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The Power of Effective Contract Lifecycle Management

Submitted by Soinggha on Tue, 10/03/2023 - 01:27

Contracts are central to every business. But despite decades of specialized tools like eSignature and cloud storage solutions many organizations struggle to promote efficiency in their contracting processes.

Effective Contract Lifecycle Management is vital to avoid bottlenecks and costly repercussions. To do so, companies must adopt systems of record and systems of engagement that are designed to streamline complex contracts.

Streamlined Processes

There are a lot of moving parts to manage in the contract process. Inefficient, disorganized contract processes are a recipe for chaos and costly mistakes. This can result in lost revenue opportunities, time waste and an unsustainable burden on staff and outside counsel.

With a centralized contract repository, it’s easy to store completed contracts and track their status. This improves collaboration and visibility across teams, and provides a framework for assessing performance and identifying areas of improvement.

Contract automation tools help organizations reduce costs by eliminating manual, time-consuming tasks like data entry, generating reports and tracking deadlines. They can also help minimize risk by establishing alerts and reminders for critical contract milestones, such as expiration or renewal dates.

Lastly, contract management tools can provide better pricing insights into the current market rates for specific goods and services. This enables management teams to negotiate better terms with suppliers, which leads to further cost savings.

It can be challenging for legal teams to stay on top of a high volume of contracts, requests from other departments and internal stakeholders, as well as compliance requirements and changing market conditions. Without the right systems in place, it’s easy for this critical function to get bogged down with routine tasks, reducing the efficiency of the team and negatively impacting business operations. Using a CLM system with automated workflows and pre-approved templates can improve efficiency and reduce the risk of errors.

Better Compliance

A centralized contract repository allows organizations to centralize their contracts and reduce security risk. It also saves time by automating reminders and generating reports on contract status. Contract management software can also automatically send contracts for review and approval, ensuring that every stakeholder is working from the most recent version of the document.

Document signature accounts for only a sliver of the Contract Lifecycle Management process, but it is a key step that can make or break your organization's efficiency. This is where CLM solutions can really shine, as they often provide a more robust and efficient process than email chains or paper routing. The best contract management systems can also eliminate bottlenecks by automating reminders and allowing for online and/or electronic signing, making it much easier to manage the entire process.

Once contracts are in place, CLM ensures that the terms meet organizational standards and compliance with laws and regulations. This can result in significant cost savings for a business. Finally, the CLM process enables businesses to track contract performance and perform audits. This can lead to more effective renewal and termination processes that prevent unwanted financial liabilities.

As a result of more effective contract management, businesses experience fewer human errors that could reflect poorly on their brand or cause compliance issues. This can make a difference in customer satisfaction, which is a powerful word-of-mouth growth tool for any business.

Increased Organizational Awareness

Contracts are fundamental to commerce, but creating and overseeing them can be a major administrative burden for businesses. Moreover, outdated manual processes, disorganization and repetitive tasks can lead to costly errors that affect the bottom line. That’s why it’s so important to streamline contract management processes and implement a better approach.

Contract lifecycle management, or CLM, is the proactive, methodical management of a contract from initiation through award, compliance and renewal. It can provide significant improvements in cost savings and efficiency and limit organizational liability.

A comprehensive CLM solution can help organizations improve their contracting process by establishing an efficient workflow and improving communication. Whether it’s for legal, procurement or other business teams, a well-designed CLM process can enable more reliable contracts by eliminating the need to manually update and re-execute contracts. In addition, improved transparency between teams can reduce the risk of missed deadlines or performance obligations and ensure that high-priority projects get the attention they deserve.

For example, a powerful CLM system can streamline approvals by automating the process through a customizable workflow and integrating with leading e-signature tools. It can also help to manage contract fulfillment tracking by analyzing contractual obligations against performance metrics in real-time and providing configurable alerts for upcoming or overdue tasks and milestones. Additionally, a CLM solution can help to provide users with graphical contract status information through a dashboard interface (charts, pies, gauges, cards, maps, etc.) and sharable, real-time data grids.

Reduced Risk

As any businessperson can tell you, contracts are the fuel that powers commerce. In order for business to run smoothly, there must be a record of every purchase made and fulfilled. But putting pen to paper is only the beginning of Contract Lifecycle Management, and managing these agreements from beginning to end presents numerous technological and operational challenges.

Whether it’s human error, lack of visibility, or inefficient processes, contracting comes with its fair share of risks. Contracting errors can lead to compliance issues, costing the company money or even legal trouble. Missed deadlines or renewals can also stall projects and frustrate vendors. Fortunately, there are solutions.

The first step is to ensure that all teams involved in the process are on the same page regarding the requirements of a particular agreement. This can be done by requiring the sales or procurement team to provide legal with a brief description of what is being negotiated. From there, a formal request can be drafted that includes the terms of the proposed contract.

Once the drafted contract is ready to go, it can be pushed for approval through set hierarchies using the chosen Contract Lifecycle Management software. This allows for streamlined communication and reduces the risk of agreeing to terms that the company can’t support. This step also reduces the time required for the review and negotiation process, allowing teams to focus on more strategic matters.