Contract lifecycle management: what it is, what it is for and how to use it
In the modern business landscape, where agility, efficiency, and compliance are essential, effective contract management plays a fundamental role in organizational success. Companies from all sectors seek to optimize their operations and minimize risks and, in this context, a technological solution emerges that transforms the way in which contracts are managed: the Contract Lifecycle Management (Contract Life Cycle Management), known as CLM.
In the next few segments of this article, we will explore the key features that define a CLM system and discuss how it directly impacts the way contracts are created, reviewed, negotiated, and managed to comply with.
Finally, let's go through how companies can apply this solution to their most specific needs.
What is Contract Lifecycle Management?
O Contract Lifecycle Management It is an integrated system of software designed to automate, optimize and simplify the complete life cycle of contracts, which uses advanced technology to act at every stage of the process, from the drafting of the contractual instrument to its conclusion. This system eliminates time-consuming and error-prone manual tasks, providing an efficient flow for contract management.
What are the stages of Contract Lifecycle Management?
The life cycle of a contract is a complex process that involves several stages, such as drafting, negotiation, execution, and compliance. In this context, Contract Lifecycle Management stands out as an ally in all these stages. Next, we will explore how this system acts strategically at each stage of the contract lifecycle.
Negotiation and drafting
In the initial phase, contracts are negotiated and drawn up to determine their terms and conditions. The CLM offers a series of features for this phase, such as:
- pre-configured templates that simplify the initial drafting of the contract, ensuring the inclusion of standardized clauses and important terms;
- clause library with a comprehensive selection of pre-approved clauses that can be easily incorporated into the contract;
- team collaboration tools in real time, making it possible to review and edit the contract simultaneously, which speeds up the negotiation.
Approval and signature
Once negotiated, the contracts undergo internal approvals and are signed by the parties involved. CLM can facilitate this process by automating approval flows, ensuring that the contract follows the hierarchy determined in the company's internal procedures and policies and obtains the necessary approvals. In addition, they can be used electronic signatures to streamline the process of obtaining signatures, eliminating the need for paper documents.
Execution and compliance
The execution and fulfillment of the contract, once signed, require constant monitoring. In this phase, the CLM can issue alerts and notifications for deadlines, obligations, and necessary actions, ensuring that the parties are aware of their contractual responsibilities; and monitor compliance with the contract by recording dates, details, and pertinent information, creating a detailed history that can be consulted at any time.
Monitoring and analysis
In addition to storing contracts, the CLM also offers analytical resources that allow the identification of trends, patterns, and opportunities for improvement in contractual instruments.
Renewal and closure
When the contract's expiration deadline approaches, the CLM can issue alerts for renewal, when so configured, or provide a detailed history of all versions of the contract to facilitate auditing and proper closing of the contract.
Advantages of Contract Lifecycle Management
In addition to simplifying contract management, CLM offers a number of other advantages that aid organizational success. Next, we'll explore these advantages.
effectivity
One of the key advantages of CLM is the significant improvement in operational efficiency. By automating manual tasks, such as drafting contracts, approvals, and tracking deadlines, the system frees up company resources to focus on higher-value activities. Automation reduces human errors, speeds up processes, and increases overall productivity.
Visibility
The CLM provides comprehensive visibility over all of the company's contracts. By centralizing this information in a single repository, companies can more quickly access the details of each contractual instrument, version history, deadlines, and obligations. This eliminates the need to search for physical documents or waste time searching for decentralized information.
Compliance
Contract management requires compliance with internal company regulations and policies. The CLM assists in this process, ensuring that contracts are aligned with regulatory standards and internal regulations. This reduces the number of litigation, fines, and other legal implications, protecting the company's interests.
Collaboration
CLM facilitates collaboration between teams and stakeholders, as more than one person can review, comment, and approve contracts collaboratively and at the same time, even though they are in different locations. This streamlines the negotiation and approval process, improving internal and external communication.
Risk mitigation
Automated CLM alerts and notifications ensure that important dates, renewal deadlines, and other obligations are remembered. This minimizes the loss of important deadlines, avoids delays and errors harmful to business.
Strategic reports
CLM offers customized reporting capabilities, allowing companies to track contract performance and identify areas for improvement.
Data-based decision-making
With the analysis integrated with CLM, companies can make more informed decisions. Access to data and insights about performance standards, contract trends, and compliance history allows managers to make strategic decisions based on concrete information.
When to invest in Contract Lifecycle Management?
The decision to invest in a Contract Lifecycle Management should be performed when the company is prepared to implement an advanced solution and there are some indications of when the time is right.
Significant volume of contracts
If the company deals with a large number of contracts on a regular basis, manual management can be time-consuming and susceptible to errors. The use of a CLM can automate and streamline the process.
Contractual complexity
When company contracts involve complex clauses, specific regulatory requirements, or multiple stakeholders, the use of a CLM can help ensure that all specificities are properly addressed and met.
Risks and compliance
If the company faces risks related to contractual deadlines, legal compliance, or audits, the use of CLM can help mitigate those risks by keeping a detailed record and ensuring compliance.
The need for transparency
If the company wants to increase visibility and transparency throughout the contract management process, the use of the CLM centralizes the information and allows its monitoring in real time.
Company growth
As the company grows, so does the complexity and number of contracts. The use of a CLM ensures that growth does not cause the creation of inefficient processes or generate internal disorganization.
Wasted time and resources
If company teams spend a significant amount of time on manual and administrative tasks related to contracts, the use of a CLM frees up those resources for more strategic tasks.
The need for agility
In a dynamic market, agility is essential. The use of a CLM allows for a quick response to contract modifications, negotiations, and compliance with requirements.
Increase in legal complexity
As laws and regulations evolve, keeping the contract management team up to date can become a challenge. The use of CLM keeps the company up to date and compliant.
Higher demand for efficiency
If the company is constantly looking for ways to improve efficiency and reduce operating costs, the use of a CLM can optimize the contract management process.
Reduction of errors
Contractual errors can be costly and damage a company's reputation. Using a CLM helps minimize human errors through automation.
Metrics and KPIs for continuous improvement
CLM offers the ability to extract metrics and data that can be used to establish key performance indicators (KPIs) with the objective of driving the continuous improvement of contract management services. By analyzing this data, companies can identify areas of opportunity, assess the effectiveness of processes, and adjust strategies to optimize contractual management.
Main functionalities of Contract Lifecycle Management
A CLM solution offers several essential functionalities that facilitate contract management.
Workflow automation
In addition to alerts and notifications, an advanced CLM solution can offer customized automations for complex workflows, ensuring that each step is followed correctly.
Integration with electronic signatures
In an increasingly technological world, the ability to sign contracts electronically is essential. A CLM can integrate with electronic signature platforms for a more centralized process.
Audit and audit trail
A strategic audit trail functionality in CLM can provide a complete record of all activities related to a contract, helping with traceability and identification of changes made.
Automated report generation
Having the ability to generate detailed reports on contracts, deadlines, renewals, and other aspects can be essential for strategic analysis.
Managing hierarchical approvals
For contracts that require the approval of hierarchical layers, this functionality can ensure that the approval flow is properly respected.
Vendor performance analysis
In addition to managing its own contracts, a CLM can include features for evaluating the performance of suppliers and partners.
Advanced risk management
Risk management functionality can be expanded to assess risks associated with specific terms in contracts and offer suggestions for mitigating them.
Integrated business intelligence
Incorporate BI resources (Business Intelligence) the CLM can allow a deeper analysis of contractual data and identify insights strategic.
Ability to collaborate externally
In addition to involving the internal parts of the company, a CLM can be extended to allow external collaboration involving customers, suppliers, and partners.
How to use Contract Lifecycle Management in your company
The application of CLM in your company can follow the following steps.
Drafting your contract
In addition to templates, your company can create customized workflows for different types of contracts. It is also valid to integrate CLM with external clause and template libraries to increase the range of available options.
Approval and review
Allow approvals to follow a specific hierarchy, ensuring that the right people review the contract. In addition to approvals, enable comments and collaborative tagging directly on documents to facilitate detailed reviews.
Negotiation with customers and suppliers
Keep a detailed history of the negotiations, including any changes made to the contract during the negotiation process, and provide controlled sharing options to ensure that only authorized parties access the contract versions.
Subscription
Enable the collection of signatures from multiple parties in a single document, reducing the complexity of the process. In addition, integrate authentication methods according to the type of contract that will be signed to guarantee the identity of the signatories.
To add more value to the subscription process, you can integrate CLM with an electronic signature platform, such as the Clicksign Platform.
Safely storage
Provide varying levels of access for different areas of the organization, protecting sensitive information, and integrate CLM with cloud storage solutions for synchronization and Backups automated.
Fulfilment of obligations
In addition to alerts, provide a visual calendar of contractual obligations to facilitate follow-up. Also try to generate detailed reports on statuses of compliance with all contracts.
Contract Management
Implement automatic reviews to detect any unauthorized changes to contracts and integrate CLM with existing internal workflows to ensure efficient management.
Optimization of the process
Use more advanced analysis features to identify insights strategic in your contracts and provide training and ongoing support to ensure that the team makes the most of the system.
CLM and electronic signature in process optimization
As we have seen, Contract Lifecycle Management (CLM) is more than a simple software, configuring a strategic approach to manage contracts in an effective, simplified, and intelligent manner.
By centralizing the process on a digital platform, CLM offers a comprehensive view of all contracts, allowing companies to make more informed decisions, reduce risks, and optimize their operational processes.
With CLM, contract management has evolved to a new level of efficiency and control and this can be further optimized when integrated with an electronic signature and online document management solution, such as Clicksign.
By combining the power of CLM with the functionality of Clicksign, companies can not only manage the entire lifecycle of their contracts, but also simplify and streamline the process of obtaining electronic signatures.
This results in a more complete and effective approach to contract management, allowing organizations to save time, reduce costs, and increase security and compliance at every stage of the process.Learn about Clicksign's solutions and Start testing now! You don't need a credit card.
