Contracts are legally binding documents and companies must manage them effectively to ensure success. But to do this, the contract's lifecycle must be broken into manageable steps. The good news is that Contract Lifecycle Management (CLM) software has been designed to help with this process!
The contract lifecycle is each stage a contract will go through throughout its lifetime, from authoring to expiry or renewal. The lifecycle begins with the request for a contract and will finish when the request is fulfilled.
To simplify it, we have broken down the eight most common stages of a contract lifecycle that you may come across with a standard contract. Depending on the size of the business and its existing processes, the number of steps may differ slightly for specific contracts.
Stages in the Contract Lifecycle
The first stage of a contract lifecycle begins with a request. The request stage of the lifecycle is one of the most crucial because it lays the groundwork for the agreement between the parties.
During the requesting stage, parties and stakeholders must gather essential details and documentation for the new agreement and its terms. They also need to establish the central focus of the agreement.
2. Contract Authoring
Once the parties and stakeholders have finalised the request for a contract, they begin the second stage of contract authoring. Also known as contract writing, this stage sees the parties establishing their terms & conditions in writing with a set of clauses, dates, and other key information.
As any legal team will know, the negotiation stage of the contract is one of the most crucial stages of the contract lifecycle. During this stage and once the contract has been generated, the parties must negotiate back and forth on their terms until they agree. The negotiation stage is often the most time-consuming stage of the contract lifecycle, frequently causing delays and bottlenecks.
One of the common obstacles that parties face at this stage is the need for collaboration tools. Typically, parties will send the contract back and forth via email and mark up changes in Microsoft Word. With multiple variants being passed back and forth, it’s easy to get lost, making it prone to human error. CLM software has been designed to create a centralised space for parties to negotiate, reducing the chance of human error.
When the parties are finished negotiating, it’s time to finalise the agreement by collecting the signatures. Today, most legal departments have matured and use e-signature tools or integrated features on their CLM.
Once the signatures have been collected, the contract is legally enforceable, and the parties must meet their agreed terms. As stated in the agreement, this stage will run for a set period, giving the parties time to meet their obligations and adhere to the terms & conditions.
6. Storage & Management
Now that the agreement has been executed, it’s time for the legal department to store it somewhere for easy retrieval. Today, cloud storage is among the most popular ways businesses hold agreements. But many companies still rely on traditional methods, storing their contracts everywhere, such as filing cabinets, local drives, and shared drives. Just over half of sales contracts, 55%, are stored in filing cabinets or shared drives, meaning they are not searchable or accessible from a single-user interface (DocuSign).
Making contracts visible is critical to managing their workflows. The essential information inside them needs to be easily accessible. 68% of employees surveyed said they typically spend 10 minutes or more trying to locate contracts (DocuSign), let alone the time taken to sift through each page looking for the needed information manually.
A CLM tool like Summize creates a central repository for all your contracts. With advanced search capabilities, rich summaries and intelligent analytics, businesses can simplify and accelerate their contract management process whilst highlighting risk and opportunity across all their contracts.
Contract auditing, or contract analysis, is a crucial lifecycle stage to ensure successful delivery. This stage allows the parties to review the agreement to provide its terms remain relevant and track obligations and compliance. It empowers the parties to spot any breaches of contract and act against the offending party. A centralised CLM solution can help businesses avoid contract breaches and decrease late fees, delays, and bottlenecks.
Summize’s automated contract analysis is leveraged by AI, creating a single source of truth that allows legal teams and seamlessly analyse their contracts. By making the data inside the contract usable, legal teams identify risks, missed revenue, opportunities, key dates and more.
8. Renewal or Expiry
All contracts will come to an end. They are only live for the agreed timeframe. The final stage of the lifecycle is when the contract ends. The parties must then decide to renew or allow the contract to expire, freeing both parties from the agreement. Many forces influence this decision. The stakeholders must review the agreement to determine the satisfactory completion of the deliverables and obligations.
Contract Management with CLM Tech
Contract management has long been seen as a time-consuming burden for legal teams – especially when 80% of sales teams are processing over 500 contracts monthly (DocuSign). But with CLM software, legal teams can automate a high volume of once manual work, increasing overall efficiency and improving contract transparency.
The principle that CLM tech solves has vast benefits for legal teams and the wider business. Contracts reach across multiple debarments, making them the foundation for the success and health of a business. Any department interacting with contracts will reap the benefits from implementing a CLM
solution – that’s why CLM is no longer optional. It’s crucial.
Traditional CLM solutions take users from where they work, requiring a change in working habits and yet another interface to learn how to use.
Summize is seen as the best Contract Lifecycle Management software
because it is the world’s first integrated CLM that uses Teams, Slack and Word as the primary user interface to ensure maximum user adoption and utilisation.