Contracts are the foundation of business relationships as they dictate every aspect of key business strategies. Contract Lifecycle Management is the proactive and methodical management of a contract right from its initiation through execution, performance, and renewal/expiry.
Proactive Contract Lifecycle Management leads to significant improvements in cost savings and efficiency of any enterprise which can be achieved by employing a robust and feature-rich Contract Lifecycle Management software.
“Contract Lifecycle Management (CLM) may not be the most glamorous part of the sales process, but it is crucial to the overall health of the organization. When contracts are updated quickly, based on accurate information, and administered effectively, it benefits both the company and the customer.”
The adoption of cloud-based CLM solutions around the world is increasing rapidly, especially in small and medium enterprises, supporting the sales of CLM software at a global level. Advancements in industry technologies have facilitated numerous growth opportunities for the global CLM market, no wonder the global CLM software market is expected to grow at an impressive growth rate of over 13% during the forecast period of 2020-2030.
The integration of modern technologies such as Information of Things, Artificial Intelligence and Machine Learning, etc. are contributing to the development of the Contract Lifecycle Management software market.
The demand for CLM software is rising the most in sectors like public, healthcare, manufacturing, and financial services across the globe. The IMARC Group expects the global Contract Lifecycle Management Software Market to reach a whopping USD 3.04 Billion by 2026, with a CAGR of 11.87% during 2021-2026.
CLM begins with contract requests and ends when the said requests are entirely fulfilled. The following are the common steps:
1. Managing requests by end-users
Time is the most valuable asset for any contract manager i.e. whether he is in charge of initiating a contract request himself or having a well-established self-service process for business teams. The request stage sets the tone for whether a contract undergoes efficient processing or struggles with delays. 95% of CLM professionals say that Contract Request Management is a crucial bottleneck in contract lifecycle management. That’s why provisions for self-service cropped up for many business teams to aid in faster contract creation and execution.
One can be faster and 3x productive with smart request queues that can check all recent activities and tasks related to contracts along with key status indicators along with options to add notes, tasks and view contract documents directly from the hover-over. This is where stakeholders gather essential details associated with a new contract, amendment, renewal, etc.
2. Authoring and drafting by contract teams
It involves the concerned parties putting the terms of a contract into the written copy by consolidating standard contract clauses, contract key dates, contract counterparty information, and other important data.
But getting all this information in a hut and emulating them in contract drafts, that too within a stipulated time, is mission impossible. Hence, 91% of contract professionals believe that going for an online contract management solution is crucial for CLM success.
In a survey conducted by CLMWeek – all of the participants equivocally consider a centralized scalable clause and template library are a must and can be used to save more than 50% of work hours in drafting contracts smartly.
3. Legal reviews and negotiations
During this, the parties negotiate the parameters drafted during the previous step. After a series of back-and-forth collaboration and redlining, conditions agreed upon providing insight regarding the expectations of all the involved parties. Every day, legal teams are bound to get an overwhelming number of contract reviews and approval from different departments. These, if not managed, can be easily overlooked which can lead to missed deadlines and loss of opportunities.
Sometimes, it becomes tedious to go into every contract record to see what’s the status of the contract or whether some additional information required for the contract has been submitted or not. Moreover, high volume vs high-value contracts can even confuse which one to prioritize first and which one to save or hold for later.
to get a contract approved
reduces that time
4. Contract/business and executive approvals
It involves a review on the part of all the parties. Parameters are set to meet compliance standards, contract obligations, milestones, and special terms of a contract.
But, 55% of global enterprises still lack enterprise-wide CLM Adoption. Hence there is an industry-wide drive to transform contract processes and standardize across departments for better productivity.
According to Gartner, the manual effort for contract review will be reduced by as much as 75% thanks to AI-based contract analytics solutions by 2024.
5. Streamlined signatures
Digital is the way to the future, and Contract Management is no exception. The traditional methods of gathering approvals and signatures are tedious and frustrating. A contract management system with e-signature integration helps you quickly get important people’s consent on contracts and documents while providing you with benefits like security, verification, and full audit capabilities for your business.
As much as 87% of contract management professionals recommend eSignature integrations to drive contract profitability and success. eSignatures are carried by an authority with a high clearance who signs a contract and ratifies its enactment. eSignature feature makes it easy to sign contracts one-off or in bulk, in the office, or on the go.
6. Contract amendments and renewals
Tracking expiry and renewal dates of thousands of contracts can be a nightmare, especially when you lack enough visibility into where a contract stands. This process can be very tedious. Amendments and renewals are a great way to track and manage contracts as they allow you to make changes to an active agreement.
Around 90% of businesses lose key revenue opportunities with regards to renewals without a proper CLM system in place. A robust and feature-rich Contract Lifecycle Management System helps you with the same. The involved parties are given the chance to revisit discounts, renegotiate terms, and engage in further opportunity realization.
7. Managing contract terms and obligations
Contract obligations are the responsibilities that each party is legally responsible for in a contract agreement. In a contract agreement, each party exchanges something of value, be it be a product, services, or money. Each party has various obligations connected with this exchange on both sides of the agreements. If either of the concerned parties fails to perform their contractual obligations as per the contract terms, it would result in a breach of contract.
According to a study by Gartner, 96% of businesses agree that visibility to contracts is essential to manage contract obligations and deadlines. This stage involves the concerned parties acknowledging their defined responsibilities, milestones, key dates, deliverables, and payment windows.
8. Contract compliance and performance management
When it comes to contracts, they are not exempted from rules and compliance requirements. Contract compliance is the agreement with a set of mandates set internally and publicly by the parties to a contract, as well as externally and publicly by governments, standards bodies, industry associations, and other organizations with some sort of oversight authority.
The consequences of non-compliance can be very costly and contract managers know this well, no wonder they spend a fair bit of their day dealing with these matters in some form. 75% of businesses are at the risk of being non-compliance without a robust contract lifecycle management system in place. In addition to the specified agreements in the contract, general and field-specific contractual rules, standards, guidelines, and practices are also made sure to be complied with.
Irrespective of the size of your business, you are going to encounter contracts at some point in your journey. Most businesses have to deal with a diverse range of contracts, from employment contracts to supply agreements with their suppliers, and tenders with their clients, etc. And as your business grows, the number of the contracts you handle will also grow and that’s when the active agreements will require a robust system in place.
CLM systems are no longer a ‘one size fits all’ market, so the key to selecting the right Contract Lifecycle Management for your business is to look at the specific requirements of your organization. Let’s take a look at some of the common CLM types/flavors:
1. Contract repository
Within a contract agreement, there are rules and terms for the engagements, key dates that need to be taken into consideration for obligations, renewals, notice, and close-out, etc. But what if you can’t find the contract itself? Many businesses relate to what it feels like to deal with missed obligations and renewals, duplication of contracts, compliance issues, and more.
A contract database or repository is a centralized location where all the contracts and their metadata are stored. The contract repository avoids data fragmentation by storing your contracts and their relevant documents, such as compliance certificates, in a single location. It also automates your data entry processes allowing every team across your company to work in the same way, hence eliminating human errors. The Aberdeen Group says that best-in-class companies have 78% of their contracts in a searchable, central repository vs. 34% for the rest. You can easily find contract records, documents, or counterparties with a quick keyword search. With this centralization of your contracts in a repository, you can easily identify any potential instances of non-compliance and take corrective action.
2. Automating/centralizing the contract review processes
Better time management is the priority of contract and legal teams who manage hundreds of contracts every day. This is why it becomes essential to automate and centralize sophisticated processes like contract/legal reviews to save time and get more legal work done effectively. Automated contract review is a technology-assisted process in which a professional uses software to review and remediate a contract much faster and accurately.
A secure and centralized system in place helps you to share contract documents for reviews and obtain feedback from internal and external users with workflow tasks, alerts, and email-based sharing. You can easily summarize terms and clauses, highlight exceptions to enable a quick review process, and much more. Moreover, after your contract is finalized, you can send it for an online signature which works intuitively and provides the highest possible levels of security and universal acceptance.
3. Managing the performance of contracts
It is said that if you can’t measure an activity, you can’t control it. Well, your contract and procurement teams work diligently to negotiate favorable terms for your business, but you still won’t get the full value from your partners if those terms are not being monitored and tracked effectively. That’s when contract performance management comes into play.
Businesses with hundreds of complex contracts due to dealing with multiple suppliers are struggling with limited resources, especially when it comes to monitoring supplier performance. Effective contract performance management can help such businesses optimize the output and accountability of their third-party network while tracking the performance of their partners against the specific terms and line items in their contracts. It helps them in increased visibility, deeper insights, improved governance, maintaining stronger contract relationships, and much more.
4. Enterprise Contract Management
Gone are the times when contracts were stored in filing cabinets or as PDFs on a hard drive, waiting to turn into a mess of disputes, delays, or litigation. But still, many businesses don’t realize the fact that even lacking a robust contract management system in place can lead to issues like unexpected financial penalties, fines, missed opportunities, and compliance issues. Digitization and automation of contract management processes offer the potential to improve compliance by 55%, says a study by Forrester and Aberdeen.
This is why Enterprise Contract Lifecycle Management makes a lot of sense for organizations that want to better centralize, manage, and monitor their contracts, some of which are already utilizing a basic CLM solution, but need a more robust and comprehensive solution. Enterprises can achieve contractual excellence with the implementation of an enterprise-wide CLM system which can help them ensure contracts are being complied with, reduce risk by identifying missing clauses, standardize contracts with templates and clause libraries, and much more.
It’s important to consider the needs of your organization as thoroughly as you would examine the features and benefits of Contract Management tools. It helps you reduce operational costs, increase productivity, and exceed your client’s expectations, and that’s exactly what we help you with.
So, are you ready to take control of your contract processes?