Contract lifecycle management is an increasingly important strategy for modern businesses. In case you aren’t familiar, the basic goals of contract lifecycle management (CLM) are to proactively manage and increase the efficiency of contracts relevant to your business. Awarding contracts, complying with internal and external regulations, renewing contracts, and analyzing and understanding contracts can all have a massive effect on the efficiency and profitability of your business.
Understanding the basic tenets of CLM can direct your strategic initiatives, and help you break down this otherwise complex process.
The 9 Steps of Contract Lifecycle Management
If you’re interested in perfecting your CLM approach, thinking in terms of these nine stages will aid you:
- Consolidate and gather information. The first stage is gathering any information currently available to you and consolidating it. For some businesses, this means gathering all currently active and available contracts. For other businesses, it’s a matter of doing proactive research on prospective future contracts.
- Capture contract data. Next, you’ll capture the data from those contracts. Historically, this has been a manual process, but modern systems are making things easier. Dedicated CLM platforms and software with integrated CLM features allow you to digitize your existing contracts and/or automatically pull data from the contracts you enter.
- Track data. After you have all your contracts in one place, you’ll need to start tracking the data relevant to those contracts. You’ll also need to employ similar processes for any newly signed contracts. Err on the side of collecting more data, so you don’t miss any important details.
- Establish authorship. With a good tracking system in place, you can change priorities to focus on creating new contracts. When establishing authors, you can create new contract templates, clause libraries, and other pieces of information that make it easier to create new contracts in a controlled environment.
- Create new contracts. At this point, you can focus on creating new contracts. There are many considerations to bear in mind here; not only will you want to make drafting and publishing new contracts easier, you’ll also want to make sure your contracts are compliant with all laws and regulations.
- Approve new contracts. Every CLM strategy needs to incorporate a contract approval process, which will ensure that each new contract is fully compliant. Depending on the complexity of your industry, this can become difficult.
- Negotiate new contracts. While you might have been negotiating contracts simultaneously with the other steps of this CLM outline, it’s important to perfect this stage of the process. In negotiation, you’ll need to be able to quickly and easily identify differences between different iterations of a contract, and work through them efficiently.
- Sign and finalize. Signing a contract may seem straightforward, but it’s important to finalize these documents effectively. You’ll need to make it convenient and secure for your individuals to sign, and simultaneously store the finalized contract so it’s available to all relevant parties.
- Analyze contracts. Finally, you’ll need to have a process to analyze your past contracts. This is why you collected so much data in the past. Use this opportunity to identify stop points and work to improve them.
Key Priorities for Better Contract Lifecycle Management
Throughout these stages of CLM, these priorities will help you improve your approach. Consider each category as an opportunity for multiple discrete improvements:
- Legal and regulatory compliance. All your contracts must comply with laws, industry regulations, internal rules, and other restrictions. It’s difficult to keep track of these, even with the help of a legal team, but the right software will make things more straightforward.
- Automation and efficiency. The less time you spend on managing contracts, the more time you can spend on more pressing priorities. If you can increase the efficiency of contract management, or automate some otherwise manual process, you’ll save countless man-hours.
- Organization and searchability. Ideally, your contracts will be organized in a way that makes them easy to find for all relevant parties. Maintaining the integrity and accessibility of contracts is easier when you have a digital database, especially if you have a search feature to help you find what you need.
- Analytics tools. Analyzing your contract history can be difficult, but it’s much easier if you have the right data-gathering and data-analyzing tools. Visuals can be enormously helpful here.
- Security and privacy. Of course, contracts also need to be kept secure at all times. Only with the right security and privacy controls will you be able to achieve this.
CLM isn’t a strategy you can execute or perfect overnight, but if you prioritize it and use the right tools, it can be much more streamlined. Make sure you invest in the right CLM software to digitize your assets and increase your transparency.