During the creation of a contract, it will go through many departments in an organisation. A clear process will improve communication between departments. Our guide looks at:
Contract lifecycle management is the process of managing contracts from initiation to execution and beyond. It involves various stages such as drafting, negotiation, approval, monitoring, and renewal or termination. The goal is to ensure compliance with legal requirements and maximize value for all parties involved.
Contracts involve up to six or seven stages depending on the company that require management throughout the contract lifecycle. Each stage must be managed effectively and efficiently for the contract to achieve its maximum value.
Demand for contract lifecycle management solutions has been steadily rising as businesses seek to gain control over their contract portfolio. It addresses key issues including time, cost, and quality by automating low value work for an in-house legal team.
Contracts are the legal agreements that define the relationship, ensuring each party meets the requirements of the contract. Although a crucial aspect for a company, contracts are often time-consuming, complicated, and challenging to track.
Contract lifecycle management allows a business to reduce the risk of a contract, while ensuring compliance with regulations and encouraging performance auditing. You can expect to see significant cost savings and increased efficiency when you add a contract lifecycle management system to your workflow.
The process starts with a new contract and ends when the purpose of the contract is complete. Or with the option for renewal. The number of stages in the process will depend on each business, its size and existing processes.
To make this easier, we’ve broken down the seven most common steps you may come across in a standard contract. You can read more about the process here.
Nowadays, businesses need to create and manage vast amounts of contracts. Written contracts account for 60 - 80% of all business-to-business (B2B) deals according to the Institute of Supply Management. For example, a Fortune 1000 company can have 20,000 to 40,000 live contracts at any given point.
Contracts present both opportunities and risks. Effective contract lifecycle management of such vast agreements is crucial but also challenging. Ignoring the process creates significant financial and operational risks for businesses.
We have included some of the key benefits to CLM for a standard contract.
Compliance is a major issue in contracts, even more so in larger agreements involving many parties. Contract lifecycle management provides better visibility into active contracts. It ensures constant compliance and decreases litigations from incomplete obligations.
A contract defines the smallest set of obligations that parties need to reach. Being a business, fulfilling and exceeding expectations increases financial returns. A contract lifecycle management plan will enhance contract performance, leading to repeat and increased business opportunities.
An efficient process can reduce labour costs and time. Effective contract management will save time and money by avoiding non-compliance.
Unmanaged contracts often fail to achieve their intended goals and can be costly. For example, businesses lose up to 9.2% of their revenue due to poor contract management. Contract lifecycle management (CLM) creates a process to identify poor contract management, turning lost revenue into opportunity.
An effective contract lifecycle management process can be confusing. To improve your contract lifecycle management process, we would recommend three simple things:
Tracking and managing your contract portfolio is a challenge for any business. Digitising and automating the process saves businesses time and money. Our software helps clients digitise contracts by using our contract creation tools.
Conducting regular contract analysis is crucial. Many businesses do not see contracts again after the signature or during the termination or renewal stage of contract management. When businesses fail to meet the agreed obligations, the risk of termination and litigation from the involved parties increases and companies can make better decisions by conducting regular contract analysis. It will help spot inefficiencies and ensure their obligations.
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Contract Lifecycle Management software is used to improve and accelerate existing contractual processes while analysing the contract over the full lifecycle. The software allows legal teams to effectively manage their contract portfolio at each stage of a contract lifecycle, with minimal manual intervention.
Businesses are turning to contract lifecycle management (CLM) solutions to modernise legal workflows as they seek to gain full control over the entire contract management process.
For most businesses, contracts are just a time-consuming burden. They are unaware of the benefits they can bring. Still, with some businesses having up to 40,000 active contracts, it can be a complex and daunting task. Contract lifecycle management is crucial in any industry if you want to stand out.
A good process will reduce financial and operational risk to the business. Increasing profits, improving supplier relationships, and creating cost savings of up to 50%. In contrast, a poor process exposes the business to lost revenue with the potential to face legal action for non-compliance.
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Legal teams everywhere are turning to digital contracting solutions like Summize, aiming to automate the process. Summize allows teams to instantly create summaries, identify key dates and important clauses.
For businesses looking to ensure CLM best practices, we've provided helpful tips on what to look out for and how best to run your processes.
To help businesses improve their processes, we have provided the top five most common CLM challenges and methods to overcome them.
We've broken down and explained the 8 stages of the contract lifecycle for a standard contract.
We've narrowed down the top CLM vendors on the market and identified the top features you should be looking for in your CLM software.
What is Contract Lifecycle Management? Learn about how contract lifecycle management works and how it can benefit your business's contract management process.
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