Successful contract management entails more than just establishing and signing contracts; it is a series of actions that guide you from the early stages of developing a comprehensive contract management process to the conclusion of the contracts.
Breaking that cycle into concrete steps is an integral part of analyzing the workflow of contract lifecycle management (CLM). The entire process must be divided into distinct categories to identify the overall trend, beginning with task creation and progressing through a series of tasks until completion. After those steps have been separated, they can be broken down and read separately, making it easy to identify areas of improvement.
This post will provide a summary of each step.
What exactly is CLM
Contract Life Cycle Management (CLM) is the effective management of contracts or agreements and relationships between entities by streamlining all stages of contract management that lead to the reduction, elimination, or reduction of financial, legal, and procurement risks. Contract Life Cycle Management is aided by various applications such as https://www.contractsafe.com.
Step 1: Requests
This is the first phase of the contract, and it begins the contract’s term. At this point, contracting parties and stakeholders can outline their expectations for the agreement.
This first stage of contract life allows parties and stakeholders to gather critical information about a new contract, amendment, renewal, and so on. The contract application phase can determine whether the contractor enjoys working well or is plagued by delays and gaps.
Step 2: Contract Writing
Once the contracting parties have established and processed the contract applications, the contract approval process can begin.
This section, also known as the contract writing phase, identifies the contracting parties and writes the contract’s terms and conditions by combining the usual contract terms, key dates, partner details, and other vital details. It is critical to remember who signs the agreement, what services are provided, and the terms that are agreed upon.
Step 3: Negotiations
Contract teams negotiate a set of definitions written at the time of authoring a contract during the contract negotiation phase, which is arguably one of the most critical stages of contract life. Following a comprehensive internal and external collaboration, the agreed terms and conditions are set to understand the contractual parties’ expectations clearly.
Step 4: Obtaining Approval
After everyone involved in the negotiations is satisfied, the contract goes through a second draft and is reviewed by the parties. Contract approval must adhere to the standard approval period as it affects both parties. The length of time it takes to approve a contract may be affected by the length of the chain of command.
After the parties have completed their negotiations, all stakeholders conduct a final contract review. Parameters are created to meet compliance standards, obligations, key dates, clauses, and contractual terms.
Step 5: Appending Signatures
Following approval, the senior employee or person with signing authority can sign the contract. Powerful e-signature applications in a progressive and digital environment can make it easier to sign contracts in the office or “on the go” other than using manual, time-consuming, and inefficient signatures.
Step 6: Assigning Roles and Responsibilities
After executing a contract, all parties agree on their pre-defined obligations, contract milestones, actual contract dates, purchases, payment windows, and other specific duties.
Step 7: Compliance
This section is related to responsibilities. It is agreed that, in addition to what is mentioned in the contract, the parties will observe the general contract rules and particular terms, standards, regulations, and practices. Strict enforcement aids in reducing late fees, court fees, and problems, as well as laying the groundwork for future contracts.
Step 8: Contract Renewal
Depending on the type of contract, the last stage of contract life may differ. Contract renewal is effective when partnerships between businesses are mutually beneficial, and the parties desire to keep in touch to continue doing business with each other.
Instead of completing all of the steps mentioned above in creating a new agreement, the parties are allowed to review the discounts and terms of the just ended contract and participate in identifying other opportunities as soon as possible.
The Advantages of Active Contract Management Cycles
- Maintain compliance
Contract life cycle management relies heavily on compliance. CLM software can assist you in maintaining contract compliance to avoid paying government fines or facing lawsuits.
- Conserve funds
There are several ways to waste money on contract mishandling. Life cycle management software can assist you in avoiding these and identifying cost-cutting opportunities.
- Eradicate human faults
One of the biggest impediments to efficient contract management is human error. CLM software enables you to eliminate this by automating a variety of unique procedures.
- Reduce delays
When different mistakes are introduced into the contract management process, the deal is delayed even further. By assisting you in eliminating errors, you may prevent the project from being delayed.
The Final Word
Contract life cycle management is a tedious procedure, but it is necessary in the business world. As a result, your firm should implement a decent contract management system to make the CLM process more manageable and stress-free sooner rather than later.