Mastering Contract Lifecycle: A Guide for Business

The modern corporate world moves at breakneck speed. In the face of increasing competition and efficiency race, companies are looking for new and innovative ways to work.

Contracting is one of the subjects that gets a great deal of attention. Improving this process can become a game-changer for a company's financial performance. Aberdeen Group says that contract automation can cut administrative costs by up to 30%.

In this article, we'll discuss how to optimise the contract management lifecycle for businesses. Also, we'll give several tips for choosing software. 

 Contract Lifecycle Management Process

The contract management lifecycle (CLM) is like an engine that drives all other operations within a firm. 

If every piece of this machine works well, your team performs tasks with ease. But even a small defect can be critical, which is why you need to conduct regular inspections and respond promptly to any problems.

Another characteristic that receives special attention in the context of CLM is continuity. The word "lifecycle" indicates that you need a comprehensive view of the process, from start to finish, to successfully manage agreements. You need to control every step because every detail matters.

Let's take a look at each stage. 

Template creation

You can simplify your work even before starting a new project. Think about the types of contracts your company deals with the most. Perhaps it's a contractor agreement or an employment contract. 

Contract templates can help to save time. With document drafts at their fingertips, your HR team can prepare employee papers without contacting legal. This will also reduce errors, as a company will standardise clauses and conditions across their agreements. 

Contract creation

This step involves creating the draft file. To do so, you need to enter information on the parties, dates, and other details. 

The text is typically not written from scratch. You can use templates or document samples from earlier projects. Previous versions of the agreement, with a similar structure and substance, might also be useful.

Contract check

Mistakes in contracts can be very expensive. Thus, it is critical to ensure that the text contains no typos and that all details are correct. If you've entered the information manually, there may be errors in the amounts or the names of signatories.

It's also important to take time to check the reliability of the other party, especially if you're working with a new client or contractor. This will help you avoid any potential issues down the line.

Reviewing and reading

Any contract involves at least two parties. While they prepare the papers, they negotiate various terms and conditions to make sure that the cooperation is advantageous for both sides.

It can be difficult to collect all changes into one file. Many people take part in the process, and comments can easily get lost in a long chain of messages. 

That's why collaboration workspaces are becoming more popular. They allow in-house legal teams to work together on a project in real time and keep track of changes.

Approval

After finalising the text, the parties can approve and sign the contract.

At this stage, it's crucial to confirm that all signatories share the same understanding of the terms and conditions. Each company needs to appoint responsible personnel to coordinate the project.

There are several options available when it comes to signing. These include physical signatures, e-signatures or clickwraps. The latter occurs when a user accepts terms when registering on a social network.

Contract monitoring

A contract is not a static document, but rather a dynamic process. Events can occur at any moment that interferes with project plans. 

To avoid financial losses and operational disruptions, you need to monitor your agreements. Here are several steps to complete:

• Adhere to the terms and mutual obligations between the signatories.
• Make sure project deadlines are met.
• Keep up with legislative changes that base the agreement.
• Check force majeure circumstances affecting the economy.
• Follow internal changes of the parties that could affect the agreement (such as a change of ownership or bankruptcy).

Storage and search

Did you know that 71% of companies cannot find about 10% of their contracts?

This is a very risky tendency because a business can get fined or sued because of a document that is not even available to read.

If you want to avoid risks, store all your contracts in a single, secure repository. This will make it easy to find the files you need. Also, new team members will be able to navigate the array of documents without the help of colleagues.

Audit and reporting

Businesses always look for ways to improve efficiency. Contracts are probably the first aspect to pay attention to.

To get the best results, your company must have a clear understanding of what it wants to get from the agreements. Clear KPIs should be defined.

After that, you’ll be able to analyse performance by any criteria (by company, for a certain type of deal, by a timeframe). Businesses also prepare reports to check their compliance with the law or respond to negative trends on time.

Expiration and renewal

As your contract approaches its expiry date, it's time to decide if you want to extend or renew it. By planning for upcoming negotiations, you can get more favourable terms.

If cooperation didn't work out as intended and desired outcomes weren't achieved, it's crucial to have a well-defined plan for terminating the contract.

What Software Can Improve Contract Lifecycle Management Process?

Contract management (CLM) systems are special software designed to improve the contract management lifecycle for companies. It automates manual processes that take a lot of time and resources. 

Here are some tasks that technology can help with:

1. Simplify the preparation of contracts with auto-fill features and templates.
2. Scan the text for errors.
3. Provide a cloud-based workspace to simplify redlining.
4. Analyse performance and keep track of contractual deadlines.
5. Remind you in time about upcoming renewal dates.

Below, we'll look at how digital contracting works, taking LIGA UNITED as an example.

How Does Contract Management Lifecycle Work?

CLM systems help businesses save time on mundane tasks. 

The need for automation has emerged as the volume of contractual work that teams face increases every year. 

For example, an average Fortune 1000 firm handles about 40,000 contracts daily.

It's untenable to use the old methods in these circumstances. To put it into perspective, can you imagine the size of storage if documents were still stored physically? Or imagine how long it would take to search for a particular contract.

Modern IT solutions take into account all the aspects of the contract lifecycle management process flow. They help to set up an efficient end-to-end process, simplifying each stage of the work.

Here's how the process works in LIGA UNITED:

1. Create a standard template for the agreements you deal with most often. You can upload a file or use the documents that are available in the repository. In future, your employees won't have to create a text from scratch - they'll only need to fill in the key details. HR and procurement departments can prepare draft agreements even without involving lawyers.
2. Create a new project. You will be able to store all related files and information in it, control the progress of tasks, add comments for the team, etc.
3. Scan the text for errors. Our system automatically detects mistakes in structure, dates, and numbering. You can also easily work through the sums and check the information about the parties. Since the work takes place in a single file, no edits will be lost during the process, and your team will save time on redlining.
4. Sign the document. On the LIGA UNITED platform, you can transfer a document between all the departments that have to approve it. At any given time, your team can see who is reviewing the text. The system is integrated with DocuSign, which allows the e-signing of your contracts.
5. Set up monitoring for the details you want to control. You can keep track of key contract events or party changes.
6. Ensure your documents are stored in a centralised and secure storage repository. It will help you to locate documents quickly, easily monitor compliance with the terms and conditions, and analyse the effectiveness of your projects.

Working in LIGA UNITED's shared space simplifies every step. Your employees will be able to focus on strategic business tasks instead of wasting time on mundane activities.

The role of contract parties

The quality of the contact is directly related to the credibility of the parties. 

For this reason, when launching a new project, you should confirm the reliability of your business partner. By doing so, you can avoid financial and reputational risks. 

LIGA UNITED provides information on millions of companies. You can easily review the following details:

• Status and registration data.
• Information on owners and beneficiaries.
• Business links.
• History of changes.
• Presence in sanctions registers.
• Trading activity and financial performance.
• Negative mentions in the media.

In a fast-changing business environment, your partner's circumstances can always change. We built our software with this in mind. With our monitoring function, you'll be able to find out in time about any changes in your affiliates that may affect the fulfilment of the agreement. For instance, you will receive a notification if an organisation undergoes a change of ownership, faces sanctions, or becomes bankrupt.

Request a product demo to learn more about the company verification capabilities in LIGA UNITED.

How To Know if You Need CLM

Businesses may face the need to improve the contract management lifecycle regardless of their industry or size. Companies that regularly analyse the effectiveness of their contracts get the most out of their bottom line and allocate their resources optimally.

Here are a few reasons why you should choose automation tools:

1. You handle a large volume of documents and agreements. Large companies conclude so many contracts daily that managing the process manually is not feasible. IT solutions can help you to use your organisation's human and financial resources wisely, protect against risks, and save time. 
2. You want to protect yourself from compliance issues. Regulators are constantly tightening their requirements for compliance and company screening. Thus, as part of lifecycle contract management, you need to keep up with regulatory requirements and verify the legitimacy of the parties you plan to work with.
3. You want to track important deadlines. A key indicator of the effectiveness of cooperation is that the parties fulfil their obligations on time. This helps to avoid penalties and demonstrates the organisation as a trustworthy partner. It's also important to know exactly when the contracts are expected to be renewed and prepare for due dates in advance.
4. You face difficulties in controlling changes. A contract is a living document that is affected by various factors. Legislative changes, political or economic changes in the country, internal changes of the parties, or force majeure - all these issues can affect the fulfilment of the terms and conditions. Monitoring features can help your business get ready for these changes.
5. You want to approve documents faster. Cloud-based solutions remove one of the most time-consuming stages of preparing a text, namely, collecting corrections and comments from many people. Since you work with a single file, the parties can approve the finished document faster.
6. You want to enhance the project control within your team. The whole process moves faster when employees can follow the progress of a task and see who is working on it at any given time. 

If you are facing any of these challenges, give digital contracting a try right now. You'll discover that working with contracts can be a breeze, no matter how many documents or how many participants are involved.

What to consider when evaluating a CLM solution

The legal tech market offers a wide range of products to improve a contract management lifecycle.

Here are a few things to consider when choosing the best solution for your needs:

Contract types

Make sure that the software takes into account the specifics of the contracts you work with most often. For example, depending on the size of your organisation and your niche, you might be more likely to deal with employment contracts or procurement contracts. 

Functionality

Prioritise the functionality that is most relevant to you. It may be that the main task for your business is to simplify the contract preparation. In other situations, you may need to establish a centralised repository to help locate documents easily. Consider whether the product includes all the tools you need.

Integration capabilities

Organisations may be using many digital tools at the same time. Analyse how these systems complement each other. Do they duplicate the same functions? Is there a need to share data? For example, you may want to integrate your CRM system with a new product. 

Ease of use

Any new software is adopted to make it easier for the team to work. Thus, the usability of the interface and its intuitiveness for the user are important factors to consider when choosing a solution. 

Data security

Contracts often contain sensitive information. Protecting it is essential to save the company from financial risks, litigation, and a negative reputation in the market. Before deciding on a digital solution, find out what security protocols it guarantees. Common precautions include enhanced security measures for user authentication, data encryption, etc.

Analytical capabilities

The main advantage of automated systems is that they turn contracts from static pieces of paper into big data. Each document becomes a part of a large puzzle that can be analysed, transcribed and put together into a bigger picture. This makes it easier for businesses to analyse strengths and weaknesses and take them into account when making decisions.

Evaluating the parties

When entering into new contractual relationships, businesses face many risks. Modern systems can assist in checking a potential partner. For example, you can look at financial indicators from open sources or read comments about the company in the media.

These factors will help you make a choice that meets your needs. However, every business is different in terms of its activity, size, and the markets and jurisdictions it operates. Thus, the list is not exhaustive and each organisation will have its unique requirements.

Which Businesses Should Use Contract Lifecycle Management?

All companies work with contracts, so making the contract management lifecycle more efficient will benefit all businesses.

Large enterprises manage a large volume of agreements. Even minor delays in the process can be costly. Besides, it's harder to establish effective internal communication and document sharing in large teams. All these needs are met by automation tools.

Small and medium-sized businesses often struggle with a shortage of personnel. For them, it is a valuable opportunity to prepare documents with minimal involvement of legal experts and funding, while avoiding mistakes.

Another important thing to understand is that CLM solutions are used by a variety of teams:

• Legal departments are typically responsible for contractual matters. They use automation tools to create a unified contract database, generate templates and accelerate the document preparation workflow, preventing legal risks and human errors.
• Procurement departments can generate contracts with new suppliers.
• Sales departments can create customer contracts and send them for approval and signature immediately.
• Finance departments control the timely fulfilment of financial obligations under contracts, make payments, and analyse expenses.
• HR can prepare documents faster when hiring employees, such as employment agreements or NDAs.
• Marketing teams often conclude contracts for advertising services and other promotional initiatives. For example, influencer marketing is becoming popular in many industries, so businesses sign promotional contracts with people who have a large social media audience.

With a unified contractual framework in place and a database of standardised templates, every department can perform its tasks faster. This is particularly relevant in a dynamic and competitive business world that strives to complete more and more tasks in a minimum amount of time.

Overall, IT solutions are relevant for any business that wants to stay ahead of the curve, use its resources efficiently, increase profits, and prevent negative cases in contracting.

Final Thoughts

The contract management lifecycle is a vital component of an effective business. To succeed in this area, you need to use automation tools that ensure that contracts run smoothly at every stage.

A centralised document repository allows you to store all the contract information in one place, simplifies the signing process and provides quick access to data. In addition, automated systems make it easy to track contract expiry dates, control the fulfilment of terms and conditions, and follow legislation.

This way, your company gets the most out of the agreement and secures favourable terms of cooperation. And your partners recognise you as a reliable organisation because you always meet the deadlines.