Effective and efficient contract lifecycle management can accomplish by the use of contract lifecycle management software. Contract lifecycle management (CLM) is the dynamic and systematic governance from the start off through award, compliance, and resumption. Implementing CLM can result in a significant change in cost savings, effectiveness, and efficiency. Understanding and automating contract lifecycle management can also restrict a company’s liability and enhance the compliance of legal conditions. Or you can say CLM is organizing an entity’s contracts from beginning through execution, its performance, and either its renewal or expiry.
Here we have explained the steps that need to be followed by companies while using CLM. These steps are crucial to adopt in contract lifecycle management; here, it’s considerable to remember that some steps are conventional and have gotten more important than others. Such as, for year’s software committed to supervising contract templates in an entity, have been available.
With the rise of solutions like artificial intelligence and automation, post-execution contract governance has achieved more attention in a way to expedite, secure and optimize businesses.
Let’s have a closer look at each of these steps and examine how CLM software can upgrade the process.
The vital steps in a CLM process are:
- Capture: many people want to get all the existing contract documents and papers in a single visible place. The reason for being this extra consciousness is that unless you don’t know about your current contract, how do you know the risk associated with it. After that, the next step is to capture the details from the contract documents.
- Trace: once all data comes in your hand and you know your contact details, the next step is to track and follow any crucial data so you don’t overlook any landmark. This is helpful for both the new or old signed contracts.
- Author: after tracing the contracts, the next step is to shift the acceleration towards the new contract-making process. The “authoring” is all about making contract templates and clause statements to business and legal users so that the creation of new contracts should be fast but in a well-controlled way.
- Generate: contract generation has two pathways. First, giving business users the authority of self-service, wizard-based generation using standard intelligent templates pre-approved legally. Second, making life easy for legal when establishing composite agreement on your paper or reviewing contracts settled on another person’s paper.
- Approval: the organization needs an approval process to ensure that high-risk contracts are preview and approved by the right personnel. Some threats need to be approved legally, some by managers, some by specific depts. Like credit, etc., preferably, safe deals should be pre-approved.
- Negotiation: the demand of the typical negotiator comprises: a list of affairs for every kind of deal, a way of marking the document to highlight how the actual draft is different from the recent one, and finding out the reasons behind the differences. (if possible)
- Signature: once the contract has been finalized, it should be signed by all the relevant personnel. And signed documents need to be stored. Some authoritative person also needs to verify that the final signed copy was not modified in any circumstances after execution document copies were sent out.
- Analyze: an organization with hundreds of contracts need to examine those contracts for potential problems, rights, and obligations. Legal executives and risk management professionals have reported managing regular risks and ad hoc reports for unanticipated scenarios.
Why company’s Implement Contract Lifecycle Management:
- Avoid litigation in case of non-compliance: A heavy cost of compliance matters links with the contracts. If contractual obligations are not meeting it may result in potential litigation.
- Save money: Penalties for contractual non-compliance, overlook from specific terms and rebates, can be avoided through vigilant contract administration.
- Valuable to customers: Fulfilling customer demands by proper contract performance increases an organization’s value and brings future business.
- Reduce resources involved in contract management: Streamlining contract administration directly influences labor time and costs.
Contract managers normally rate their work as “challenging.” The contract life cycle can reduce some stress by developing an orderly mechanism for every task, resulting in high efficiency and productivity. Moreover, CLM alleviates liability and enhances cost savings and business relationships, which makes it obvious that understanding and automation of an organization’s CLM has become a necessary project.