Madrid, Jul 27, 2023 – Contract Lifecycle Management (CLM) refers to the management of a company’s contracts throughout their lifecycle, i.e., from development, negotiation and execution, through renewal or expiration, to performance and analysis.
The legal department of any company of a certain size is under strong pressure to closely monitor all contracts, which is logical considering the legal and economic obligations and risks that can arise from a single contract.
Risks and obligations that are multiplied by the number of contracts that the company signs with different individuals or legal entities. Indeed, we are talking about many contracts and therefore many risks.
But there is no choice but to assume and mitigate them, as contracts are essential to business operations. Contract Lifecycle Management solutions ensure that agreements are signed in a timely manner and obligations are fulfilled.
In particular, CLM tools help the legal department and other teams to draft contracts efficiently, locate them quickly, and accurately assess risks and obligations.
However, the most advanced Contract Lifecycle Management tools also require gathering contract data needed to assess the overall health of the business. Without them, companies could miss expiration dates or other key milestones, and may even miss the opportunity to extract maximum value from each agreement.
Cross-cutting CLM use cases
We have already seen that in-house lawyers and their teams are the main users of Contract Lifecycle Management software, but they are not the only beneficiaries. Many other departments such as Mergers &Acquisitions, Sales, Procurement and Human Resources frequently use CLM software.
That is to say, as the potential number of users is very high, it is important that these platforms can manage both sales and purchase contracts: they must be flexible, cross-cutting… and very smart.
And they are actually very smart now that artificial intelligence is embedded in them. CLM software helps automate and accelerate contracting processes, improve operational performance, analyze contracts, and receive alerts and reminders to meet contractual obligations and regulatory requirements.
As a result, Contract Lifecycle Management tools reduce manual work, costs and risks, while ensuring regulatory compliance and safety.
Contract lifecycle management process
The three most important steps in the lifecycle of a contract are creation, execution and analysis.
1 – Contract creation
This involves defining contract scope, identifying the parties, drafting the contract and preparing it for signature.
Dynamic contract creation and automation allows the text to be adapted from an integrated clause library that helps edit clauses according to the needs of the operation in question.
Contract Lifecycle Management software minimizes contract review time and eliminate duplicate clauses, typos, and unauthorized or poorly worded phrases, all of which helps professionalize the contracting process and makes negotiations more cordial and fruitful.
2 – Contract execution
This phase of the process includes monitoring contract progress, ensuring that all parties recognize their contractual obligations, resolving any disputes that may arise, and facilitating the signing as much as possible.
Secure integration with electronic signature software facilitates the entire signing process. Users can define workflows and easily update agreements. And at the time of execution, all data is stored in a central repository for later use.
3 – Contract analysis
At this stage, it is determined whether the contract continues to meet the company’s needs, the necessary changes are made, propensity to renew the agreement is estimated, decisions are made about which suppliers to do business with, and customer attrition is identified in each sector.
Users have at their disposal powerful tools such as AI-based analytics and advanced reports and dashboards that allow them to access a smart contract repository and extract and display essential information when they need it most.
Contract Lifecycle Management software helps companies address the sectors or territories where they can achieve the best results and enable them to determine, for example, whether suppliers are late in delivering inventory or components that make it possible to meet production targets.
Companies can also find out if the parties to the contract are breaching the terms or spending too much time negotiating the agreement.
Benefits of Contract Lifecycle Management tools
- No paper or ink is used in the contracting process.
- The contracting process can be integrated with third-party systems.
- These CLM solutions enable close monitoring of non-standard contracts through modification alerts.
- They reduce the total cost of ownership.
- CLM software improves visibility through configurable dashboards and reports.
- They send notifications of key dates related to contracts with suppliers.
- CLM tools eliminate the time and cost of sending and signing multiple copies of contracts thanks to electronic signatures.
- CLM solutions ensure regulatory compliance through controlled and automated processes and comprehensive audits.
Faster and more accurate contracts
Contract Lifecycle Management solutions help Legal, Finance, Procurement and Sales departments accelerate contract management processes by using information more efficiently. By storing bids, supplier data, negotiated prices and contract terms in a central digital repository, companies can sign contracts faster and see how agreements are reflected on the bottom line.
No more hassles and chasing colleagues to get the correct version of the contract or their signature. There is no need to scold anyone for not following the correct process when drafting a contract.
We have entered a new era: the era of quickly finding contract-related documents with advanced search capabilities, generating customized reports and KPIs, automating contract creation through templates, closing deals faster thanks to electronic signatures, and identifying and assessing contractual risks in a timely manner.
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