Contracts are a vital force of any organization as they encompass the code of conduct in commercial relationships by all stakeholders or parties involved. While contracts are put in place to enhance the operational and financial performance of a company, the process through which contracts are designed and implemented can be anything but straightforward.
To maximize the value from these performances, the way the contract management is developed, tracked, and reported on, is essential.
Let's learn a little more about the contract lifecycle management.
Contract Management Definition
Contract management refers to the process in which a contract is created, executed, and analyzed to maximize the operational and financial performance of a company.
At the same time, Contract Lifecycle Management (CLM) is defined as the combination of contract management, people, and technology that maximizes an organization’s performance.
As businesses grow and develop, contract management can become increasingly complex, highlighting the need for effective strategies and solutions. An appropriate CLM is perhaps one of the most common challenges when running a company, as organizations of all sizes face the need to juggle multiple contracts at the same time.
Thanks to technological advances, like the enhancement of artificial intelligence (AI), effective CLM software has become a crucial tool in reducing risk, improving productivity, and maximizing a contract’s value. Contract inception, drafting fulfillment, and review are sped up, all while providing valuable data insights along the way once the use of a CLM software is implemented.
In order to facilitate the lifecycle, companies such as Akorda offer contract management software tools that help modernize a company’s CLM offering customers a responsive team that leverages the use of artificial intelligence (AI) to streamline and automate the entire contract lifecycle. By simply uploading the contracts onto Akorda’s website, the built-in AI does the work by speeding up the CLM from drafting to fulfillment, while providing valuable data insights along the way.
Stages of Contract Lifecycle Management
To fully understand the benefits of contract management software and an efficient CLM, it’s important to understand the eight steps that need to be taken into account during the contract management process. Recognizing what each step comprises is the best way to ensure that the process meets all the requirements and objectives to maximize operational and financial performance.
During this stage, one of the stakeholders involved initiates the contract process. This is the first stage of the contract lifecycle, which allows suppliers, customers, and partners to gather the essential details associated with any (new) contract, amendment, renewal, etc.
Some software products allow teams to establish contract request forms that ensure all data is captured in a centralized place, which allows stakeholders to review and approve all the information requested in one single place.
In this step, the stakeholders or contract parties put the terms of a contract into writing, by establishing the standard clauses, terms and conditions, and key dates of the contract. This step is also known as the contract writing stage.
The writing stage of a contract creation is a multidimensional process, which without an effective CLM organization lacks the benefit of utilizing pre-approved contract templates, from a pre-approved contract repository or database.
By using Akorda’s CLM software, organizations can track changes and maintain the template of pre-approved contracts, return to previous document versions, enhance item management, optimize negotiations and so much more!
To improve and expedite this multidimensional process, Akorda supports and incorporates into the software the tools you already know to boost your efficiency, such as Dropbox, OneDrive, Zendesk, and DocuSign amongst others, to edit contract documents online.
Once the contract has been drafted, the parties involved negotiate the parameters established until the conditions are agreed upon by all stakeholders involved, thus setting the expectations for the agreement. Contract negotiations may entail a back-and-forth collaboration, version control and redlining, to meet the expectations of all involved parties.
By enlisting the help of CLM software, organizations can ensure a smoother and centralized process where bottlenecks are avoided in negotiations, by:
- Providing pre-approved templates and clauses in a centralized repository.
- Enhancing document collaboration and tracking changes across multiple parties.
- Staying on top of key dates and tasks by employing automated notifications.
- Providing a centralized and efficient online collaboration and ultimate contract approval tool.
- Providing a user-friendly and mobile signing process.
Although technology can increasingly simplify and streamline this step, a holistic approach is necessary at every stage of the contract management workflow. At the base of any contract management lifecycle, there is a need for clear communication between all stakeholders to effectively allocate contract ownership and associated accountability.
Once all conditions and expectations have been agreed upon, all parties review the contract to set the parameters to meet contract obligations, milestones, compliance standards, or any special terms.
This step of the process, however, can be quite lengthy as it can involve the different chains of command within the same organization. An automated approval workflow powered by CLM software can streamline this process by alerting the right individuals at the right time of the tasks that are to be fulfilled to move the contract process to the next step. Any delays in completing these tasks will stall the approval process and subsequently delay operations.
To ratify the enactment of a contract and all the parameters therein agreed upon, a senior company employee with high clearance will sign the contract. Akorda’s CLM software offers customers a user-friendly electronic signature functionality that allows stakeholders to sign contracts, either when working remotely or at the office. In our increasingly mobile world, manual signatures are fast becoming time-consuming and inefficient and are being replaced by more effective solutions.
By engaging in a contract, all parties agree to tasks and responsibilities that they are (legally) required to complete. Contract obligations, and the subsequent general compliance of them, are important stages for organizations to track and confirm if the agreements and obligations are being met.
CLM software can simplify an organization’s life by effectively monitoring and tracking the terms agreed to a contract once the contract has been implemented. The automated workflow can inform managers of task alerts, compliance status reports, and others, saving time and maximizing performance.
Once the obligations of a new contract have been defined, compliance refers to the implementation of terms and conditions outlined in the contract. Through the agreed regulations stipulated, this practice ensures that all parties (legally) abide by what has been agreed upon.
This step of the process involves periodic reviews of an existing contract and, much like with obligations, it’s a process that can benefit from an automated CLM workflow, through automated task alerts, compliance status reports, and other contract management solutions that monitor contract compliance.
Without proper compliance management, friction points may arise, that can cause stakeholders to incur in late fees, litigation, among others issues. These can easily be avoided with an appropriate contract management software that will track obligations and compliance more effectively. A great CLM will be an essential tool, allowing all parties involved in a contract to know if the standard and the terms and conditions in a contract have been or are being met.
8. Renewals and Amendments
One or more of the parties involved in a contract may want to revisit or renegotiate the terms agreed upon, introducing changes to an existing contract.
During the renewals and amendments, stakeholders are given the opportunity to revisit the terms and conditions of their agreements, renegotiate them or engage in further opportunity realization. With the support of Akorda CLM software, contract renewals and amendments can be easily tracked and audited while automating the workflow to speed up the negotiation, approvals, and final e-signature, providing valuable analytics into the risk and value of all contract types.
Contracts are the lifeblood of any company, and appropriately managing them will have a very positive impact on a company’s operations. Successfully completing the eight stages of the contract management process can be a lengthy affair, but with the use of modern technology, this process can be effectively streamlined while reducing or effectively avoiding points of friction throughout the CLM process.
An outdated and manual contract management system in our modern and fast-paced world can be a source of headaches and legal consequences due to a lack of compliance with a contract’s terms and conditions. Effective tools such as CLM software are helping organizations take the contract management process to the next level by optimizing it and providing advanced analytics, virtually anywhere and anytime.
Managing and optimizing your company’s contract performance can be easier with the help of new technology-based products available. To streamline and automate across the entire contract lifecycle, book your free demo of Akorda’s award-winning software today.