10 things to know about Contract Lifecycle Management Software in 2023

The process of contract management has begun to occupy a crucial role in organizational business processes. Contracts, being an essential document, must be stored, secured, and monitored effectively. One of the biggest challenges that complicate the contractual process is the multitude of contracts. The lack of trained specialists to maintain the contracts pose a risk to the organization’s contract functions. The contract management software overcomes contract bottlenecks and during the post-pandemic period ensures business continuity. The software has become a favorite of contract managers and legal teams for its simplicity and usability. In this blog, we outline the insights for 2023 and why it is essential to equip your business with contract lifecycle management software.

What is a contract management system?

A contract management system is a tool or software that is used to manage the process of creating, storing, and maintaining contract documents. It typically includes features such as document generation, negotiation, approvals, signatures, and storage. The goal of a contract management system is to streamline the contract management process and help organizations maintain compliance with legal and regulatory requirements.

What is contract lifecycle management? 

Contract lifecycle management, also known as CLM, is a term that refers to the processes and systems used to manage the entire lifecycle of a contract, from the initial negotiation and creation of the contract, through its execution and performance, to its eventual renewal or expiration. CLM typically involves the use of contract management software or other tools to automate and streamline the contract management process, helping organizations to manage their contracts more efficiently and effectively. The goal of CLM is to help organizations reduce risk, increase compliance, and improve their overall contract management processes.

What is the difference between contract management and CLM?

The main difference between contract management and CLM is that contract management refers specifically to the processes and systems used to manage the creation, storage, and maintenance of contract documents, whereas CLM encompasses the entire lifecycle of a contract, from initial negotiation and creation, through execution and performance, to renewal or expiration. In other words, contract management is a subset of CLM, focusing on the administrative aspects of contract management, whereas CLM encompasses a broader range of activities and processes related to the management of contracts.

What are the stages of contract lifecycle management?

The stages of contract lifecycle management can vary depending on the specific processes and systems used by an organization. However, in general, the stages of CLM may include the following:

  • Planning and preparation: This stage involves identifying the need for a contract, determining the parties involved, and defining the terms and conditions of the contract.
  • Negotiation: This stage involves discussing and agreeing on the terms and conditions of the contract with the other party or parties involved.
  • Approval: This stage involves obtaining the necessary approvals from relevant stakeholders, such as legal departments or senior management, before the contract can be executed.
  • Execution: This stage involves signing the contract and putting it into effect.
  • Performance: This stage involves managing the contract during its term, including monitoring performance and compliance, and making any necessary adjustments or changes.
  • Renewal or expiration: This stage involves deciding whether to renew the contract or allow it to expire at the end of its term.
  • Termination: This stage involves ending the contract prematurely, either by mutual agreement or due to a breach of contract by one of the parties.

What are the roles associated with contract lifecycle management ?

The roles associated with contract lifecycle management can vary depending on the specific processes and systems used by an organization. However, in general, the following roles may be involved in CLM:

  • Contract managers: These individuals are responsible for overseeing the entire contract lifecycle, from initial negotiation and creation, through execution and performance, to renewal or expiration. They may also be responsible for managing the contract management team and ensuring that all contracts are in compliance with legal and regulatory requirements.
  • Contract administrators: These individuals are responsible for managing the administrative aspects of contract management, such as creating and storing contract documents, tracking contract performance, and ensuring that all contract obligations are fulfilled.
  • Legal departments: Legal departments are typically involved in the negotiation and approval of contracts, as well as in the management of any legal issues that arise during the contract lifecycle.
  • Senior management: Senior management is typically involved in the approval of contracts, as well as in the overall management of the contract management process.
  • External parties: Depending on the nature of the contract, external parties such as vendors, customers, or partners may also be involved in the contract lifecycle, either as signatories to the contract or as parties to whom the contract applies.

What are the typical bottlenecks in contract lifecycle management?

The typical bottlenecks in contract lifecycle management can include:

  • Manual processes: Many organizations still rely on manual processes for contract management, which can be time-consuming and error-prone.
  • Lack of standardization: Without standardized processes and systems, contract management can be fragmented and disorganized, leading to delays and inefficiencies.
  • Inadequate training: Without proper training, contract managers and other personnel may be unsure of how to properly manage contracts, leading to mistakes and non-compliance.
  • Lack of visibility: Without adequate visibility into the contract management process, it can be difficult to track the progress of contracts and identify potential bottlenecks.
  • Ineffective communication: Poor communication between the various parties involved in the contract lifecycle can lead to misunderstandings and delays.

Overall, the key to overcoming these bottlenecks is to implement a robust contract management system that can automate and streamline the contract management process, as well as provide the necessary visibility and communication tools to ensure that contracts are managed efficiently and effectively.

How to plan for implementation of a contract lifecycle management system?

To plan for the implementation of a contract lifecycle management system, you should consider the following steps:

  • Identify the business needs and goals for implementing a CLM system. This will help you determine the specific features and capabilities that your system will need to have.
  • Conduct a thorough evaluation of the different CLM systems on the market, including both commercial and open-source options. This will help you determine which system is the best fit for your organization’s needs.
  • Develop a detailed implementation plan that outlines the specific steps and tasks that will be involved in implementing the CLM system. This should include a timeline, a budget, and a list of the resources that will be required.
  • Communicate the plan to all relevant stakeholders, including senior management, contract managers, and other personnel who will be involved in the implementation process.
  • Provide training and support to ensure that all personnel are familiar with the new CLM system and know how to use it effectively.
  • Monitor and track the progress of the implementation to ensure that it stays on track and that all goals and objectives are met.

Overall, the key to successful implementation of a CLM system is to carefully plan and prepare for the process, and to involve all relevant stakeholders in the decision-making and implementation process.

What causes delays in contract negotiation and execution?

There are several factors that can cause delays in contract negotiation and execution. Some common causes of delays include:

  • Lack of clear communication and understanding of the terms and conditions of the contract.
  • Misaligned expectations or misunderstandings between the parties involved in the negotiation.
  • The need for legal review or approval of the contract, which can take time to obtain.
  • Inadequate staffing or resources to handle the negotiation and execution process.
  • Difficulties in reaching agreement on the terms and conditions of the contract.
  • Unforeseen events or circumstances that interrupt the negotiation and execution process.

Overall, the key to avoiding delays in contract negotiation and execution is to establish clear communication and understanding between the parties involved, and to allocate adequate resources and personnel to handle the process in a timely manner.

How to monitor the contracts workflow ?

To monitor the contracts workflow, you can use a contract management system that includes features such as document generation, negotiation, approvals, signatures, and storage. This will help you to automate and streamline the contract management process, and provide the necessary visibility and communication tools to ensure that contracts are managed efficiently and effectively.

In addition to using a contract management system, you can also monitor the contracts workflow by:

  • Establishing clear roles and responsibilities for contract managers and other personnel involved in the contract management process.
  • Developing and implementing standardized processes and procedures for contract management, including negotiation, approval, execution, and performance.
  • Tracking and monitoring the progress of contracts, including key milestones, deadlines, and performance metrics.
  • Communicating regularly with the parties involved in the contract, to ensure that all relevant stakeholders are aware of the status of the contract and any potential issues or challenges.

Overall, the key to effective contract workflow management is to have clear, standardized processes and systems in place, and to monitor and track the progress of contracts regularly to ensure that they are being managed efficiently and effectively.

What are top KPIs for contract lifecycle management ?

There are a number of key performance indicators (KPIs) that can be used to measure the effectiveness of contract lifecycle management. Some common KPIs for CLM include:

  1. Contract completion rate: This measures the percentage of contracts that are completed within the agreed-upon timeframe.
  2. Contract compliance rate: This measures the percentage of contracts that are in compliance with legal and regulatory requirements.
  3. Contract renewal rate: This measures the percentage of contracts that are renewed at the end of their term.
  4. Contract value: This measures the total value of all contracts managed by the CLM system.
  5. Time to contract execution: This measures the average time it takes to complete the contract execution process, from initial negotiation to final signing.
  6. Contract risk: This measures the potential risks associated with contracts, such as the potential for disputes or breaches of contract.

Overall, the specific KPIs that are used for contract lifecycle management will depend on the specific goals and objectives of the organization. It is important to choose KPIs that align with the organization’s objectives and that provide valuable insights into the effectiveness of the CLM process.

Contract management software is transforming the process of creating, managing, storing, and executing contracts. In 2022, experts are expecting more businesses to adopt robust applications to streamline contract activities. DocuCollab is the best contract management software with an array of benefits. Click here . to know more.