Just a few decades ago, contracts were routine pieces of paper that gathered dust on long shelves in corporate archives. However, with the advent of contract lifecycle management, the process has changed radically.
Today, a company's contracts are a vital operational link. They affect the bottom line and require risk control and rigorous auditing. This article explores contract lifecycle management systems and key considerations for companies utilising them.
Contract Lifecycle Management Stages
Contract work moves through many stages in a repeating cycle.
That's why a conversation about contract lifecycle management software should start with the process itself. It's the basis for automation tools - and the ways work can be simplified along the way.
Let's discuss what the process is all about.
Imagine you're organising a party with your friends. You've talked about it, but to avoid any date or detail mix-ups, you make a group chat.
Likewise, working on a new agreement begins with a written draft.
This initial step can be automated. If your company has standard templates and uses contract lifecycle management systems, you'll just need to fill in a few parts. This way, you can finish the task without legal assistance.
The following step involves reviewing the document. To avoid risks and 'nasty surprises', check the text thoroughly. Focus on the structure and presence of all relevant clauses. Ensure that the information provided by the other party is accurate as well.
Redlining and negotiation
Negotiating is one of the most difficult phases of Contract Lifecycle Management. Going back to the party example, it's like negotiating a suitable time for dozens of guests.
The more expensive the deal, the bigger the organisation, the harder it is to agree. Sometimes it's difficult to sync all the changes in one document. Sometimes it's impossible to agree on some conditions.
Consider the high stakes in negotiations between big companies like Apple and Netflix. For example, when Netflix halted subscription payments through the App Store, Apple was estimated to lose around $257 million annually.
At last, you've settled on the party time and gotten confirmation from all invitees.
In the analogy of a contractual relationship, this means that the document has been agreed upon and signed by all parties. This phase in contract lifecycle management can be seamless if your organisation has a well-defined approval flow.
Fulfilment of the terms
Now it's time to make sure the party goes off without a hitch.
In the contract world, keeping your partners satisfied means making sure you meet all the terms. If you fail to do so, you risk getting fined. You'll expect the same from your contractors when ordering services.
Guests are arriving, but the food isn't delivered? Drinks aren't cooled down? Some rooms are still messy? To avoid this, you must plan for the event.
Similarly, in contracts, having a monitoring system is crucial to prevent missed deadlines. You can also use modern tools to keep track of legal changes, parties involved, or other factors that impact compliance.
Storage and search
One of your guests is running late, but it's okay because you have their contact information ready and you've called them.
However, locating contracts can be challenging. Research shows that 71% of companies struggle to find around 10% of their contracts. Using contract management lifecycle software can solve this issue. It allows you to store documents in a single repository, making them easy to find and secure.
Audit and reporting
Once the party is over, you might want to ask your friends if they had a good time. You could consider if there were better ways to plan or save on costs.
Similarly, in business, evaluating is essential. You must grasp the overall extent of your transactions and assess which ones are profitable. This helps you strategise for future collaboration with partners and enhance your company's gains.
Expiration and renewal
Since the party went well, you've decided to meet up with your friends again next month.
Companies also tend to renew successful agreements. Contract lifecycle management tools can help you remember when contracts are ending. At this stage, it's essential to allocate time for potential new negotiations if you or your partner want to adjust terms.
What Is Contract Lifecycle Management Software?
Large organisations manage up to 350 contracts weekly. These documents act like the company's circulatory system, powering the entire organisation.
With such a volume, it is impossible to carry out contract lifecycle management manually. That's why companies are looking for ways to automate every step of the process, to optimise the workflow and to relieve employees from mundane tasks.
Contract lifecycle management (CLM) systems are specialised software for this needs. They understand the entire process and assist with every assignment, from drafting the text to contract renewal.
Such solutions are becoming very popular in the market because contract lifecycle management automation is extremely profitable. Companies realise contracts are more than just a piece of paper with terms; they're complex processes that lay the foundation for the company's success.
Conversely, any mistake in contract lifecycle management can result in substantial financial losses, reputation damage and other risks. In the following sections, we'll take a closer look at how to avoid those negative consequences by adopting IT solutions.
Contract Lifecycle Management Software Features
Every legal tech product comes with its own special set of tools. The most popular features include:
Cloud document repository: Nowadays, companies handle a lot of contracts. Legal teams need to keep files organised and current. It's also crucial for professionals to reach documents while working from afar and using various devices.
Smart Search Filters: Contract lifecycle management systems help you swiftly locate documents. You can filter files by name, contract type, and more. This is invaluable for organisations dealing with many documents and multi-employee projects.
Auditing: Data alone is of no use if you can't analyse it. Automation tools change data into actionable insights. You get real-time visibility into your company's agreements, helping you spot errors and opportunities for development early on. Some products have compliance management platform capabilities, to ensure your contracts are legally conform.
Templates: Your company likely deals with a few common agreement types. Save time by preparing templates for these in advance. This also reduces risk, as the legal team designs the best format and clauses early on. Others just fill in the specifics.
Redlining: With contract lifecycle management tools, manual tracking of changes is unnecessary. No more sifting through long email chains or various file versions. This greatly simplifies daily teamwork.
Personalised Workflow: Contract lifecycle management systems prevent process errors, like missing crucial approvals. Design the best workflow for your team to ensure smooth, delay-free progress.
Text Analysis: You can also use contract lifecycle management tools to check text for errors. They catch mistakes in details, dates, or numbering – things easily overlooked by humans.
Automating contract-related tasks has become a necessary goal for organisations. As legal technology and generative AI are rapidly advancing, we can look forward to even more exciting features in the coming years.
What Are the Most Relevant Contract Lifecycle Management Software Trends?
Technology is swiftly changing, transforming entire industries. The current surge in generative AI prompts us to consider how document management will evolve in the near future.
Moreover, the following trends continue to have an impact:
This trend in contract lifecycle management can be summarised as follows: all routine tasks that can be entrusted to software will sooner or later be performed by software.
For example, cloud solutions gained popularity because they allow simultaneous access to a document from many devices and by many people. Machine learning (ML) and natural language processing (NLP) technologies also look very promising. With these technologies, companies can instantly analyse a large number of contracts and identify their strengths and weaknesses.
We all love data these days, don't we? Mainly because it gives confidence to business decisions.
In the realm of contract lifecycle management, data analytics helps to assess a company's contracts. You will be able to fine-tune your strategy and identify gaps and growth points.
In the realm of contract lifecycle management, employing data analytics technologies assists in assessing a company's contracts. This enables you to fine-tune your strategy and pinpoint areas for growth and improvement.
Communication remains one of the trickiest parts of contract lifecycle management. You'll interact with various representatives from the other party and within your team. The COVID-19 pandemic has added its twist, with remote work becoming common among team members.
With all this in mind, companies are looking for tools to ensure effective communication and coordination of tasks - so that important messages don't get lost in someone's unread emails.
Environmental, social, and governance (ESG)
Every year, ESG factors become more important to business. And contract lifecycle management is no different.
When entering into a new contract, it's crucial to ensure your potential partner holds a positive reputation. You should also check their adherence to industry norms, labour regulations, and responsible resource usage.
By establishing monitoring mechanisms, you can avoid situations that might impact your company's ESG performance. This lets you spot shifts in partners, laws, or the industry, allowing you to halt deals that are not beneficial to your business.
Technology is changing the way organisations think about contract lifecycle management and what it can be.
In recent decades, the perception of a contract has evolved from a piece of paper with terms and conditions to a key operational link that generates business revenue.
As a result, the roles of contract lifecycle management professionals are evolving. Proficiency in technology is likely to become a vital part of their skill set. The demand for experts to handle routine tasks may decrease, replaced by strategic and operational consultants who can conduct thorough audits and devise action plans for business growth.
Contract Lifecycle Management Software Types
For those planning to adjust their work approach, here's some fantastic news.
The market has a range of contract lifecycle management solutions to match various preferences. You can choose a system depending on your goals, line of business and the size of your company.
With this in mind, let's offer a few questions to present the diversity of contract lifecycle management platforms.
What is the size of the organisation?
Certainly, a small local café and a Fortune 500 corporation have distinct requirements for contract lifecycle management. As a result, there are varying software choices available:
- Small and Medium-sized Businesses (SMBs) can opt for contract lifecycle management solutions that are versatile, user-friendly, and swift in adapting to market shifts.
- Large Enterprises can benefit from advanced contract lifecycle management systems that provide complex workflows, performance assessment, audit capabilities, and seamless integration with other systems, such as CRM and ERP.
What is the industry?
There are products designed to precisely match the needs of certain industries, from pharmaceuticals to energy. Certainly, the industry a company operates in has an impact on the kinds of agreements it typically engages in.
Here are a few examples:
- Financial Industry: Contract lifecycle management products for financial firms focus on cost control, financial performance assessment and audit. Key features include integration with accounting systems, effective risk management and compliance with regulatory and reporting standards.
- Start-ups: Start-ups benefit from systems that match their forward-thinking approach and ensure streamlined processes for common documents like M&A or IP contracts.
- Real Estate: In the real estate sector, contract lifecycle management tools streamline tasks for specialists. Real estate companies handle numerous contracts daily for rentals, purchases, and more, making automation highly beneficial.
Which departments use contract lifecycle management software?
The software can also be grouped based on how specific teams use it. And, indeed, the need to deal with contracts goes beyond just legal departments.
- Supplier/procurement teams focus on finding reliable suppliers at good prices. Contract lifecycle management systems help assess partner risks, prevent mistakes in standard contract clauses, and simplify negotiations and renewals.
- Sales teams value speed, as nobody wants lengthy paperwork when a profitable sale is on the line. That's why for salespeople out-of-the-box templates and e-signature capabilities come in handy.
- Legal teams play an important role in ensuring that the deal is free of legal risk. They need contract lifecycle management products for convenient redlining and reviewing, error checks, as well as a clear approval process.
Is there a need for remote access?
Lastly, contract lifecycle management systems can be categorised by where the data is stored:
- Cloud-based - refers to a group of software located on external servers and accessible from any location, on any device.
- On-Premise - These systems are installed locally in the company, meaning that the information can only be used within the office and from work computers, even without the Internet.
- Hybrid - This type of contract lifecycle management product is a mixture of the two previous groups. It means that corporate documents are stored in both local and remote data centres.
The answers to these questions will help you choose the best Contract Lifecycle management software for your organisation. More tips will follow in the next section.
What Should Be Considered When Purchasing Contract Lifecycle Management Software?
In today's dynamic business world, effective contract lifecycle management is crucial for success. Contracts can greatly affect how a company works and its financial outcomes.
To optimise your workflow and make the process more efficient, Contract Lifecycle Management (CLM) software would be a valuable asset. But, with many options out there, making the right choice can be a daunting task.
This section will look into the important factors to think about when buying Contract Lifecycle Management software.
- Scalability and Flexibility: Your needs will inevitably evolve as your business develops. Choosing a contract lifecycle management software that can scale with your organisation's growth is essential. Consider solutions that are flexible, easy to customise, and align accurately with your designated processes and workflows. This way you’ll ensure your contract lifecycle management solution stays relevant in the long run.
- Ease of Use and User Experience: A powerful CLM software is only effective if it is user-friendly. Complex interfaces and steep learning curves can hinder adoption across your team. Prioritise a platform that offers a seamless user journey, with features that are easy to navigate. This ensures that all stakeholders, from legal teams to sales and procurement, can collaborate easily within the platform.
- Comprehensive Feature Set: While the core functionality of any contract lifecycle management system is managing contracts, a robust feature set can elevate its utility. Consider options that encompass contract drafting, automated approval workflows, e-signatures, compliance tracking, and advanced analytics. The software's ability to cover all contract stages, from creation to renewal, impacts its effectiveness.
- Integration Capacity: In today's interconnected business ecosystem, integration with other tools is crucial. Consider CLM software that can seamlessly integrate with your existing systems, such as Customer Relationship Management (CRM) or Enterprise Resource Planning (ERP) software. This integration minimises data silos and optimises efficiency.
- Security and Compliance: Contracts often contain sensitive and confidential information. Thus, robust security measures are non-negotiable. Ensure that the CLM software adheres to industry standards and regulations, such as GDPR or HIPAA, if applicable to your business. Look for features like role-based access control and data encryption to safeguard your contracts.
- Reputation and Reviews: Research the reputation of the CLM software provider in the market. Read contract lifecycle management software reviews, and case studies, and seek recommendations from industry peers. Reliable customer support is equally important, as timely assistance can prevent disruptions in your contract management processes.
- Cloud vs. On-Premises: Decide whether a cloud-based or on-premises solution aligns better with your business needs. Cloud-based solutions offer accessibility and ease of updates, while on-premises solutions provide more control over data and security.
- Total Cost of Ownership: While the upfront cost is a significant consideration, remember to factor in the total cost of ownership (TCO). This includes licensing fees, implementation costs, training expenses, and ongoing maintenance. A clear understanding of the TCO helps avoid budget surprises down the line.
- User Training and Adoption: A powerful CLM software is only effective if your team embraces it. Ensure that the software provider offers comprehensive training and resources for users. A well-trained team maximises the software's capabilities, leading to improved contract management efficiency.
In conclusion, choosing the right Contract Lifecycle Management software requires a comprehensive assessment of your organisation's unique needs and future goals. Thus, you need to consider many factors to make an informed decision that positively impacts your contract management processes and overall business success.
Why Choose LIGA UNITED as Contract Lifecycle Management Software?
For LIGA UNITED users, working on new deals feels like a breeze. No matter how much paperwork you handle daily, our tools will help reduce your team's routine workload and make every step more efficient.
- Set up a library of templates to ensure that your contract lifecycle management process always gets off to a good start.
- Define workflows and keep an eye on your team's tasks.
- Ensure well-structured contracts with all necessary clauses.
- Catch common errors in the text like typos, vague wording, numbering, dates, and amounts. This will simplify the approval phase of your contract lifecycle management.
- Check the reliability of the party you are contracting with. The system detects companies on sanctions lists and those with problematic links to russia and belarus.
- Monitor contract deadlines.
- Track changes in parties and other factors affecting compliance.
- Safely store documents in a searchable, cloud-based repository - providing your team with an essential tool for contract lifecycle management.
By automating these routine tasks, you can focus your efforts on improving contract performance.
LIGA UNITED gathers various information sources, offering a more comprehensive view compared to other contract lifecycle management solutions. Specifically, we provide insights on UK companies, legislation, and case law.
In particular, we provide information on UK companies, legislation and case law. So you can be 100% confident that you are contracting with a reliable partner and in a favourable legal environment.
To find out more about the benefits, request a demo access.
To Be Continued…
Contract lifecycle management software has completely changed the way we work with contracts. Automation has boosted profitability for organisations, enhancing teamwork and collaboration among partners.
The ongoing technological evolution promises further changes in contract lifecycle management. We look forward to seeing how contract operations will change in the coming years.
The stages include contract creation, contract check, redlining and negotiation, approval, fulfilment of the terms, monitoring, storage and search, audit and reporting, expiration and renewal.
Contract lifecycle management software (CLM software) automates contract management tasks, from creation to storage, enhancing collaboration and reducing errors.
Focus on scalability, user-friendliness, essential features, integration capabilities, security, vendor reputation, and total cost.