Traditionally, legal teams have used specialized tools to manage contract processes. These solutions focused on document generation and eSignature.
Creation
Contracts are a fundamental part of most companies’ value chain. They govern everything from purchasing to shipping and routing. They can also influence business strategy, limit risks, and help to increase efficiency. Effective contract management, however, requires a set of tools that manage the entire process from end to end.
The best Contract Lifecycle Management tools will cover the entire contract lifecycle, allowing teams to collaborate on every step of the process in one place. This is what sets CLM software apart from point solutions that focus on just one aspect of the process, such as drafting or contract tracking.
When it comes to creating contracts, a few different things can happen:
For example, some people might start with a template or a blank document and fill in the required information. This stage is called drafting and can be handled with software solutions that provide the ability to create documents from scratch or in Microsoft Word, while others might need more advanced negotiating capabilities for specific contract parameters. Regardless of the exact process, it is important that the contract creation phase can be easily tracked and managed to prevent delays. Moreover, once contracts are created they must be saved or stored in a secure location. Whether they are being used for reference or to drive new business, it is crucial that contract managers can quickly locate and access contracts and related data.
Negotiation
CLM software allows legal teams to review contracts for compliance, regulatory, and other operational issues. It also supports the negotiation process, which typically involves a combination of drafting and revising agreements, as well as determining the best way to implement or modify approved terms.
Contract managers and other stakeholders need to be able to access all of this data and make informed decisions. Without the ability to gather contractual information, organizations may miss important milestones or expirations and not realize the full value of each agreement.
The next stage of the contract lifecycle is the execution phase. This typically involves a process that includes e-signature, routing, and logging. This is when the benefits of CLM are most noticeable. Legal teams can track progress, and stakeholders can be more confident that contracts are ready for signature.
Many companies use tools like kanban boards, project management software, and online storage solutions to bring some semblance of organization to their contract repository. However, these tools are often not equipped to handle complex or negotiated contracts that require collaboration and approvals. Fortunately, new CLM vendors are emerging that can provide valuable support to these processes. For example, CounselLink’s CLM solution is a secure cloud-based platform that lets legal, procurement, sales and business teams contract smarter. It combines category-leading innovation, unrivaled CLM expertise and a deep commitment to customer success, and is used by 200+ leading businesses worldwide.
Approval
Contracts are the cornerstone of every business and represent a significant portion of a company’s risk. Managing contracts requires a highly disciplined process across all departments to ensure that agreements perform as expected. Contract management software automates high-volume processes to achieve centralized data, collaboration, efficiency and compliance.
The contract management workflow is a complex and time-consuming task. It involves multiple people, multiple systems and countless documents. These manual processes are prone to errors and inconsistencies, leading to bottlenecks, delays and risks. The use of a purpose-built CLM tool allows companies to overcome these challenges and make their contracts faster, easier and more accurate.
Once all the parties have agreed on the various terms, clauses and dates in a contract, it is ready for approval. This step typically requires department heads, executives and ‘higher-ups’ to review the contract and ensure everything is as it should be. Contract lifecycle management software can help speed up this stage by allowing contracts to be e-signed and reviewed online which reduces the need for physical meetings and document handling.
Today’s best-of-breed CLM solutions provide a simple, intuitive and AI driven interface to make the process of creating, reviewing, approving and executing contracts easy for both admin and end users. Some of these solutions even enable no-touch contract creation within line-of-business systems like CRM and Procurement enabling teams to self-serve contracts. Other CLM vendors allow for a single contract repository to be shared between multiple systems, minimizing duplication and ensuring the right version of the contract is always visible.
Execution
Managing contracts of all types is a vital part of running any business. From employment agreements to property leases, contracts are essential for legal teams, procurement departments and sales teams. CLM software streamlines contract processes to help businesses manage their agreements with greater efficiency and consistency.
In the 2010s, new Contract Lifecycle Management tools emerged that digitized key contract steps to reduce manual work, increase transparency and strengthen compliance. These CLM solutions also helped users gain valuable insights into performance data across all contract stages, including creation and management, negotiation and approval, and execution and renewal.
Unlike the highly customized enterprise Contract Lifecycle Management tools of the 2000s that took months, if not years to implement and were difficult to maintain and update the new tools offered the flexibility of Software-as-a-Service (SaaS) pricing models and a go to market approach that emphasized configurability and scalability.
These new digital systems transformed complex contracting workflows by reducing the number of tools, minimizing bottlenecks and streamlining collaboration. As a result, companies were able to complete internal contract review and negotiation much faster and at lower cost. In addition, the visibility into contracts and contracting processes throughout the entire organization strengthened compliance and helped businesses limit financial risk. This was the beginning of a move from systems of record to systems of engagement that Greylock described in his investment framework.