Smart CLM is a vital upgrade on Manual Contracting
World Commerce and Contracting report that poor contract management practices cost businesses an average of 9% of their annual revenues. Drafting, negotiating, and executing several contracts manually every day can drain time & productivity in an organization, leading to massive losses in revenue and business efficiency.
Managing contracts at every stage of the contract lifecycle is a labor-intensive and time-consuming process. Digitizing contract management can help eliminate the inefficiencies in manual work by automating the entire process, and consequently slashing TAT for contract execution by 90%.
Contract Lifecycle Management, usually shortened to CLM, is the real-time management of the stages a contract goes through, using smart CLM software. These stages include –
- Contract performance
Each stage is carefully reviewed by multiple parties before the final approval, followed by execution. Let’s dive into the details of a contract’s lifecycle and how contract lifecycle management works.
What is a Contract Lifecycle Management?
Contract Lifecycle Management is the journey of a contract right from draft to the final execution process, tracking the entire lifecycle of the contract. A ‘Life cycle’, in the context of contracts, is a model used to understand & classify the various stages of a contract. The contract lifecycle journey begins with initiating a contract request and covers every key stage of the contract including contract execution, tracking, contract intelligence, and renewal.
Here’s how a contract’s lifecycle goes –
- Initiation – This is the first stage of the contract lifecycle that involves business stakeholders discussing the essential details of the contract, agreement, renewal, etc. A business professional submits a request to legal for drafting a contract and once initiated, further actions are taken.
- Drafting – Once the stakeholders have gathered the required details and obtained an understanding of the business requirements, the terms and conditions of the contract are drafted by consolidating standard clauses, counterparty information, key dates, and other critical data. In CLM, this stage is simplified by drafting the contract with templates and clauses available in the library, with the assistance of an AI-enabled wizard for key clause suggestions.
- Negotiation – Once the contract is drafted, parties negotiate the clauses and the key data mentioned. This stage usually involves multiple rounds of negotiation/collaboration that takes days to finalise. Utilizing smart contracting software enables parties to negotiate in real-time, reduce email clutter, and speed up the process.
- Approvals – Once the parties review the conditions mentioned in the contract and set parameters to comply with the standards, contract obligations, milestones, special terms, etc, the document is sent for approval. In the CLM, approvers can track who made what changes to the contract. This provides clarity regarding the edits the contract has gone through, and the roles assigned to the parties involved in the contracting process.
- Signing – Parties review and sign the contract, ratifying its contents. To make the process more convenient, CLM offers electronic signature solutions where the concerned party can eSign the contract online without getting them transported to their location. With eSign solutions, they can sign bulk contracts and save a significant amount of time.
- Performance & Intelligence – Parties agree upon and comply with the additional conditions and the previously mentioned terms, guidelines, and practices to avoid late payments, litigations and further hinder the process. If a party doesn’t comply with the agreed conditions, then they are liable for actions as mentioned in the contract or as previously discussed with the stakeholders.
- Renewal – Parties can revisit and renegotiate the contract stored in the repository. Additionally, contracts that are expired may be renewed.
Managing contract lifecycles manually can delay the execution of contracts due to multiple rounds of negotiations and approvals after sending the documents for physical signatures. Additionally, manual contracting often results in missed obligations, risks of a breach, and missing out on important contract renewals. Businesses and enterprises can benefit from CLM by deriving insights and business intelligence from contracts, and using these to both resolve pain points in the contract lifecycle and obtain a comprehensive grip on the contracting aspect of the business.
How Contract Lifecycle Management works
Automation is the core of the Contract Lifecycle Management software. Since it is powered by Artificial Intelligence, the software can understand what the user is doing in real-time and provide suggestions, tools, features to help complete the process within the stipulated time. It can also update the status of the contract in real-time.
Here’s a rundown on how CLM works –
- User logins to a CLM platform
- The user works on the contract requests submitted by the business team.
- The user adds counterparties and assigns them specific role
- Parties collaborate and negotiate clauses in real-time
- User invites parties to review and approve the contract
- Parties eSign the contract and pay stamp duty digitally to get the contract eStamped
- The contract is stored in the repository for renewals, review & further use.
CLMs boast several features enabling end-to-end management of the contracting process. These include –
- Clause libraries and clause locking
- Online negotiation
- eSign and eStamp integrations
- Centralised contract & content repository
- Smart dashboard
- Ready templates
- User management
- Audit trails & activity logs
- Customisation tools
With the features CLMs provide, here’s how you can benefit from utilizing them –
Cost-effective – A survey by Global Legal states that 65% of Legal professionals lose time on administrative tasks. CLM reduces TAT from days to minutes by automating the process – from negotiation to signing and execution. ESigning eliminates dependency on logistics and cons of physical signatures, saving time and effort put into approving/executing contracts.
Real-time negotiation – With a CLM system, parties can negotiate clauses, and comment or suggest in real-time, unlike in the manual process where they have to negotiate back and forth, resulting in too many emails. CLM provides templates and clause libraries with clause locking to speed up the process and secure the document.
Manage all contracts & agreements in one place – CLMs supports bulk contracts and agreements. They store drafts and executed documents in the repository enabling users to search and view contracts by their status, type, edit history, and more. Centralized contract storage with smart clause retrieval also boosts a business’ audit efficiency by nearly 60%.
Total transparency – CLM saves all the changes made in the documents. It lets parties know who made the said changes and when they were made, the roles assigned to the parties, and other essential information. Therefore everyone involved in the contract is aware of the roles and actions are taken with the contract.
Enhanced productivity – With automation simplifying contract management, reducing manual errors, and saving time, businesses can improve their efficiency with the workflow process and be more productive.
Reduced expenses – Automating contracts online reduces expenses associated with procuring materials such as paper and stamp paper and transporting the documents as all the dependencies on physical elements and aspects are eliminated. According to research by Goldman Sachs, contract lifecycle management systems reduce erroneous payments by 75-90% and cut operating & processing expenses by 10-30%.
No missing deadlines – CLM keeps track of expiration dates, renewals, and other key data so that no deadlines are missed. It also notifies the concerned parties when a contract reaches its expiration date and is up for renewal.
Tamper-proof & secure without duplications – Clause locking in the CLM enables parties to lock clauses so that no other party can edit the contents. That way, the contract is tamper-proof. Additionally, eSignature integration legalizes the document instantly. The meta-data of clauses in legacy contracts are tagged to ensure they aren’t tampered with.
Automate and expedite contracts instantly with SignDesk’s smart CLM
Draft contracts and negotiate clauses in real-time with SignDesk‘s end-to-end contract management solutions – CONTR.ACT. Additionally, CONTR.ACT provides easy eSignature and eStamping integrations to execute contracts instantly & securely. Manage bulk contracts and enable seamless workflow process while reducing TAT by 90%. Our clients have experienced significant reduction expenses owing to automation.
Learn more about how our contract lifecycle management works by contacting one of our sales representatives.