What is contract lifecycle management?
Contract lifecycle management (CLM) is the automation, digitization, and streamlining of all facets of the contract process to mitigate the risk of error and reduce unnecessary spend in a contract’s negotiation and execution. A contract lifecycle management solution can place the process in a digital environment, where pen and paper and manual systems are redundant. This greatly increases the efficiency around the contract lifecycle, freeing up employees’ time and effort that were generally used to painstakingly work through each contract to ensure that terms have been met. With the CLM solution, this is done automatically, and the online systems will flag errors and vulnerabilities before they become issues.
How does contract lifecycle management work?
The processes involved in CLM are rather broad. Generally, the four contract lifecycle processes are: Authoring, Execution, Review, and Renewal. These four processes are the umbrella under which the general steps of the contract lifecycle fall. We have provided a brief breakdown of how those steps might function in a digital solution:
Any contract lifecycle begins when a new contract is deemed necessary in an organization. One party will approach the other and draw up proposed terms.
Negotiation and authoring
This process can be conducted online. All the relevant people from both parties can be privy to a transparent, online negotiation process, which will result in the drawing up of an agreement that suits both sides.
Review and approval
Here the legal teams of both parties will become involved, ensuring that the contract is acceptable and enforceable, and following due process and compliance. Once the lawyers are happy, the contract is ready to be signed. Again, conducting this using a contract lifecycle management solution means that the process can be transparent to everyone.
Both parties agree to begin the terms of the contract. Once signed, copies can be automatically distributed to both parties’ relevant departments.
With a CLM solution, the contract can be automatically stored and backed up. A cloud solution ensures that the contract cannot be misplaced and will always be available to those who require a review of its terms.
With the ease of retrieval through a digital solution, the contract can be reviewed at a moment’s notice by any interested party. The online system also enables easy search and review processes for past contracts, relevant supplementary documentation, and other related information.
A central portal makes the tracking of the execution simple and improves oversight of the process at every level, from those on the ground to the relevant executives. As each term of the contract is met (or in some cases, not met) the relevant report can be filed online, and any immediate issues will be automatically flagged by the system, eradicating the potential for human error in identifying issues.
A CLM digital solution will automatically evaluate whether the terms of the contract have been met, and it can thus assess the success of the contract over the course of its timeframe. It can rapidly identify where, and often why, issues arose, or terms were not met. These evaluations and assessments can then inform the decision over whether to renew or terminate the agreement.
Renewal or termination
Finally, the contract lifecycle draws to a close with the decision to end the relationship or renew the contract for another term. This process can simply be followed with a digital CLM solution, as all relevant documentation can be quickly and easily retrieved, and any small tweaks in negotiations can almost instantly be applied to not only the contract itself but also to the systems that govern and evaluate it.
The implementation of a consistent contract lifecycle management solution can be challenging, as identifying which stage of the lifecycle each of your contracts are at can be time-consuming and somewhat imprecise. With an expert partner like SCP, you can rest assured that the CLM solution that we implement for you will serve your existing processes and address each contract as if it were designed specifically for the solution – because, in a way, it was.