Effective contract management can be intricate and demanding. However, understanding the pivotal steps and integrating contract lifecycle management (CLM) software can transform this time-consuming journey into a structured and efficient process that saves time and increases revenue. In this guide, we will explore what the contract management process steps entail and how a contract management solution acts as a stairwell to success, virtually ensuring every step is streamlined and effective.
What Is the Contract Management Process?
The contract management process is a structured approach involving the contract creation process, contract negotiation, execution, and analysis of contracts, ensuring they are managed effectively and efficiently. This journey is made up of several contract management steps that aim to optimize operational and financial performance while minimizing risk in the stages of the contract.
Understanding the contract phases is crucial to ensuring that contracts are managed efficiently, maximizing their potential benefits while minimizing risks and inefficiencies. As such, let's review some phases of contract management.
Contract Initiation
The first of the contracting process steps is contract initiation. It marks the beginning where needs are identified, and the preliminary terms are established. It is here that the foundations of a successful contract are laid.
Contract management software can streamline this step by automating the process of merging pre-approved contract templates with standard clauses and contract metadata for virtually any type of contract. Additionally, clauses introduced during drafting can be quickly replaced with preferred and pre-established clauses from a pre-approved library via automated redlining.
Contract Development Process
This phase involves the negotiating and finalizing of the contract document. Legal and financial implications are analyzed, and the involved parties strive to ensure that the contract is mutually beneficial through back-and-forth collaboration and negotiation.
A contract management system aids in collaborative drafting, automates track changes and version tracking with numbered versions of the contract, and helps ensure that all legal and compliance standards are met efficiently with all necessary parties having necessary access and input.
Contract Execution
During contract execution, the contract is formally agreed upon, final tweaks are made, and the contract is signed by all necessary parties involved.
Review and approval workflows within contract management software help ensure that contract administrators, legal teams, and other necessary resources are wasting no time and receiving alerts and notifications for the next steps. Electronic signature software capabilities expedite the signing process so that signatories are alerted when they need to sign the contract - including bulk signatures. From there, signed contracts are safely stored and easily accessible by necessary resources.
Performance Management
In this phase, the execution of contract terms and conditions is monitored. It is crucial to ensure that all parties adhere to the agreed-upon terms and responsibilities.
Contract management software can provide real-time monitoring tools and alerts to help ensure all parties meet their obligations and deadlines, enhancing accountability. Metrics such as lifecycle time, workflow efficiency, financials, and more can be centrally managed for maximum ROI. By offering real-time insights and analytics via a risk assessment matrix, CLM software aids in identifying, assessing, and mitigating risks associated with contracts, virtually ensuring that organizations are always a step ahead with unprecedented contract data visibility.
Compliance & Monitoring
Ensuring compliance with the contract terms and conditions and applicable regulations is crucial. The contracting process steps involve continuous monitoring to identify and address any deviations promptly.
Automation tools help monitor compliance, and contract analytics identify any deviations, helping ensure timely corrective actions. Advanced reporting metrics combined with automated system notifications of key dates and renewal requirements help ensure that legal, regulatory, and other compliance standards are maintained throughout contract lifecycle management (CLM). Legal teams can quickly report and audit complex financial and compliance data while adhering to the Sarbanes Oxley Act (SOX) if needed.
Key Takeaway: The Path Ahead
Implementing CLM software optimizes the contract management process flow by automating and streamlining various contract management steps - from initiation to contract renewal. It fosters efficiency, transparency, and compliance throughout all contract phases. CLM software automates repetitive tasks - reducing the time and effort required in the process of contract management. It virtually ensures that contracts move seamlessly through various contract steps, enhancing efficiency.
The phases of contract management should be centrally managed so your organization can get the highest possible ROI when you process contracts. Embarking on this journey of enhanced contract management basically ensures not only streamlined operations but also the realization of the comprehensive potential of every contract - marking the attainment of unprecedented levels of organizational success.
There are various contract management system features out there - and you should make sure your solution has the features you need to manage the contract management process. Data shows that the vast majority of legal teams and contract management professionals (74%, according to CLOC) are embracing contract management software for stronger contract oversight with award-winning contract administration features.
To achieve such a level of success, book a free demo of award-winning contract lifecycle management software today!
*Legal Disclaimer: This article is not legal advice. The content of this article is for general informational and educational purposes only. The information on this website may not present the most up-to-date legal information. Readers should contact their attorneys for legal advice regarding any particular legal matter.
