An organization’s exposure to risk greatly depends on the quality of its contract lifecycle management.
Contract lifecycle management is the management of an organization’s contracts from start to finish.
Contract lifecycle management helps organizations reduce contract risks, protect agreements with regulations, inspect records for performance, and maintain ongoing organizational processes.
Effective management leads to cost and time savings for all members involved.
Depending on how complex a contract is, contract lifecycle software can provide intuitive controls to assist in managing contract lifecycles.
An industry-leading software provides modern best practices for contract management in terms of consistent quality and cost-savings.
A digital platform means your team can:
- Automate drafting procedures based on user objectives.
- Provide team members and counter-party individuals access to working drafts.
- Employ AI-driven processes to monitor inconsistencies.
- Archive contract content in a central repository.
Contract lifecycle software is best utilized for high-volume, complex contracting. A contract screening process is necessary before adopting this technology.
But each organization has its own systems and methods for contract lifecycles, usually, the cycle falls into the following stages.
1. Contract Creation/Authoring
A contract is normally made to outline an arrangement between parties for goods or services. Before a contract can satisfy everyone, precepts are agreed upon to create a legally binding document.
A software can expedite the beginning stages of contract creation to set rules appropriate to their legal constraints.
An automated system can improve these two processes:
- Signing process — Streamlined process for authorized individuals during the contract signature phase.
- Templates and clauses — Automatically assemble criteria such as products or price terms for quick process controls.
A centralized system can improve contract lifecycle management with greater transparency for everyone involved.
2. Collaboration and Negotiation
A transaction can involve many people for both commercial and legal sessions. This stage takes a lot of time and effort so detailed reports are necessary.
The negotiation process during the lifecycle generally consists of the following segments:
- Assembly — Generate standardized templates for consistent clauses and client terms.
- Proposal changes — If someone needs to change something, the system can bring up terms dependent on the original agreement.
- Review — Scan signed terms for any inconsistencies.
- Management — A central repository contains all tracked obligations throughout the contract’s lifecycle.
Proficient management can handle any needed changes so future phases won’t fall apart due to inconsistencies.
3. Contract Authority
A final agreement requires each party to sign the document. All parties must consider the value, risk, and other factors about who is in charge of approvals. This section is critical. If contract commitments aren’t clearly stated, disputes can occur thereafter.
4. Contract Approval
Once a contract passes the negotiation phase and all the agreed terms are up to date, all approved definitions are ready to support negotiation updates.
Automated software can examine deviations from original agreements by:
- Observing rights and obligations.
- Analyzing performance and management issues
- Notifying members for renewals or expiry dates.
This highly digitized phase is much improved with automation instead of manually reviewing each alteration during a contract lifecycle.
5. Contract Performance
If a contract isn’t performing as intended or just isn’t helpful after careful consideration, the director should customize or restart the contract lifecycle.
This way, your team can make the necessary changes needed to avoid repeat errors or make decisions based on new findings. An efficient contract lifecycle management process continues with tools to renegotiate terms for more beneficial agreements concerning your business.
Lifecycle management is fundamental for any profession that relies on contracts. The most successful and compliant companies across many industries go to great lengths to optimize their contract management efforts.
In summary, technology compliments contract lifecycle management methods in the following five best practices:
- A central repository for all contract content.
- Appropriate templates for duplication.
- Regulate the negotiation process.
- Maintain compliance at every step of the process.
- Benchmark performance for improvements.