Contract Lifecycle Management (CLM): Manage contracts more efficiently and transparently

Contracts are an essential part of the business world. They regulate the relationships between companies and their customers, suppliers, partners and other business partners, for example when purchasing vehicles or renting property. Contracts can be extremely complex and extensive, and their administration time-consuming and error-prone. Contract Lifecycle Management (CLM) is an approach for the systematic management of contracts in their individual contractual phases. CLM systems offer a range of functions that help companies to organise their digital contract management more efficiently and effectively. Find out how to do this in this blog article.

Why is contract lifecycle management important?

Contract lifecycle management is important for organisations because it helps them keep better track of their contracts. Contract lifecycle management software helps organisations to manage their contracts throughout their entire lifecycle: from creation and negotiation to execution, monitoring and termination. This brings a number of benefits, including:

• Increasing efficiency: CLM software helps organisations save time and money by automating manual tasks such as creating, negotiating and managing contracts.
• Risk minimisation: CLM software helps companies to minimise risks. It promotes compliance with legal and regulatory requirements and automates the monitoring of contractual obligations. This includes deadline management, for example.
• Improved transparency: CLM software helps companies to manage their contracts more transparently by centralising all contract information in one place and simplifying access to it.
• Greater collaboration: CLM software allows companies to manage their contracts across departments by providing a shared data repository and a common platform for communication.

The 6 phases of the contract life cycle

The contract life cycle comprises the following phases:

1st phase: Creation

In this phase, standardised contract templates are created that serve as the basis for new contracts and enable efficient contract creation.

2nd phase: Review

Here, the contracts created are run through a defined workflow that includes various tasks and checks to ensure that the contracts meet the required standards and guidelines.

3rd phase: Approval

Once reviewed, the contracts are forwarded to the relevant individuals or departments for approval and authorisation before they become legally binding.

Phase 4: Commitments

In this phase, the liabilities specified in the contract, such as deadlines and tasks, are monitored and managed to ensure that they are fulfilled on time and that there are no breaches of contract.

5th phase: Compliance

This is where contract compliance is monitored and reporting and evaluations are carried out to ensure that all relevant rules and regulations are adhered to.

6th phase: Cancellation/contract renewal

In this phase, automatic reminders and processes are set up to remind you of upcoming cancellation or renewal dates and to ensure a smooth process for contract terminations or renewals.

Advantages of Contract Lifecycle Management

CLM systems offer a number of benefits for organisations, including:

• Increased efficiency and time savings: CLM systems help to increase the efficiency of contract administration by automating tasks such as the creation, negotiation, management, monitoring and archiving of contracts.
• Risk minimisation and legal compliance: CLM systems help companies to minimise their risks by supporting companies in meeting legal compliance requirements. This can avoid costly legal disputes.
• Cost reduction and improved cost management: CLM systems help companies to optimise their contract processes.
• Improved transparency and reporting: CLM systems improve transparency and reporting by centralising all contract information in one place and simplifying access to it. This creates a better overview of contract portfolios.
• Digital signature: With electronic signature software as part of CLM software, contracts can be signed quickly and easily from anywhere and collaboration in contract management can be improved. The reason: All contract information is centralised in one place, usually a document management system (EDMS). Digital contract signing can also reduce the risk of errors in contract management because the digital signature prevents manual input errors.
• Greater collaboration and communication: CLM systems can promote collaboration and communication between different departments and stakeholders by providing a common data repository and platform for communication.

Selecting and implementing a CLM system

To find the right software for your contract lifecycle management, you need to clarify a few basic ideas. Probably the most important: You shouldn’t choose a stand-alone solution so that you can continue to use your existing infrastructure, such as Microsoft 365. The contract lifecycle management system should be compatible with all your other systems so that you can import and export data from other systems into the CLM system. Further steps are:

1. Determine the requirements: What do you want to achieve with your CLM system? What are the most important problems you want to solve?
2. Research: There are many different contract lifecycle management systems on the market. Compare the different systems and choose the one that best suits your requirements.
3. Test the system: Before you implement contract management software, it is important to test it. Make sure that the system meets your requirements and that you can use it easily.
4. Implement: Once you have selected a contract management system, you need to implement it. This includes making the system available to your employees and training them.
5. Use the system: Once the contract management tool is implemented, you can use it to manage your contracts. Use the system to create, manage and archive your contracts.

Best practices for contract lifecycle management

Organisations looking to manage their contracts more efficiently, effectively and securely can take inspiration from these best practices.

• Define clear roles and responsibilities. Who is responsible for creating, negotiating, managing and monitoring contracts? And who has access rights to which contract documents? Make sure that everyone involved is clear about their tasks and responsibilities.
• Standardise contract processes and templates. This will help to improve the efficiency and consistency of contract management.
• Review and update contracts regularly. This will ensure that contracts are still up to date and comply with current legal and regulatory requirements.
• Integrate CLM systems with other company systems. This will help you to further improve the efficiency of contract management and ensure data consistency.

More efficiency, less risk, improved transparency

Contract lifecycle management enables companies to manage contracts efficiently. With the right CLM software, contracts can be stored centrally, deadlines monitored and contractual obligations met automatically. Contract lifecycle management offers benefits such as increased efficiency, risk minimisation and improved transparency. By adhering to best practices and integrating with existing systems, a successful CLM system can be implemented.