What is the Contract Lifecycle Management Process Diagram?

Understanding the contract lifecycle management (CLM) process

The CLM process encompasses all activities involved in managing contracts. Having a structured approach to contract management minimizes risk, ensures compliance, and maximizes value from business relationships. Contracts move through predictable stages that require coordination among legal teams, procurement departments, business stakeholders, and vendors. 

Without a clear understanding of how contracts progress through different phases, organizations often struggle with delays, missed deadlines, compliance issues, and lost opportunities. The contract lifecycle management process provides the framework necessary to transform chaotic contract handling into a streamlined and efficient operation that supports business objectives. 

This page will guide you through each stage of the contract lifecycle management process, explain the benefits of using visual diagrams to map these workflows, and demonstrate how modern contract management software can streamline the entire process. 

• Understanding the contract lifecycle management (CLM) process
• The stages of contract lifecycle management
• Benefits of using a CLM process diagram
• The importance of CLM software
• Simplify the CLM process with Icertis

The stages of contract lifecycle management

Every contract follows a similar path through distinct stages, though the complexity and duration of each phase can vary depending on the type of agreement, stakeholders involved, and organizational requirements. Understanding these stages helps teams coordinate their efforts and ensures that critical steps aren’t overlooked during the contracting process. 

The eight stages of the contract lifecycle management process include:

Here are the stages of contract lifecycle management that you should consider including in your contract lifecycle management process diagram:

1. Contract initiation

Depending on the nature of the agreement in question, contract initiation might range from a fully automated process (for standardized, high-volume contracts) to a simple request from line-of-business personnel or executive management. These requests should clearly outline the business needs, detailing the purpose of the contract and the intended outcomes of the business relationship.

Common across procurement teams, contract initiation will require an “RFx”. This abbreviation encompasses a range of “request for” documents, including a “request for proposal” (RFP), “request for quote” (RFQ), “request for information” (RFI), or “request for bid” (RFB). These RFx processes define the steps that must happen in order for your organization to find and select suppliers for the goods or services needed to operate your business.

2. Authoring

Contract authoring is the creation of the initial draft of the agreement, where legal teams and business stakeholders collaborate to outline the terms and conditions that will govern the business relationship. During this stage, the contract is drafted with careful attention to the obligations and responsibilities of each party, payment terms, deliverables, timelines, and any special provisions required for the specific arrangement. 

The authoring process requires input from multiple departments to ensure that technical requirements, legal protections, and business objectives are all properly addressed. Modern organizations often use standardized contract templates and clause libraries to expedite the authorization process while maintaining consistency and minimizing legal risks. 

3. Negotiations

The ultimate goal of contract negotiations is to achieve a balanced agreement that all parties can fully comply with. By the time negotiation is complete, contracts should clearly define expected outcomes and outline remedial actions to be taken if either party fails to meet its commitments under the agreement.

Typically, the negotiation process begins with the presentation of a contract draft to the vendor. The supplier will review the contract and return it with questions, comments, and concerns. Further discussions may take the form of face-to-face meetings or back-and-forth communications via email, phone calls, or other means.

Organizations often set deadlines for reaching an agreement, after which they may suspend negotiations and pursue other suppliers.

4. Approval

After the negotiation process, most organizations will initiate a round of approvals to ensure that key internal stakeholders have had the opportunity to review and sign off on the final draft before the agreement is executed.

The approval process typically involves routing the contract through a predetermined hierarchy of decision-makers, based on factors such as contract value, risk level, and business impact. This might include approvals from legal counsel, finance teams, procurement officers, and senior executives. 

CLM tools can automate this routing process, sending contracts to the right people in the correct sequence while tracking approval status in real time. These systems can also enforce approval thresholds, ensuring that high-value or high-risk contracts receive appropriate scrutiny before execution. 

5. Execution

Contract execution is the formal process of signing the contract, where authorized representatives from each party provide their signatures to make the agreement legally binding. This can be accomplished through traditional wet signatures on physical documents or through electronic signature platforms that offer the same legal validity with greater convenience and speed. 

The execution stage requires careful validation of authorized signatories. Once all necessary signatures are obtained, the final signed contracts must be distributed to the relevant stakeholders and stored in a secure repository, where they can be easily accessed throughout the contract term.

6. Ongoing management

After execution, the real work of contract management begins. Organizations must monitor performance against contract terms, track compliance requirements, and manage key milestones and deliverables. This ongoing oversight ensures that both parties fulfill their obligations and that the business relationship delivers the expected value.

Effective contract management relies on alerts and reports that help teams stay on top of important deadlines, renewal dates, and performance metrics. Many organizations use dashboards and automated notifications to monitor contract health and identify potential issues before they become serious problems.

7. Renewal or termination

Finally, there comes a time when contracts are open for renewal or termination. In many cases, this presents opportunities to lock in prices, renegotiate terms, or otherwise effect positive changes in the business relationship.  Unfortunately, contract renewals often fall through the cracks, leading to missed opportunities.

An enterprise-grade CLM solution will trigger review processes by alerting key stakeholders whenever contracts come up for renewal. Armed with contract analytics software that quantifies vendor performance and overall contract value, decision-makers will be better equipped to determine the best path forward.

Contract termination is also an option that organizations must consider when relationships aren't working out as planned. The termination process involves reviewing contract terms to understand notice requirements, final obligations, and any potential penalties. Proper termination procedures help organizations exit agreements cleanly while minimizing legal and financial risks.

Benefits of using a CLM process diagram

Having a visual representation of the contract lifecycle management process provides numerous advantages for organizations looking to improve their contracting operations. These diagrams serve as communication tools, training resources, and process improvement guides that help teams work more effectively together.

Improves Clarity and Communication

Contract lifecycle management process diagrams help teams understand their roles and responsibilities throughout the contracting process. Visual tools reduce miscommunication by providing a common reference point that clarifies workflows, decision points, and handoff procedures, eliminating ambiguity across teams. 

Speeds Up Contract Cycles

Clear workflows lead to faster contract approvals and execution because teams know exactly what needs to happen at each stage. When processes are well-defined and visible, bottlenecks become easier to identify and resolve. This efficiency has a direct impact on overall business agility, enabling organizations to respond promptly to opportunities and changing market conditions. 

Ensures Compliance

Diagrams help organizations track compliance checkpoints throughout the contract lifecycle management process. By visualizing the approval and review stages, teams can ensure that all required steps are completed before contracts move forward. This approach reduces risks by preventing contracts from bypassing important controls or oversight mechanisms. 

Saves Costs

Organizations that use well-designed process diagrams achieve significant cost savings by reducing errors and delays. Clear visual guides reduce the likelihood of mistakes that can lead to contract disputes, missed deadlines, or compliance failures. There's also a substantial reduction in manual contract handling as teams become more efficient at moving agreements through standardized workflows. 

Enhances Onboarding

Contract lifecycle management process diagrams serve as excellent training tools for new employees who need to understand how contracting works within the organization. Visual aids help people learn faster and retain information better than text-based procedures alone. This leads to quicker ramp-up times and more confident team members who can contribute effectively from day one.

The importance of CLM software

Modern CLM software like Icertis Contract Intelligence plays a crucial role in automating and managing contracts throughout their entire lifecycle. These platforms provide the technological foundation needed to implement sophisticated contract workflows, track performance metrics, and maintain comprehensive contract repositories. CLM software also supports diagram creation and updates, making it easier for organizations to visualize and optimize their contracting processes.

The integration of contract AI and contract intelligence capabilities has transformed how organizations approach contract management. These advanced features enable automated contract analysis, risk assessment, and performance monitoring that would be impossible to achieve through manual processes alone.

AI in contract management enables organizations to extract valuable insights from their contract data, identify opportunities for optimization, and make more informed decisions about their business relationships. This technological evolution has made CLM software essential for organizations that want to maximize the value of their contracting operations.

Simplify the CLM process with Icertis

Icertis is a leading CLM solution that changes how organizations visualize and manage their contract processes. The platform provides comprehensive tools for creating detailed process diagrams, automating workflows, and tracking contract performance throughout the entire lifecycle.

With Icertis, organizations can enhance their process visualization capabilities while dramatically improving contract management efficiency. This combination of powerful technology and user-friendly design helps organizations achieve better outcomes from their contract relationships while reducing the time and effort required to manage them effectively.

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