Contract lifecycle management (CLM) is crucial to any business dealing with contracts. CLM reviews, tracks, and manages every aspect of a contract. It ensures their performance and compliance throughout its cycle from execution, implementation to expiration or renewal.
A contract lifecycle management involves various steps, and the process begins right when the contract is proposed and continues until its renewal. An effective CLM can help cut costs and time for the organization and mitigates legal and financial risks. And for this, you need to take the crucial contract management principles into consideration.
There are seven stages to this process, and each step is vital for its success. These stages are explained below.
How Do Contract Lifecycle Management Processes Work?
Request
It is the first process of contract lifecycle management, which starts with requesting a contract. In this, the business stakeholders enter a mutual agreement to create a contract. This is where the initial draft of the contract is made with the information provided by the stakeholders. The request information remains in the CLM Software and visible on the dashboard for further stages.
Authoring, Reviewing, and, Negotiation
Most contracts do not reach an agreement in the initial drafting, so in this stage, the terms and conditions are negotiated, and changes are made so that the parties reach an agreement. In this stage, the approvers and signing parties are determined, and their details are added to the contract document. After the drafting, the concerned parties review the contract.
Approval or Legal Review
The contract document prepared is submitted for further approval or legal review. Once the document is approved, it moves further to the next step in the CLM lifecycle. For quick approval, it’s crucial to have accessible software with an updated record of changes.
Agreement Signing
The contract, which is approved in all stages, is sent to the respective parties for signature. Electronic signature functionality in your software makes signing contracts easy and quick.
Database or Repository Storage
Once the contract is signed, it gets stored permanently in the retrievable database of CLM software. All the contractual meta-data and documents are indexed and stored for future reference and are accessible through contract API.
Execution and Compliance
After the contract goes into effect, all the concerned parties are bound by its terms. They need to ensure compliance with the terms of the agreement or obligations. If any of the parties fail to follow the contract, it can end the deal, and legal recourse is offered for them. Contract lifecycle management software provides contract analytics and offers insights like cycle times, savings, risks, expiry or renewal date, etc.
Renewal, Amendments, or Disposition
This is the final stage when the contract reaches its termination date. For keeping it in an active status, it must be renewed. Because if it’s not renewed on time, it could cause financial risk for both the parties involved. The contract can be restored with or without the amendments related to payments, discounts and, other obligations.
By choosing the right CLM software, you can make your processes more efficient and minimize human error. It will help organize and manage all your contracts. By automating the contract lifecycle management process, you can free up your administrative team from manually going through countless contracts and divert your resources to more productive tasks.
