The contract lifecycle management (CLM) system includes all complete featured analytics modules that enable insight into data such as cycle times, deviations, legal processes, and business operations.
Types of CLM Systems
Contract lifecycle management systems (CLM) automate and streamline contract processes during the critical stages. The method comprises the following steps: initiation, authoring, process and workflow, negotiation and approval, ongoing management, compliance, and contract renewal.
CLM tools provide businesses with a streamlined contract process that saves time and reduces errors. The tools enable businesses to create templates for frequently used contracts and automate the creation process for new contracts. This feature saves time and increases efficiency. The streamlined process also reduces the risk of errors, such as missing contract terms, which can result in costly legal disputes.
Your contracts are not only the administrative part of your business but also strategic. CLM is core to the depreciation of your legal, financial, and public relations.
How Does CLM System Work
Contract lifecycle management systems help you to improve the velocity of your contract value and streamline your processes. It is proactive methodologic management of a contract from initiation through award, compliance, and renewal. Additionally, CLM protects your organization from an audit, besides improving accuracy. CLM systems can lead to significant improvements in cost savings and efficiency. The understanding of automating CLM can limit the liability of an organization while increasing compliance with legal requirements.
Below is how CLM works:
- Standardize the language of your contracts using pre-approved clauses and template libraries.
- Storing your contracts in a highly secure central repository
- Provision of simple forms for casual internal users
- Defining workflows routing contract documents through steps and people required for approval
- Leverage alerts as reminders of important contract dates, terms
- Use reports and dashboards to track the contract statuses
An effective contract lifecycle management system can be achieved through effective and proactive CLM software. The software can lead to significant improvements in cost savings and efficiency.
Algorithm of Contract Lifecycle Management System2
The contract management process includes some steps and software. The steps on how to implement a contract management system are as follows:
The organization templates library significantly improves contract risk management, accelerating contract turnaround with the incorporated rules.
The extensive rules engine CLM software offers the dynamic creation of contracts from templates and contracts. The contract content is assembled using a criterion associated with the contract.
The contract lifecycle management process captures commercial terms of products and services, integrates data with enterprise systems, and helps enforce terms.
An effective contract begins with leveraging all data concerning the contract.
Contract execution involves updating the contract document and data to the central repository after the performance.
Contract lifecycle management software users can gain valuable performance insights on all areas of contracts, from legal, finance, sales, and procurement.
Through the above steps, contract managers can achieve better compliance with contract commitments by identifying, capturing, assigning, and tracking the completion of tasks assigned to business owners.
Five Non-obvious Benefits of a CLM system
Many employees’ expectations are being in a workplace where they can make a change while focusing on what matters. As the demand for legal professionals keeps rising in the job market, they will choose to work for a company where they are able to utilize and develop their skills. CLM systems have user-friendly methods that will assist your staff in areas where they need it. Applying a more manageable workload will reduce the time spent on administrative tasks, thereby improving employee satisfaction and retention. Additionally, the legal tech will liberate your legal staff from performing many repetitive tasks by automating them.
Ease of Use
CLM platform assists you to be open to possibilities and sharing contracting work among several departments. A user-friendly CLM platform allows for legal predefines besides automating workflows and permissions, making anyone confident handling contracts for persons without a background in law.
Contract Management Skills Improvement
A modern CLM complies with all the GDPR requirements preventing organizations from having personal data dispersed across multiple locations and platforms. However, the lack of a modern CLM platform will make it hard for CLM to be compliant. With the CLM platform offering documents with detailed trails and activity logs, you can keep track of the person who performs a particular activity, thereby offering transparency into contract changes. Additionally, a good CLM platform reduces the number of hours and considerably lowers the costs of contracting.
ACLM platform will assist you in avoidance of contract value leakage. A good number of times, a contract may become worthless as anticipated because of an improper contracting process.
Enhanced Client Relationship Management
A CLM platform will provide you with an increase in the ease of how you are doing business. You risk losing customers because of factors such as low processes. As such, ensuring that you have smooth and efficient operations can make your customers stay and perform business with you for a longer time. A CLM platform will enable a company to become a brand that clients love because of its ease and smoothness.
CLM tools can improve supplier relationship management by enabling businesses to track supplier performance and manage supplier contracts. The tools provide insights into supplier behavior, such as contract compliance, delivery times, and quality of goods or services. This feature allows businesses to make informed decisions about which suppliers to work with and negotiate better deals.
In delivering orders to the client, there are opportunities to save money and improve delivery while obtaining products that might work better at a lower price. As such, a CLM system helps improve the client relationship helping make a difference if the system is not employed.
Improved Analysis for Decision Making
The CLM system that dictates its terms and conditions and procedures implements and enhances the level of compliance amongst the relevant stakeholders. Moreover, the contract lifecycle management system increases compliance invariable and helps mitigate several risks within an organization. A CLM incorporates techniques involving tools, thereby automating the contract management process. Consequently, the manual work is reduced, leading to an improvement in efficiency and scope of errors. As a result, the personnel can focus on more strategic aspects like evaluation of contract management and identifying areas that require improvement.
Departments that may Benefit from a CLM System
CLM assists the sales team in performing in the following ways:
- Building clause libraries to allow your team to find documents.
- Integrating CRM platforms.
- Dynamic templates with auto-filled forms for helping employees draw documents faster.
Marketing also bears the burden of a contract management system which CLM can help improve in the following ways.
- We are ensuring fast contracting and launching of new marketing campaigns.
- Assisting in keeping track of deadlines using the CLM platform
- Sending automatic notifications to remind customers to terminate expiring contracts.
The finance department has to approve the terms in loan documents, track cash flows and furnish invoices, and allocate budgets throughout the organization. The CLM system simplifies and improves these processes through the following:
- Showing contracts stored in the platform by highlighting metadata about the signed agreements.
Assigning metadata allows you to include new information in the reports and see the broader finance.
Contract management is deemed a challenging task. A CLM platform will reduce stress to contract managers by creating an orderly process for each task that will lead to more efficiency and high productivity. A good will lead to a reduced liability, leading to an increased cost of savings and quality delivery, enhancing business relationships.
How to Implement a CLM System to Maximize its Benefits for Your Staff
Regarding the type of business you have, contracting is the best aspect unequivocally central to the organization’s functioning. However, daily agreements will form the backbone of an organization’s relationship with stakeholders like its suppliers, partners, and customers. Implementation of a sound CLM system will, as a result, drive long-term value for the organization. Therefore, good contract management can ultimately make or break the organization. In ensuring practical contract management, it is essential to follow some basic tips. Here are some tips on how to implement a contract management system to maximize the benefits of the staff:
- Identify Business Objectives and Goals
Before drafting a business, it is crucial to identify the business objectives and the goals through which the contract is necessary. Identifying a business objective will assist you in setting appropriate expectations for parties and enhancing them.
- Draft the Contract in a contract lifecycle management system
Upon identification of the objectives and expectations get identified the drafting process starts. Gather all the supporting information and the documents required. Drafting is a highly critical process because any form of ambiguity may result in business losses.
- Negotiate with Involved Stakeholders
Negotiation among the interested parties commences once the contract is drafted. However, the negotiation process should be conducted so that all the involved parties communicate with transparency and mutual trust.
- Finalize and Execute the Contract
Upon conclusion of the negotiation phase, the contract is amended to incorporate any appropriate changes, and the arrangements will go for approval by the relevant teams. Once the agreement is approved and finalized, the execution by all stakeholders starts based on the specifications.
- Manage the Obligations and Audits
It is worth noting that contract management does not end when the contract is executed. Managing responsibilities enables compliance with all contract specifications providing the contract performance meets the business requirements.
Olga Mack is VP at LexisNexis and CEO of CounselLink CLM.
Olga V. Mack is Vice President at LexisNexis® and CEO of CounselLink® CLM, a next-gen contract management company that has pioneered digital negotiation technology.
An award-winning general counsel and operations professional, Olga embraces legal innovation and has dedicated her career to improving and shaping the future of law. She shares her views in her columns at Above the Law, Forbes, Bloomberg Law, Association of Corporate Counsel (ACC) Docket, and more.