minimization/elimination of attending risks.
All these are efficiently performed with the aid of CLM software. The automation of the entire process reduces the financial, legal, and operational risk a company can be exposed to. And it has several benefits over manual contract management.
Contract Lifecycle Management – 8 Stages
A proper understanding of the stages of CLM will help any organization enjoy sustainable profits with reduced loss margins.
Let’s discuss these stages below…
This stage is also known as initiation. This is where you do the groundwork and identify your organization’s objectives and the risk desire of the other party. Hence, this stage can be time-consuming; however, when done properly, the returns are high.
Most successful organizations have a template library that has readily available templates that can be used when necessary.
Using CLM solution template authoring, you can reduce the time that would be consumed if you were to manually author a contract.
After identifying the expectations of the parties involved, you can easily pull out a smart template and insert the necessary details. You can just insert the necessary clauses, custom text, tag exhibits, etc.
The simplicity of the template makes it easy for anyone to use. And it is done in approved and standard legal language.
This is the professional type of haggling. At this stage, there is a lot of communication to reach an agreement.
Manual negotiation involves the traditional haggling method. However, with the CLM solution, the contract can be shared between both parties, and whatever changes they desire can be made. This way the template then goes to and fro between both parties until a consensus is reached.
This solution comes with a redlining capability as well as a comparison tool that allows you to compare different versions of the agreement document.
You can also tag necessary stakeholders so that they can see each review of the document.
Check out these tips. If you want to learn how to become a better negotiator.
Approval can take time when done traditionally since it needs to be reviewed by several executives in the company.
However, CLM solution speeds up the process because the executives and stakeholders are fully involved in the negotiation process as we mentioned above.
It combines necessary data which include dollar value, contract type, and industry to create smooth workflows and parallel approvals that hastens the contract approval.
Even execution of contracts these days is now digitized which enhances the overall efficiency. Great CLM software should have features like Adobe Sign that allow contracts to be executed on the go.
The end of CLM is not execution; rather the post-execution administration of the contract is the scope of these digital solutions.
Hence, every stakeholder is expected to acknowledge their respective obligations regarding performance, timeliness, and especially payments which they will then meet as part of the compliance.
Hence CLM software includes features such as milestone tracking, analytics, dynamic workflows, and automated alerts that enable all stakeholders to meet up their obligations.
When done properly, this stage will prevent the occurrence of litigation, bottlenecks, and late fees. All the rules, practices, and standard guidelines when complied with will ensure there is a chance for contract renewal in the future.
8. Renewal or Expiry
Depending on the type of contract, the end of CLM is either renewal or expiry.
Most CLM software has automated alerts that notify you about the expiry or renewal of a contract. If it is to be renewed, the software can execute it in little time.
It also shows insights regarding the last contract if it was profitable or not based on the data collated. Hence, the organization can determine if it should go ahead with a renewal or not.
We recommend you read this article https://en.wikipedia.org/wiki/Contract_management_software for more information on CLM software.
With the right CLM, you are sure to maximize your organization’s performance. The information at your disposal allows you to execute them with the precision that will always lead to renewal.