Contracts are central to every business operation, whether it’s forming new partnerships, hiring employees, or delivering services to customers. Yet, many organizations rely on manual methods to manage their contracts, making it easy to miss deadlines, overlook critical terms, or fall short of regulatory standards.
The result? Studies show that businesses lose nearly 40% of a contract’s value due to inefficient management.
Effective contract lifecycle management (CLM) helps prevent these losses. It creates a structured system for drafting, negotiating, approving, and monitoring contracts, so that important details are never missed, and compliance is maintained. In this guide, we explore what CLM is, why it matters, how it works, and what to look for in a CLM solution that fits your organization’s needs.
Simply defined, contract lifecycle management is the process of enterprises managing their contracts through initiation, execution, and renewal.
Here are some of the essential components of an effective contract management cycle in any organization:
By investing in contract lifecycle management software (or CLM software), you can easily automate the entire CLM lifecycle for improved efficiency and collaboration. Next, let’s look at why enterprises need an efficient CLM software tool to manage their various contracts.
With contract lifecycle management tools, your enterprise can standardize the entire process and simplify contract-related activities. CLM solutions provide a centralized location for storing and managing all your business contracts. Through this centralized location, every business team can view the current status and history of every contractual agreement and take the appropriate action (if needed).
According to Fortune Business Insights, C-level executives and business leaders spend around 18% of their working time managing contracts. A CLM software can automate most of their contract-related activities, thus allowing them to focus on important business decisions and high-value work of strategic importance.
As mentioned in the previous section, the CLM software can automate various steps, including the following ones:
By using a CLM tool, you can add, modify, or remove the required contract clauses as customized for your business. The CLM tool can automatically check the draft for any errors or inconsistencies.
After drafting the contract, the next step is to automatically route the contract through the approval process. The CLM tool ensures that the contract draft is delivered to the right person or authority, thus speeding up the approval process.
Using its e-signature feature, the CLM tool enables every contract to be digitally signed by an authorized person. This reduces the time and effort for physical contracts, thus accelerating the approval process.
After contract approval, the next step for the CLM software tool is to automatically monitor each contract. This includes sending automated reminders about renewal dates, and performing performance reviews to ensure contract compliance.
Across the entire contract lifecycle, the CLM tool can leverage the contract data and performance for real-time analytics and reporting purposes. With these insights, you can identify any areas of improvement in contract management and improve your contract management strategies (if required).
Here are five of the key features that you must look for in your CLM solution:
CLM tools come with a variety of pre-designed contract templates, which can be used when creating a new contract. These pre-built templates ensure legal compliance while saving a lot of time and resources in developing contracts.
By using collaboration tools in CLM, contract stakeholders can now track real-time changes in the contract draft, thus making it easier to negotiate the contractual terms. This feature is key to settling differences and getting approvals on time.
With its version control feature, the CLM solution enables stakeholders to track any changes to every contract over time. You can also view any additions – or modifications – to the contract along with the person who made the changes.
With the compliance tracking feature, enterprises can now monitor critical contract dates and milestones – and maintain compliance with regulatory requirements. CLM tools also provide alerts to remind your stakeholders of contractual deadlines.
Finally, CLM solutions provide your enterprise a centralized storage to keep all contracts and related documents. With its search and filter function, you can easily search and access documents whenever needed.
Here are five benefits of contract lifecycle management in any enterprise:
A reliable CLM tool effectively streamlines the contract approval process, thus improving your operational efficiency and reducing any compliance-related risk.
With its support for work automation, CLM tools can significantly improve work-related efficiency, thus allowing business professionals to focus on high-value tasks.
CLM solutions also empower enterprises to scale up the volume of their business contracts. With the increasing volume as well as complexity of contracts, CLM can automate contract management, thus ensuring that you don’t miss any contractual deadlines or opportunities.
The CLM tool also automates the contract lifecycle process, thus saving both time and costs. Through electronic signatures, enterprises can save the cost of physically printing and mailing contractual documents for approval.
With its data-driven insights, advanced CLM solutions can improve decision-making across enterprises. Based on your requirements, you can now track relevant KPIs and metrics to gauge your contract performance and identify areas of improvement.
CLM is a “boon” for enterprises looking to standardize their contract-related processes. The CLM software helps you to manage all contracts (across business functions) from a single integrated platform, thus delivering a consistent structured approach.
Now that you understand its benefits, let’s look at some of the real-world applications of contract lifecycle management.
Here’s how the following industries can deploy their CLM tool:
Here are some of the best practices to follow when implementing CLM in your enterprise:
Before implementing the right contract lifecycle management platform, you need to understand your specific pain points in contract management. This enables you to customize your CLM solution according to your business needs.
Additionally, identify the process bottlenecks (like signatures), which could potentially delay the process transformation.
For a successful CLM implementation, you must involve stakeholders from across business functions including sales, finance, and legal teams. This enables your enterprise to understand their individual needs before implementing the right CLM solution.
Through a collaborative approach, you can understand and mitigate the contract-related pain points (or challenges) in every business function. This, in turn, leads to higher adoption and business integration.
Without the right CLM solution, you cannot maximize your benefits from implementing this tool. As a best practice, choose the CLM software tool that’s the best fit for your needs.
Additionally, ensure that your CLM solution is easy to integrate with your existing systems, like financial reporting and CRM.
Enterprises cannot achieve CLM success by simply implementing the right solution. To ensure adoption, you must also support your end-users through:
To summarize, contract lifecycle management (CLM) is the right solution for your enterprise to streamline its contract management process from initiation to final approval.
As a leading provider of contract lifecycle management solutions, Legistify has been simplifying contract management for its customers through AI-enabled automation. If you need more information about our CLM solution, consult our experts today.
