Contract lifecycle management (CLM) refers to the strategy and processes used to manage a contract from initiation through renewal or termination. Managing contracts has become more complex than ever, and bungling it can cost you money, leave you vulnerable to regulatory fines, and more. You need more than just an Excel spreadsheet to manage your contracts through their lifecycle from initiation to termination or renewal.
You need contract management software with the right features to help you take full advantage of the terms of your executed contracts, manage compliance, and generate supplier performance reports. Implementing a new CLM isn’t always easy — some employees may not see the flaws in your current system, and, of course, no one likes to learn a new software tool. Here’s how to smooth the implementation of CLM, so you can manage your contracts efficiently and effectively.
Understand The Contract Lifecycle
To develop and implement a solid CLM strategy, you and your staff need to understand the legal business contract lifecycle. It can generally be broken down into five stages, with each stage requiring its own procedures to effectively manage the contract. The stages are:
- Creation and drafting
- Termination or renewal
The contract document itself is typically drafted using standardized language and clauses, and many CLM applications offer a range of templates you can choose from. The negotiation phase is typically more complex and time-consuming, requiring a great deal of advanced planning. At the execution stage, there are likely to be several signatures and approvals required.
Administration of the contract may be the most complex part of managing the document during its lifecycle. It requires paying close attention to make sure the terms of the contract are met, that problems with performance or quality are addressed and that deadlines are honored. This is the stage where effective CLM brings the highest potential for cost savings because it’s at this stage that team members are most likely to lose track of the terms of a contract, forgetting about hard-won price negotiations or missing expiry and renewal deadlines. Finally, the contract will enter the last phase of its lifecycle, at which point you’ll have a choice to make about whether to close out the contract or renew it and if it’s renewed, you may revisit negotiations too.
Plan For The Workflow You Want
Before you can successfully implement a CLM strategy, you need a clear picture of exactly what you want the workflow around contract management to look like with the new strategy and tools in place. This will establish clear benchmarks that are easy for staff to meet. Sit down with key members of the team to brainstorm an ideal process. Mind mapping is an ideal brainstorming tool for this — create a visual flowchart that communicates the process and results you want. Encourage team members to think about what works and doesn’t work in the current system. For example, maybe some part of the team gets left out of the loop when a new contract is executed, even though they really should know about it from the drafting stage.
Use Only The Features You Need
When choosing a CLM app, think hard about what features you need and keep it simple. Many CLM software solutions have capabilities that can be enabled or disabled, so that you can change the software to keep up with your evolving needs. Often, you can choose from a selection of contract templates, for example, turning off those you don’t need in order to make it easier to find those you do and avoid confusion.
Think about the types of contracts you mostly execute and what you need to keep track of them throughout their lifecycle. For example, you’ll need a repository for active contracts, historic contracts, drafts, and templates. You’ll probably need an indexed search feature that allows you to search contracts by keyword. You’ll need some drafting tools, like a clause library, industry-standard templates, and digital document signing capability. You’ll need compliance tracking tools, notifications of impending milestones, and reporting capabilities.
Implementing a new CLM strategy can be as messy as implementing any new business process. Be patient with your staff, and offer them the support they need as they learn. It might be tough now, but you’ll begin reaping benefits immediately.