Contracts really do make the business world go round. They are the foundation of any business relationship – a vessel for setting expectations and allocating risk. But contract creation and subsequent management are often overlooked, under-optimized, and inefficient processes; additional burdens rather than a place to add value. Contract management is a skill and requires legal expertise and resources. When you’re on a lean legal team, it’s tough to dedicate time and manpower on something that doesn’t seem to add meaningful value.
With the right approach and tools (such as Lexion), Contract Lifecycle Management can save time, money and resources allowing you and your team to focus on what really matters.
What Does CLM Stand for?
Contract Lifecycle Management, often abbreviated “CLM”, is the process of managing contracts from start to finish – which doesn’t end when the contract is signed! CLM happens along a circular continuum and can be split into two distinct phases: pre-signature activities and post-signature. While most legal departments are skilled at the pre-signature stage, the post-signature stage is equally important. At a high-level, the lifecycle of a contract includes:
- Pre-draft activities
- Execution of the contract
- Ongoing oversight and maintenance
- Storage and reporting
CLM embraces the pre- and post-signature phases and acknowledges that contracts require continual work to ensure obligations are met and each party is satisfied. CLM includes all the activities that support your contract throughout its duration.
The Stages of the CLM Process
A contract’s lifecycle has seven stages:
- Obligation Management and Compliance
- Auditing and Reporting
Once the need for a contract is identified, the contract lifecycle begins. The authoring process itself is anything but simple, often requiring cross-departmental collaboration with a variety of teams to make sure you have all of the information you need to draft an agreement while ensuring the company is appropriately protected. The authoring stage is often one of the most time-consuming tasks underneath the CLM umbrella.
Sourcing the legal language necessary to protect you, your company, and your assets are burdensome work. That's where CLM software, such as Lexion, truly shines.
Once a draft is complete and shared with the counterparty for review, negotiation begins. Each party needs to ensure the obligations are clear and risk is fairly allocated while seeking maximum value for their company. Like authoring, negotiation is a collaborative activity that involves multiple stakeholders.
CLM solutions like Lexion provide visibility across stakeholders and ensures a source of truth – no more searching through emails for specific communications and determining which stakeholders are engaged!
Most companies have some kind of process for approvals, whether formal or informal. In the contract lifecycle, approvals are often the source of bottlenecks and delays. Ultimately, before the contract lifecycle can continue, it is necessary for stakeholders to review – and approve – the contract and its terms.
Using CLM software such as Lexion will allow you to easily submit and track all approvals , ensuring you have the sign offs you need to move forward to execution.
Gone are the days of somber business people in suits huddled around a desk, passing a pen back and forth. Electronic signatures are here to stay.
Through robust APIs, Lexion integrates with the most popular e-signature tools such as Docusign, so customers can continue to use the tools they already use.
5. Obligation Management and Compliance
Once the contract has been signed, the process is over, right?
Nope. Execution is just the beginning of the post-signature phase; the parties need to understand what obligations they have and ensure those obligations are met.
Through the use of powerful CLM software such as Lexion, you can help proactively ensure you understand your company’s obligations and the stakeholders have visibility to track against those obligations over time.
6. Audit and Reporting
In a data-driven world, having insight into your contracts is incredibly important to make decisions. While most contracts are electronic these days, it’s difficult to gather information meaningfully across your contracts to draw conclusions, identify trends and highlight potential risks, let alone show that information in a way that is easy to understand.
With CLM software with robust search and reporting such as Lexion, you are able to efficiently find the information you need, create reports that allow ongoing tracking and provide visibility to relevant stakeholders.
At the end of a contract’s lifecycle, the parties have the option to extend their business relationship through a renewal or terminate their business relationship and go their separate ways. Ultimately, the goal of any company is continued loyalty – and business – from their customers as well as vendors. In the event of renewal, the contract's lifecycle begins again – hence the circular continuum.
Which CLM Solution is Right for You?
As you can see, a contract's lifecycle is a delicate ecosystem in its own right. You can either take on the unenviable task of managing that ecosystem by hand, or you can enlist the help of a CLM software solution to do the heavy lifting. CLM software solutions take all the time-consuming legal legwork out of the equation, making your in-house legal department more efficient, agile, and valued.
If you're in the market for a CLM software solution for your business or firm, there are some key factors you'll want to consider. Some questions you should ask include:
- How easily does the CLM solution integrate with my current tech stack?
- How does it handle existing contracts?
- What features are included?
- What is the solution's pricing structure?
- Does it include an e-signature function?
- Does the solution provide compliance-related features?
- Can contract-related files be shared between authors?
Lexion is an end-to-end contract lifecycle management solution that accommodates all your contract-related activities. Our system stands out as one of the easiest to use advanced CLM systems available. Please contact Lexion today for a demo of our easy, AI-powered CLM suite.