If you have not exploited the benefits of contract lifecycle management (CLM) in your organisation, you might be missing out on a great opportunity.
It has been found that 80% of organisations do not effectively manage their contracts. Thus not realise the 30% reduction in administration costs available through CLM. Adherence to company, regulatory and industry standards through your CLM allows for a 25% improvement in compliance.
Whilst many businesses have not leveraged the benefits of a contract repository, automated workflows, and Artificial Intelligence, you can reap these benefits with a simple to use contract management solution. Gartner recently released their 2021 Critical Capabilities Report for Contract Lifecycle Management and covered the typical use cases and vendor reviews.
Contract lifecycle management solutions can provide enormous value in your business with relatively little investment and effort. Contracts are typically put in place to prevent disputes, liabilities, and legal risks. Because contracts are a fundamental part of any successful business, you need to ensure you store, manage and extract as much value from these agreements in your current operation.
How does Contract Lifecycle Management work?
Contract management requires adherence to a pre-defined process managed through workflow to create, store, and manage contracts. It also uses pre-approved clauses and terminology to create your internal legal playbook to improve negotiation and limit risky 3rd party clauses. This means that your contract management system controls the workflow, notifications, escalations, and storage of your contracts whilst you deliver value in your personal engagements with stakeholders.
Your contract lifecycle management system is an important component in your business to ensure the successful execution and management of contracts. Organisations leveraging CLM can increase revenue realisation up to 9% annually through effective contract management processes. Value resides in contracts that are not fully realised and claimed. So what is the best practice processes and disciplines that you need to consider?
Contract Lifecycle Management best practice is key!
Effective contract management is typically made up of the following best practice stages:
Requesting, Authoring, Negotiation, Approval, Storing & Organization.
The first step is enabling the request phase that helps employees, stakeholders, or vendors the ability to request a contract or amendment from the legal team. The request is received by the legal department, prioritized, or automatically assigned for review.
Once approved the first draft will be authored and shared with the requestor or counterparty. The authoring can be simplified with pre-approved contract templates and clauses.
The negotiation phase follows and typically makes up the longest part of the contract process. Parties will review various versions of the contract and that’s why redlining and version comparisons are so critical.
Once agreed between all parties it will follow a final approval internally to ensure adherence and compliance. Approval management is key to ensure a timeous approval of the contract for signature. Governance through a comprehensive audit trail ensures visibility and adherence to key approvals and decisions made. Leveraging an e-signature solution further automates the contract execution and reduces unnecessary printing.
Storage and organization of fully executed contracts allow for easy access and better reporting. Alerts and notifications will be automated to notify and prompt teams to either renew, adjust, or terminate agreements when contractual periods lapse. The repository needs to be fully searchable and optimised.
The lifecycle of a contract traditionally conforms to the process shared above. Naturally, you would require an agile approach in any modern legal, procurement or sales office. We prefer the flexibility and simplicity of a Contract Management Solution that uses no-code configuration to adapt to your continuous changing requirements and needs. This not only provides significant cost savings but also reduces risk and increases productivity.