This blog post was updated on March 30th, 2021
Contract lifecycle management requires a thorough strategy, careful planning, and the right technology. Without all three elements, managing contracts can not only be challenging for contract management, sourcing, procurement, vendor management, and legal professionals; it can prove difficult to maximize contract value. Contracts require tremendous pre-award and post-award investment. Without a suitable contract management system in place, you can find it difficult to maximize ROI. 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. Read on to learn how you can master contract lifecycle management.
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 contract requests to contract renewals. The circular diagram below depicts how contracts require full oversight in the following areas.
Buy-side and sell-side contracts can impact your entire organization. When implementing manual contract management - using spreadsheets, emails, shared drives, and paper-based processes – you can overlook the integral combination of people, process, and technology required to maximize your contracts’ value.
Contract lifecycle management amalgamates the three elements of people, process, and technology – allowing contracts to benefit your entire organization and stakeholders. Procurement focusses on compliance. Legal insists on reducing risk. The CFO focuses on top-line and bottom-line results. The head of sales must simplify contract creation and accelerate contract close-outs. The fastest way to maximize contract' value and benefit your organization, customers, vendors, partners, and other stakeholders is with a holistic contract lifecycle management system.
Contract Management Challenges
Too often, organizations that fail to drive business value from contracts lack an easily accessible contract repository, contract reporting and analytics, streamlined contract authoring and contract negotiations, contract data integration with invoicing and purchase order systems, and the ability to track contracts to intended results. Contract mismanagement can initially be attributed to siloed organizational challenges. However, contract mismanagement brings challenges across the entire contract lifecycle – including, but not limited to:
Tracking Contracts – Organizations can find it difficult to track contract statuses in real-time. Searching for contracts and ensuring the correct version proves difficult – yielding missed opportunities due to missed tasks, approvals, expirations, and renewals.
Contract Approval Process – Approvals are slow because stakeholders, vendors, and customers can waste time relying on emails and spreadsheets to manage tasks and negotiate. This approach proves difficult when it comes to maintaining version control and tracking contract statuses. Slow approvals lead to organizations failing to meet objectives around business rules, business processes, and compliance standards.
Contract Clauses – Organizations without standard clause libraries can take longer to execute contracts due to delays from inaccurate documents, lengthy legal reviews, slow contract approvals, risk challenges, and compliance issues.
Lost Revenue – Inefficient contract management processes can negatively impact your organization’s bottom-line. These losses can detrimentally impact contracts across the board, including buy-side and sell-side contracts.
Signatures - Signatures are critical to the contract lifecycle. However, delays can increase in contract execution, meeting obligations, and meeting compliance standards due to signature bottlenecks – especially when relying on manual wet signatures rather than speedy eSignatures.
Contract Generation – Document assembly can be increasingly challenging when organizations manage a high volume of contracts, especially highly complex contracts. With multiple stakeholders involved in contract creation, reviews, and approvals, static documents can quickly become obsolete - causing a loss of control over contracts and increasing risk and compliance issues.
Contract Renewals – Manual contract renewal processes cannot provide sufficient time for stakeholders from ranging departments to transparently review complex contracts and assess clause positioning and wording. The high margin for error can inhibit productivity and increase missed opportunities.
Storing Contracts – Organizations that manually store contracts – with methods such as email, filing cabinets, and shared drives – can lose opportunities due to a lack of real-time visibility and searching and reporting capabilities.
Organizations that manage contracts manually – with tools such as spreadsheets, email, paper documents, and shared files – and that leverage a basic contract repository software can still grapple with slow contract management processes, stemming from manual contract workflow, limited visibility and contract collaboration, and a lack of integration with mission-critical applications.
An ineffective contract management process can lead to high contract failure rates, transforming contracts from a business value-driver to a value-depleter – yielding an unwanted source of revenue loss and increased risk.
Your contract management challenges are not the problem; your symptoms result from not leveraging a streamlined contract lifecycle management system.
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 its 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 any of these questions, your current contract management style is decreasing your contract turn-around times and exposing your organization to undue risk – yielding significantly unrealized contract value.
Are you ready to master contract lifecycle management? Download the “Mastering Contract Management Whitepaper” to become a CLM master!
Get started with CobbleStone Software today with a free demo of Contract Insight® - CobbleStone's award-winning source-to-contract management software suite that was recognized as a Leader by Forrester.
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."