Working with contracts can be likened to parenting. The contract is your child and you need to provide it with all the information it will need to handle life in the real world. Your approach to handling contracts and what you add to them will ensure the success of the agreement you make with the other party. It is a lay description of contract lifecycle management. However, let us understand the technical aspect of this process.
This is the entire process involved in capturing terms of a contract, authoring the document, negotiating terms, approvals and appending signatures, and following through to meet obligations and handle the renewal of the contract.
As you can see, there is a lot involved in this process which is why contract lifecycle management is necessary. This process makes it possible for everyone to understand what they are agreeing to without hidden obligations popping up in the course of the relationship between clients.
Even with parties that may have the best of intentions, it is still important to have written agreements that have been negotiated, approved, and formally consented to with signatures. The contract also needs to be safely stored. This avoids sticky situations that can arise because of the absence of an organized system.
Contract life management can result in substantial progress and efficiency and it has legal implications that every business should endeavor to secure by complying with legal requirements. The benefits include:
Reduced Time Spent Administering Contracts: Contract lifecycle management software streamlines the process of administering contracts. These processes usually take up a lot of man-hours and incur high financial costs. With a management system in place, this is something you do not have to give a lot of attention to.
Avoid Costly Penalties: It is not uncommon that a supplier or client finds that they are guilty of breach of contract because they did not perform a particular obligation. With contract administration in place, this cannot happen. Payment errors and rebates can be avoided because everything that is expected of each party is well defined and there are systems to ensure obligations are met on time.
Contract Managers are Free from Administration Tasks: Administrating contracts is a task that can be automated so that the contract managers can focus on other tasks instead of constantly following up compliance issues as well as having to author contracts. CLM software takes care of most of the administration.
Impress Customers With Efficient Performance: Enterprises that have contract management cycle processes can deliver services to customer expectations or even exceed expectations.
Prevent Litigation: Incomplete contracts expose parties to non-compliance litigation when they fail to live up to their end of the agreement. This can be avoided by having a lifecycle management process that enables the following:
As mentioned above, there are several processes involved in managing contracts right from start to finish. With the right contract lifecycle management software, any enterprise can achieve the following.
Anyone who has had to author a contract from scratch can attest to the complexity of such a task. To ease this process, contract templates can be used. Well designed templates that incorporate all the elements of a particular contract can save time while ensuring the document is compliant with the legal contract best practices. With most organizations faced with the task of creating multiple contracts, automation of this process is a relief. Important and complex contracts can be created rapidly without human involvement through most of the process and the risk of costly errors is reduced to a minimum.
The best management systems are paperless, however not every time will your contract process be free of paper. Contract lifecycle management tools will give the user the ability to capture all documents by scanning paper documents and storing the data within a system that makes it easier to track. These systems are not different from other document management software that enable cloud storage for easier and safer management of documents.
Remember, contracts usually have accompanying documents that also need to be filed within the same system. All these can be captured and digitized easily. Users can then access these documents on the go and that makes compliance and verification much easier.
Regardless of distance and time, contract lifecycle management solutions make it possible for different parties to collaborate in the process of negotiating and approving contracts. Each party can receive an electronic copy of the draft contract on which they can suggest changes that will be highlighted and considered when making a final draft. Every contribution can be easily traced to whoever has made the remark and everyone can see the changes that have been suggested.
Because this process is carried out electronically, time is saved. There’s no reason to involve courier services or risk documents getting misplaced. Contracts between parties in different time zones or continents can be concluded just as fast as it would be if all parties were seated in the same boardroom.
Once the contract has been approved and all parties involved are happy with the draft, a final copy is drafted and sent to all involved for signing. All signatures can be collected electronically and with the final document signed, every party will receive an electronic copy that is also securely stored in a contract library that only authorized individuals to have access to. E-signatures have made it easier to execute legally binding contracts across geographical locations.
Contracts tend to be dynamic especially when they are binding over a long period. Often there will be amendments and everyone needs to keep track of the changes that are made. Often, amendments may confuse if there isn’t any reliable management system in place. Notifications can be used to alert signatories of any changes made to the contract.
For example, a contract might be made for the supply of a particular amount of goods over 12 months with the possibility of increasing the supply after that period, a notification can be sent to all parties before the time elapses and the contract will be automatically updated if no one has objections to the new quantity.
Even after the ink has dried, performance audits will have to be undertaken continuously to ascertain that everyone is meeting their obligations. The contract will have clear benchmarks that will help to measure if the value is being realized. An automated CLM contract will have notifications to alert parties about deadlines that may have been missed.
Such a system ensures that a business provides prompt and quality service to the client. At the same time, the business will avoid lost revenue as a result of missed deadlines or failure to renew contracts.
Managing contracts manually exposes a business to many pitfalls and it takes up a lot of time. Automating the process, however, will ensure a lucrative business relationship with fewer burdens placed on the shoulders of legal teams.
Businesses will avoid risk by guaranteeing compliance through the use of approved professional templates. A streamlined process of handling negotiations and approvals makes things move much faster towards execution.
Despite the natural human tendency to forget dates, notifications can help remind concerned parties of upcoming deadlines. Businesses that are employing lifecycle management tools are seeing smoother operations with less time spent dealing with litigation.