Contract Lifecycle Management Software: No More Headaches
Every dollar in and out of a company is tied to a contract.
Contracts are a necessary evil for most businesses, and getting them through the legal department impedes closing deals. But while sales, procurement, and other business teams have specialized tools to automate their processes, the legal department has been bogged down with plain old Word, email threads, and backup drives (both online and offline) for decades.
That’s the problem contract lifecycle management (CLM) software solves. A CLM tool helps you turn contract chaos into cohesion, bringing all aspects of the contract process together on one platform and bridging the gap between law and business.
What is contract lifecycle management (CLM)?
Contract lifecycle management is the process of managing a contract’s entire lifecycle, from creation and negotiation to execution and renewal.
A contract lifecycle management system helps companies automate and streamline this process. It ensures that everyone involved in a given contract or deal, from legal to corporate, is connected from start to finish and can easily access related information.
While contract lifecycle management doesn’t necessarily require dedicated software, modern business’ complexity and fast-paced environment require more than spreadsheets, folders, and email chains to manage the different moving parts effectively.
A contract lifecycle includes a diverse and complex set of tasks, typically occurring in the following phases:
- Contract authoring or creation
- Contract collaboration and negotiation
- Contract approval
- Contract execution
- Contract tracking, audit, and reporting
- Contract renewal or expiry
Traditional contract management pitfalls
Traditionally, legal teams work in a siloed environment, separate from other departments but still deeply involved in all business aspects. This creates bottlenecks due to tiered collaboration and disrupted information flow between functions, resulting in process inefficiencies.
A legal team working with outdated models might face the following challenges.
Lack of standardization
Without standardized processes and templates for creating and managing contracts, chaos reigns, resulting in teams struggling with different formats and languages. Not only does this make contract tracking a nightmare, but it also complicates accurately and timely enforcing contract terms.
Things falling through the cracks
The biggest sign of an overworked legal team and a disorganized contracting process is when you miss important contract renewal or expiration dates or struggle to keep track of your executed contracts, leading to costly errors and lack of compliance.
Lack of alignment between business and legal priorities
Poor communication between business and legal teams leads to misalignment with company priorities. They can end up working independently without productive collaboration. This can cause misunderstandings and delays that frustrate both teams and negatively impact business.
Inadequate visibility and documentation
Who would you contact if you were looking for a specific contract or wanted to know more about it? Is this information readily available? Not maintaining contract documents properly makes it difficult to find and reference specific terms and conditions when needed, especially as your business grows.
Negative perception within the organization
Because Legal can impede a deal or partnership when necessary, teams that lack visibility into closing deals or proper communication channels with Legal can become frustrated, creating distances between them. All teams need to work together to close deals and ensure business success, so a negative perception of the legal department would only cause businesses more trouble.
Automating traditional contract processes with tech
The easiest way to get started with contract lifecycle management is to first use online applications like kanban boards, project management software, online storage solutions, and spreadsheets to bring some semblance of organization to your contract repository. Many teams are also adopting e-signature tools to automate signature collection.
This will help you move away from:
- Outdated processes like contracts stored on individual hard drives
- Sifting through email threads for contextual clues
- Lack of visibility into executed contracts that may be renewed or expiring
- Manually signing and scanning agreements to solve the execution
You can also employ dedicated CLM software to streamline contract lifecycle management and remove roadblocks. A specialized contract management tool helps your legal team automate repetitive manual tasks, provides insight into different stages of the contract lifecycle, and helps identify areas for improvement in your current processes.
How to recognize if your team needs a CLM solution
Before you invest in organizing your contract process, examine a CLM’s use case in your company. Do you even need CLM software?
Adopting a CLM solution may be your best bet if your legal team struggles with traditional contract management challenges. Here’s a simple exercise to take stock of your current processes and identify automation needs.
Source: SpotDraft
This exercise will also help you create a business case when evaluating the different CLM solutions and convincing stakeholders to get funding.
CLM isn’t just for legal teams
While contract lifecycle management software is primarily a legal enabler, it also acts as a business enabler. The entire organization benefits from efficient contract managament. Different teams and stakeholders can use CLM software in various ways to streamline legal and business tasks, from creating contracts using pre-approved templates to tracking contract data and insights.
Sales team closes deals faster
A CLM tool provides sales with standardized and pre-approved documents to create and customize contracts independently. It also integrates with the customer relationship management (CRM) solution to enable a more efficient and transparent contract creation process.
With a CLM, the sales team can close deals faster, focus on the value proposition, and negotiate specific terms instead of grappling with a contract’s overall structure and language. It saves time and effort otherwise spent drafting and negotiating contract terms from scratch. The pre-approved templates reduce the risk of errors or omissions that can delay contract completion.
Contract management software also helps sales teams streamline the contract negotiation process, track activities, speed up the review process, track the status of contracts, identify opportunities for upselling or cross-selling, and much more.
Finance gains crucial visibility and insights
Contracts are the least-used data source, usually because tracking and managing them at scale is a challenge. However, through CLM systems, finance teams can use contract data to improve cash flow, increase efficiency, reduce risk, and make more informed decisions.
Proper contract management ensures timely payments in line with contract terms, improves cash flow, and reduces the risk of financial disruption. It also paves the way for more efficient processes, saving finance teams time and effort on manual tasks like finding contracts and tracking payments.
With better contract management, finance teams have a more complete and accurate view of their contract portfolio to make better business decisions and improve financial planning.
CFOs, in particular, can derive incredible benefits from CLM tools, from leveraging contract intelligence to create accurate financial forecasts to ensuring compliance and mitigating financial risk.
Source: SpotDraft
Procurement gets vendor contracts under control
Procurement teams regularly deal with many vendors and contracts. They also manage processes, vendor relationships, financial health, and track renewals and expirations.
Contract lifecycle management software makes life easier by providing a central repository for all supplier contracts and better visibility and tracking of the contract lifecycle. It automates tasks like tracking payments or getting reminders for automatic contract renewals.
A CLM also helps procurement teams collaborate more efficiently with other teams in the organization, such as finance and legal. It can help automate the approval process and set conditional logic.
You can set up sequences triggering automatic approvals for contracts below a certain value and reviewing requests from stakeholders for contracts above a certain threshold. This ensures that contracts are properly reviewed and negotiated and that all relevant parties are kept informed throughout the process.
Additionally, contract lifecycle management tools help procurement teams make more informed decisions about their contract portfolio, improve strategic planning, and identify opportunities for cost savings or other improvements in the procurement process.
All teams in the organization enjoy increased efficiency
Besides supporting legal, sales, finance, and procurement teams, an organization’s CLM system solves business challenges for everyone dealing with contracts and data.
Source: SpotDraft
This includes:
- HR teams using CLM software to organize and streamline employee offer letters and agreements
- Operations teams using it for better visibility and tracking contracts related to specific projects
- IT teams responsible for data security within the organization and ensuring that all sensitive contract data resides in a single, secure contract repository
How does CLM software automate the contract lifecycle?
Contract management software equips you with the tools and functionality needed for each phase of the contract lifecycle, from entering contract requests from CRM software or creating contracts directly on the platform to tracking contract status and generating reports.
Contract creation with templates or online editor
Gone are the days when MS Word was sufficient for legal work. Businesses today need a better solution for creating and editing contracts. Modern CLM solutions offer companies two ways to streamline contract creation:
- Through pre-approved contract templates that allow users to easily fill in details like names, dates, and contract values
- Through in-app contract editors that enhance traditional word processing software to provide a purpose-built solution designed to simplify legal paperwork
Contract collaboration and negotiation
Many CLM software include features that enable more efficient collaboration with team members and stakeholders from other business functions. Some of these features are:
- Shared workspaces
- Document sharing with access control
- Annotation tools that allow more flexibility
- Management and automation of review or approval request
Some contract tracking tools also provide solutions for conducting contract negotiations within the platform by enabling counterparty collaboration through redlining tools and activity tracking.
Contract execution and e-signing
Although specialized e-signature solutions exist, many teams prefer to run the entire contracting process on a single platform. CLM solutions enable contract execution by providing a native or integrated e-signature solution within the platform.
Users can mark contracts for execution, collect signatures in order, send reminders, and track status on one platform.
Contract repository management
One of the biggest challenges a CLM solves for legal teams is creating a central repository of all contracts and related documents and data and providing a log of activity for more context and transparency.
What are the other benefits a CLM tool offers?
- Simplifies both storage and search, makes contracts accessible, and eliminates the need to dig through old email threads or random folders whenever the need arises
- Makes your organization audit-ready, with data that can be pulled automatically in minutes instead of being sorted manually in days
- Streamlines contract tracking, allowing instant access to the status of contracts and reminders for upcoming renewals, expiration, or contract actions
Reporting and analytics
Many modern CLM solutions offer analytics dashboards and reporting capabilities for tracking key performance indicators (KPIs) and contract performance. These features help stakeholders gain more transparency and insight into the procurement process, find areas for improvement, achieve greater efficiencies, and tangibly present their work.
Integration with other tools
Many contract management systems offer integrations with other business tools such as CRMs like Salesforce or Hubspot, collaboration tools like Slack or Microsoft Teams, cloud storage solutions, and so on. Integrations provide work efficiencies when working with multiple platforms and a more comprehensive view of contract-related data.
How to select the right CLM software for you
Once you identify the need for CLM software in your business, carefully review the different solutions on the market to choose the right one. A CLM tool is a significant investment. To achieve a return on investment (ROI) and ensure contracts don’t fail completely, your chosen solution should align with your business needs and how your team works.
Source: SpotDraft
Here are some things to consider when evaluating contract management solutions.
- Take stock of your current processes and identify problems you want to solve.
- Talk to internal stakeholders about the issues they face.
- List feature and integration requirements in order of necessity.
- Set your budget and determine your expected ROI.
- Gather recommendations from internal and external people familiar with CLM systems.
- Thoroughly review competing solutions, attend live demos, and participate in free trials wherever possible.
- Research customer support and software implementation processes and compare them to the level of support you need to implement and use the software.
It helps to be as thorough as possible and involve internal stakeholders who will ultimately use the platform in the evaluation process.
Ensuring CLM success
Most CLM implementations fail due to insufficient planning and a lack of acceptance within the organization. Businesses often find a disconnect between the processes of different teams and individuals. Some use the software as intended, and others prefer manual workflows or are unaware of the solutions available to them.
Learning a new solution can be tedious. Your employees may be reluctant to use CLM software, leading to lower adoption rates and implementation failures. The key to successful CLM adoption and achieving the ROI lies in thoughtful planning and a well-organized rollout.
Source: SpotDraft
Start by creating an appropriate plan that carefully considers all stakeholders involved, the goals you want to achieve, the processes you want to streamline, and your expectations for the implementation timeline. Then, follow these tips to successfully implement your new solution:
- Assign a POC to take care of the entire implementation process from start to finish and coordinate with your CLM vendor.
- Invest in training the teams using the CLM to ensure rapid adoption.
- Try to integrate the tools that different teams can use to ensure smooth processes and avoid redundancies.
- Plan the rollout in phases and set deadlines.
- Open the communication channels and accept feedback. Similarly, communicate with the implementation team to understand best practices.
- Reduce delays to ensure timely implementation.
Do your best; leave CLM software the rest
Contract management lifecycle is an essential aspect of a business. It impacts costs, compliance, operations, and growth. Streamlining your contract processes and improving cross-functional communication through contract management software is the best way to ensure transparency, reduce processing time, and free up your legal team for more strategic work.
Whether you’ve identified bottlenecks in your contract operations, lead a lean legal team struggling with the demands of a scaling organization, or just want to make room for more efficiencies in your current processes, a contract lifecycle management (CLM) solution helps you streamline commissioned work according to your business needs.
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