Contracts are the lifeline of modern business. Without them, there wouldn’t be company partnerships, employment opportunities, or the exchange of goods and services. We already know that contracts play such a critical role in business but Contract lifecycle management (CLM) is the glue that holds the whole process in place.
It is thanks to CLM platforms and systems that you are able to optimize the process without losing sight of what’s important for your company’s growth.
In this article we will examine the ins and outs of Contract lifecycle management.
What is Contract management?
Contract management is the process of overseeing contracts go into with vendors, partners, customers, and/or employees. It ensures the compliance, accuracy, and validity of commercial agreements. Having been done manually for decades, the process is risky and error-prone. Also training employees to handle contract administration is complex and expensive.
Fortunately, the advent of the Internet saw more and more organizations automate some of the processes in contract lifecycle management. What was initially motivated by the goal to decrease input and processing times produced far more benefits than anticipated? Modern-day Contract lifecycle management (CLM) has done wonders in eliminating approval delays, decreasing productivity, and leading to more accurate information.
The role played by Contract lifecycle management (CLM) is evolving. It’s not just filing documents anymore. Today, Contract management entails understanding every aspect of a contract’s lifecycle to extract meaningful data insights.
As businesses need to operate across multiple verticals, are engaging in Contract lifecycle management to drive their performance and know how they can better achieve their objectives. A Gartner Report has mentioned that ‘CLM is evolving from an operational record-keeping system to an enterprise-level core system addressing business risk, costs, and the pursuit of revenue maximization.’
The steps of Contract lifecycle management
1. Identify Business Objectives and Goals
Preparation is hugely important to the success of each individual contract. In CLM, it’s important to identify the reasons that the company creates contracts, including its needs, expectations, and goals. It’s also vital to define the risks contract management departments face, such as slow turnaround, bad compliance, and lack of standardization.
2. Prepare the Contract
Gather all supporting information and documents required, while adhering to all regulatory/legal and organizational requirements. Drafting a contract is an extremely critical process as any level of ambiguity might result in business losses.
3. Negotiate the Contract
Once you have a draft of the contract, the negotiation stage commences. Take into consideration what each party expects from the contracts concerning the pricing structure, terms, and conditions, rights and obligations, warranty provisions, renewals, and termination, etc. Ensure that all proposed changes in the negotiation process are effectively tracked for incorporation.
4. Finalize and Execute the Contract
Once you have completed all negotiations and amended the contract to incorporate any appropriate changes, the contract goes out for approval to all relevant teams. It is essential to have a proper workflow of the approval process for various types of contracts to ensure that approvals do not impede the contract cycle. Once the contract is approved and finalized, the execution by all relevant stakeholders starts based on all the specifications mentioned in the contract.
Automating this step with a Smart contract-driven solution can actually speed the process along as the execution of the contract is governed by code and not manual approval.
As the Contract lifecycle management arrives at its closing date, it is essential to keep track of termination or renewals. Missing contract renewals can result in significant losses regarding the loss of long-term relationship building and synergies, missed revenue maximization opportunities, etc. Additionally, it implies the organization has to execute a new process for the same contract requirement.
However, the good news is that this too can be automated.
To make your CLM system more useful, you can implement Trakti’s solution to ensure that you reap the maximum benefits from your contracts.
To find out more about Trakti, Book your Demo.