Contract Management Basics

The Importance of a Contract Lifecycle Management System

Contract lifecycle management (CLM) software automates and streamlines the management of legal agreements, offering efficiency, accuracy, and greater effectiveness at scale.

CLM software addresses many of the challenges commonly associated with the management of legal agreements. By automating, streamlining, and digitization contracting processes, CLM systems increase accuracy and consistency while making your organization more efficient.

Contract lifecycle management – also known as CLM – involves managing all the contracts an organization enters into – whether those are with vendors, customers, partners, or any other party with whom the company has a relationship.

CLM covers everything from the initial stages of drafting and negotiating a contract all the way through to its expiration or renewal. Throughout that process, CLM helps companies manage risk, maintain compliance with their obligations, and monitor and manage the performance of their trading partners. The best CLM software will help you streamline and automate all phases of your contract management processes, improving efficiency and driving business value for your organization.

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Challenges in contract lifecycle management

Even a small oversight in your contract management processes can lead to serious negative repercussions, including financial losses, legal action, or reputational damage.

A lack of standards and controls concerning contract language can be problematic in several respects. When legal terminology is not standardized across multiple documents, for example, it will typically lead to an inefficient use of resources. If attorneys or paralegals must handle virtually every contract as a one-off exercise, it consumes time that could better be spent elsewhere.

Inconsistencies across multiple geographies create further complexity. Manually managing those can be especially challenging. Tracking various formats for specific jurisdictions, with different currencies, terms and conditions, and escalation/de-escalation clauses, can get complicated very quickly. Manually managing that kind of complexity is burdensome, and it’s easy to make mistakes. If contracts are stored in multiple locations, it can be difficult to locate the information you need quickly and even harder to monitor performance closely.

The net result is often a chaotic mix of non-standardized contracts, manual systems, and disorganization.

What does a contract lifecycle management system achieve?

CLM software provides a systematic framework for managing legal contracts, from the early stages of negotiation and refining the language of an agreement all the way to renewal or termination. Every step throughout the contract lifecycle is monitored and managed using automated workflows and approvals.

CLM software makes it easier to draft and execute legal agreements, however complex or simple they might be. Standard clause libraries, for example, help to accelerate processes and ensure accuracy and consistency along the way. Those same mechanisms can also adapt to the specific requirements minor differences are necessary to accommodate different legal jurisdictions. Smoothly managing these kinds of complexities is one of the things that a good CLM system can do very well.

A good CLM system also makes it easy to find information quickly without searching through multiple digital repositories or locating paper copies. That increases overall efficiency and agility.

Contract analytics adds yet another dimension, using advanced software technology to extract meaningful information from legal agreements and report on key metrics surrounding risk and performance. The Icertis Contract Intelligence (ICI) platform uses sophisticated AI capabilities and natural language processing (NLP) to drive value-creating insights for contract management teams.

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Three benefits of CLM solutions

CLM software provides numerous benefits that drive tangible business value for any organization. These fall into three broad categories:

1. Improved efficiency

CLM software removes manual steps from your contract management processes, making it faster and easier to get things done. Efforts that might otherwise be spent poring over one-off contracts or locating important documents can be redirected to more productive purposes. Naturally, efficiency is about saving time and money – which directly affects costs. In fact, IDC estimates that the average enterprise saves the equivalent of 9 full-time equivalents by rolling out CLM software. The right CLM solution also helps you achieve better results. A systematic approach to managing contracts ensures that nothing slips through the cracks.

Automated workflows also provide a level of control and auditability that manual systems lack. Imagine, for example, it is the end of the quarter, and an important deal is imminent, pending internal approval of a few minor changes to the proposed contract. CLM software ensures that the correct approver is proactively notified so that the process moves along swiftly. If the primary approver is out of the office or  doesn’t respond, CLM software can be configured to route the alert to an alternate user or notify management. The result is that things get done faster, with stronger accountability.

2. Increased revenue

Following that example, consider a scenario in which your company misses out on an important sales opportunity because of a delay in getting the contract approved. There’s a personnel change at the customer’s organization, a project is suddenly put on hold, and the deal falls apart.

After contracts are signed, CLM software helps enterprises to get full value from their contracts.  It can highlight opportunities that might otherwise be overlooked, such as inflation adjustments, pricing discounts, and rebates.

Lastly, effective contract management reflects good management all around. When customers see that you run a tight ship – with efficient processes that move forward rapidly – they understand they are working with an organization that recognizes excellence. The best CLM software supports your organization in achieving high standards in everything they do, which casts your company in a good light.

3. Effective risk & compliance management

Many organizations in today’s global economy have leveraged third-party relationships to open new sales channels, expand geographically, and/or assemble package solutions that can deliver on a wider range of customer requirements.

Complex relationships also bring higher levels of organizational risk, however. To manage the vast array of contractual relationships, companies need CLM software to help them monitor and mitigate risk. Contract Intelligence ICI) can help companies identify and assess their risk exposure across an entire portfolio of contracts, continuously monitoring for changes that might call for closer scrutiny. CI supports companies in adapting to legal and regulatory changes that could impact their obligations or those of their trading partners or strategic alliances.

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Conclusion

CLM software helps companies streamline their contract management processes, which drives efficiency and effectiveness. Adding contract intelligence to that picture creates a powerful platform for driving business value. Icertis Contract Intelligence (ICI) offers extended value beyond that available from other CLM vendors. To learn more about Icertis, contact us today to discuss your organization and how we can help you.