Contract lifecycle management requires a well-thought-out strategy, careful planning, and the right technology. Without all three elements, managing contracts will not only be challenging for contract, procurement, and legal professionals; it won’t be possible to get the most business value out of your organization’s contracts. Too many organizations are missing end-to-end contract management that provides a clearly defined process, actionable insights, and accountability, ultimately negatively impacting productivity, profitability, risk exposure, and compliance. Learn how to master contract lifecycle management in this blog.
What is Contract Lifecycle Management (CLM)?
Leading organizations may already use a contract repository to store, track, and collaborate on their contracts. While a secure cloud-based repository improves visibility and accountability, it’s not enough to drive maximum business value from contracts. Contract lifecycle management focuses on the entire contract lifecycle from request to renewals.
Buy-side and sell-side contracts will impact your entire organization. When taking a manual approach to managing contracts by using spreadsheets, emails, and shared drives – even a secure document repository – you may still be missing the integral combination of people, process, and technology required to get the most out of your contracts.
Contract lifecycle management takes all three of these elements, so your contracts can benefit your entire organization and stakeholders. Procurement is focused on compliance. Legal wants to reduce risk. The CFO is looking at top-line and bottom-line results. The head of sales must simplify contract creation and accelerate contract-close outs. The fastest way to get the most out of your contracts and benefit your organization, customers, vendors, partners, and stakeholders is with contract lifecycle management.
Contract Management Challenges
Too often, organizations that fail to create business value from contracts lack an easily accessible repository, contract reporting and analytics, streamlined authoring and negotiations, contract data integration into invoicing or purchase order management systems, and the ability to link contracts to results. Contract “mismanagement” may initially seem to be siloed organizational challenges, but mismanagement brings challenges across the entire contract lifecycle including but not limited to:
- Tracking Contracts – Organizations can’t track contract status in real-time. Searching for contracts and ensuring the correct version is at hand isn’t possible, and opportunities are missed due to missed tasks, approvals, expirations, and renewals.
- Contract Approval Process – Approvals are slow because stakeholders, vendors, and customers waste time relying on emails and spreadsheets to manage tasks and negotiate. This approach makes it difficult to maintain version control and track contract status. Slow approvals fail to meet objectives around business rules, business processes, and compliance standards.
- Contract Clauses – Organizations without standard clause libraries take longer to execute contracts due to delays from inaccurate documents, lengthy legal reviews, slow contract approvals, and more risk and compliance challenges.
- Lost Revenue – Research reveals that more than 8% of yearly revenue is lost due to inefficient contract management processes. These losses impact contracts across the board in both buy-side and sell-side contracts.
- Electronic Signatures – Signatures are critical to the contract lifecycle but delays in contract execution, meeting obligations, and meeting compliance standards become too familiar due to signature bottlenecks.
- Contract Generation – Document assembly becomes a challenge when organizations manage a high volume of contracts or highly variable contracts. With multiple people involved in contract creation, reviews, and approvals, static documents quickly become obsolete causing loss of control over contracts and a higher probability for risk and compliance issues.
Contract Renewals – Manual contract renewal processes don’t provide proactive time to address complex contracts with transparency to see clause wording across all departments. The high margin for error results in lowered productivity and missed opportunity.
Storing Contracts – Organizations store contracts with a combination of emails, paper files, and server storage. Opportunities are lost due to a lack of real-time visibility or searching and reporting capability.
Organizations that manage contracts manually (spreadsheets, email, paper documents, shared files, etc.) and even organizations that have some form of basic contract repository software still face a slow contract management process with manual workflows, limited visibility and collaboration, and a lack of integration with other systems.
Your contract management challenges aren’t the problem; they are the symptom of an organization that doesn’t leverage contract lifecycle management.
What are the Benefits of a Contract Lifecycle Management System?
A contract lifecycle management system allows organizations to manage and automate the entire lifecycle of their contract process. Consider the following questions:
- Are you unhappy with what your current contract management process looks like?
- Do you have multiple people involved in your organization’s contracts?
- Do your contracts spend too much time in legal review?
- Does it take too much time to negotiate and close-out contracts?
- Do you need a standard contract management process and visibility that spans across departments and entities?
- Do you miss key dates and contract milestones?
- Do you require a reliable audit trail?
- Do you need permissions and user access control?
- Would you like to successfully manage internal and external compliance?
- Do you struggle to translate contract metrics into actionable contract management reports?
If you answered "yes" to just one of the questions above, the way you are managing contracts today is most certainly increasing contract turn-around times and exposing your organization to more risk and is not positioning you to get the most value out of your contracts.
How do the areas you struggle with within contract management impact the entire contract lifecycle? Download the "8 Critical Stages of Contract Management" today to find out.
Stay tuned for “Contract Lifecycle Management Mastery Part 2” and be sure to read all of the articles in the “Mastering Contract Management Blog Series."