Contract management is a complicated activity. The fact that there exist multiple forms of contracts that your business deals with at the same time makes it even more cumbersome to keep track of all the details.
This is perhaps why the adoption of contract lifecycle management software is on a steady climb. Fact.MR reports that the market for contract lifecycle management software is expected to rise steadily at a 10% CAGR between 2022 and 2032.
The advancement in technology has diversified the way in which businesses implement contract management software. One way is through purchasing an off-the-shelf solution ready for use. The second and more popular method is designing a customized solution by using no-code platforms.
Through this blog, you will glean what contract lifecycle management is and how leveraging technology for managing contract lifecycles can help your business.
Contract lifecycle management is the continuous process of monitoring and managing a contract at every stage, keeping track of all the terms, conditions, and compliances so that your business may operate smoothly.
In simpler terms, contract lifecycle management is the task of ensuring that every contract your business signs is executed to the letter. This involves:
The lifecycle of a contract begins when a request for the contract is expressed. It continues either till the contract term concludes, or a renewal is in process.
These are the four main reasons for you to incorporate a contract lifecycle management software at your enterprise:
Manual processing and tasking innately take longer than automation. With contract lifecycle management software in place, your business can expect reduced manual intervention, resulting in better tasking efficiency and improved turnaround times.
Contract lifecycle management software provides administrative controls to your contracts department, allowing them to design and automate workflows pertaining to the lifecycle of all your contracts.
It also helps identify anomalies and bottlenecks in the system, giving you the opportunity to streamline and fix inefficiencies.
By implementing contract lifecycle management, your business can improve internally and understand the value of effective, efficient processes.
Although this isn’t a direct impact that contract lifecycle management software has on your business, it is a by-product.
Consider these statistics:
Following the best practices for implementing and operating contract lifecycle management software can help your business achieve contract-specific goals within the set timeframe. The impact would also be evident in your yearly revenue figures.
Managing contracts is a challenge in itself – keeping track of the lifecycle of each one is even more complicated.
Especially if you have a business that relies on third-party systems for operations, it is absolutely essential to ascertain compliance with every single vendor’s contract.
Logically, manual tracking of every contract throughout its lifecycle is a waste of resources when this activity can be handled using contract lifecycle management software at a much lesser cost.
The software can be automated to keep a track of compliances and potential risks; it can notify the administrators in case a breach is likely.
Contracts are an opportunity to build long-term relationships with business associates. It is essential to always maintain the visibility and transparency of contracts.
A contract lifecycle management software can effectively keep all the contracts housed on a single platform, creating a single source of truth for your business.
The CLM software can also be customized to create a communication channel between your business and the vendors in matters pertaining to the contract.
When both parties work on the same documents on a single platform, communication is transparent, clear, and on the same page. It eliminates information disparity and ambiguity and maintains good visibility into the contract terms.
The lifecycle of a contract, from its inception to its expiry or renewal, can be summed up in a total of nine stages. Let’s understand each stage in detail.
The first step in contract lifecycle management is initiated by one of the parties involved by raising a request for a contract.
This party then proceeds with authoring the contract with the information received by other stakeholders involved.
The second stage marks the beginning of authoring the contract. This is the stage where the stakeholders involved create the document in CLM software using templates and filling in the information.
This is also the stage where the stakeholders review, red-line, and negotiate the clauses in the contract.
The prepared contract passes to the approval team in the third stage. The approvers review the contract and forward it to the legal counsel to address any concerns there might be.
The fourth stage consists of a gathering or a virtual meeting of all the entities involved for an official signing.
In a CLM, your business gets the option to send the electronic contract through to the concerned parties for signing, saving time and resources.
In the fifth stage, the signed contract is then stored in the digital library or repository of the contract lifecycle management software.
The software automatically indexes the entry. This type of storage allows your administration to swiftly recall the document and scan it for necessary information.
The sixth stage involves managing the contracts in the CLM repository through established policies and protocols. It also involves securing the data and creating regular backups, monitoring performance, compliance, and status of the contracts.
The seventh stage consists of enabling the administrators and stakeholders easy access to the contractual documents. It involves checking access authorizations and creating logs of other actions like searches according to company policy.
In the eighth stage, the CLM software is involved in creating logs of user activity and generating performance, compliance, and analytics reports with all the relevant data. This stage enables easy access to contract status for the users.
In the last stage of the contract lifecycle management, the expiry date and terms of the contract are reviewed.
This is the stage where the stakeholders involved must decide whether a renewal is in order, amendments are to be made, or the term is to be considered concluded.
Here are the five main benefits that your business can enjoy using good CLM software:
Just like Rome wasn’t built in a day, a contract isn’t created overnight – especially if your business has a manual process.
Before it can be finalized, a contract needs to undergo multiple discussions, meetings, revisions, and modifications before the involved entities agree to put the seal on it.
This creates multiple versions of the contract, which may create challenges with tracking the changes happening over a timeline. It is possible for the entities involved to end up with different versions – some updated, some not.
With contract management software, all the entities involved work on the same document. Any change that is made is logged and recorded, making it possible to keep a tab on the versions. It eliminates confusion.
An advantage that contract lifecycle management software brings to your business is the ability to collaborate on a contract in real time.
The hassles involved in arranging meetings with all the representatives present only to draft a contract, pose the following problems:
On the other hand, CLM software can arrange a representative meeting in a matter of minutes and have all the parties involved collaborate on creating the contract in real-time, in a virtual environment.
Contract lifecycle management software offers a plethora of contract templates to choose from.
Your business doesn’t need to build any contract from scratch, saving that much time and energy. You can simply choose the required template from the templates library and begin customizing it for the specifics of the deal.
Additionally, there is no concern about the security of your digital contracts created in this way because of the multi-level encryption security you can build into the CLM software.
This can be done using no-code platforms when creating your own custom solution for contract lifecycle management.
The best part about employing contract lifecycle management software for managing contracts at your organization is that analysis of contractual information can be carried out easily.
Automated risk tracking, lifecycle status, and compliance monitoring eliminate the need for your administration team to create contract reports manually.
This way, your business can significantly save on manpower and time spent on monitoring contracts.
Additionally, your team gets access to unified dashboards that provides necessary information and insight at a glance without having to search for information manually by scanning all the contracts individually.
CLM software empowers your staff to streamline contract workflows.
Let’s agree: there are a lot of processes and tasks involved in contract lifecycle management (approvals, for example) that can be automated to save time.
With software, it is possible to design workflows in a way that conveys the contracts timely to the right departments for examination and approval.
The time delays occurring by missed emails, missing personnel, or other reasons can be completely eliminated by setting up a contracts approval protocol in the CLM systems.
Working by specified rules and algorithms, approvals can be efficiently handled by the contract lifecycle management software throughout the life of your contracts.
Contract lifecycle management may sound like a complicated activity. In truth, with a robust CLM platform in place, you don't need to worry about breaching compliances or not obeying the terms in the document.
Especially if your business uses a custom-designed platform created through no-code platforms like Hubler, you can include custom functions in the CLM like notifications, alerts, custom labels and suggested actions, etc.
Contract lifecycle management is truly made easy when your business designs it from scratch. For information on how to create your own custom CLM solution, book a demo with us.