Why You Can’t Manage Contracts Efficiently Without a Contract Lifecycle Management System in 2024
How modern business complexity and legal requirements make CLM systems (Contract Lifecycle Management) indispensable for efficient contract management today.
Key Takeaways:
- Understanding Contract Lifecycle Management
- What has changed since the automation of Contract Management
- The different stages of the Contract Lifecycle Management and their automated solutions
- GAIA’s solutions for integrating Contract Lifecycle Management with ease
What is Contract Lifecycle Management?
Contract Lifecycle Management (CLM) is a systematic process of managing the entire lifecycle of contracts within an organization. This approach oversees every step, from initiation and creation to negotiation and execution, and eventually renewal or termination of a contract. Therefore, a well-functioning CLM system ensures compliance, efficiency and transparency within the organization.
Most organizations use Contract Lifecycle Management to:
- Mitigate Risks: CLM systems ensure compliance with legal and regulatory standards, minimizing the risk of missing legal or regulatory obligations.
- Increase Efficiency: Also, CLM automates and streamlines workflows, which saves time and resources.
- Enable Visibility: With a CLM tool, centralized access to all contracts and their content is possible, enabling better tracking and an overview of your contract data.
- Decrease Costs: Most importantly, it reduces errors, missed deadlines, and financial penalties which can be costly. Without CLM, you would usually hire counsel which causes additional costs.
Contract Lifecycle Management Before vs. After
Before the implementation of automation software, traditional contract management was slow, fragmented, costly, and error-prone. New CLM systems and tools improved the speed and efficiency, transparency and compliance while reducing the complexity and workload for organizations:
Contract Management Before CLM
- Manual Process: Not long ago, and sometimes still, contracts were drafted, reviewed, and signed on paper. Each stage from negotiation to execution, required manual input, making the process not only unnecessarily time-consuming but also prone to human error, especially if the person is not a professional.
- Decentralized Storage: Contracts were then often stored in different locations, both physical and digital. This led to difficulties in tracking documents and retrieving critical information when needed.
- Lack of Visibility: With contracts scattered across various departments and systems, gaining visibility into the status of a contract (e.g., where it was in the approval process or upcoming renewals) was challenging, leading to missed deadlines and lost opportunities.
- Inefficient Collaboration: Because contracts had to go through various parties who reviewed and approved the documents, the process often took a lot of time and was infiltrated by miscommunication.
- Risk of Non-Compliance: Without the centralization and automation of the monitoring, many times organizations fail to detect legal and regulatory requirements especially expiration dates.
Now CLM has transformed Contract Management:
CLM systems nowadays have successfully automated many aspects of contract management. They can provide centralized digital storage for all contracts, so all stakeholders can access all information and communicate & manage with different parties in real-time. It reminds you of deadlines and legal & regulatory obligations.
Interested in the Top 5 Contract Management Tools to level up legal efficiency?
The Different Stages of a Contract Lifecycle
Although a CLM systems master the process and mostly accompanies you through the entire lifecycle of a contract, it sure helps to understand the different stages of its lifecycle:
- Creation: The first stage involves drafting a contract. It is possible to do it from scratch, but mostly predefined contract templates within the CLM system are being used.
Example: The procurement department needs to draft multiple supplier agreements, using a CLM platform with automated templates can easily and efficiently generate all the necessary contracts. Besides ensuring that the agreements fulfil all standard legal requirements the platform also offers individualizations as needed. - Negotiation: Once the contract is drafted usually the negotiation process is initiated where different stakeholders may need to review and suggest modifications to the contract terms.
Example: A sales team at a software company negotiates with a client over the terms of a software licensing agreement. CLM enables them to communicate in real time, assess changes and always work with the latest version of the contract. Needless to say, this speeds up negotiations, as both parties are aware of edits at all times, email exchanges are reduced and therefore all in all there is less miscommunication and confusion. - Approval: Usually, the contract needs to be approved by different stakeholders, such as legal, finance, or executives. An automation by predefining the order of approving or signing people accelerates this process.
Example: One User Case could be a legal team which needs to review and approve a contract before it is signed. A CLM system automatically can send the contract to the legal team or the final decision maker for approval, notifying them via email or system alerts. The system tracks when the contract is approved and sends it to the next approver or signee. - Execution: The contract is typically executed by obtaining signatures. Therefore, CLM systems often offer e-signature solutions.
Example: A human resources department is hiring a new employee and needs to finalize the employment agreements. A physical signature is now unnecessary because the CLM uses an integrated e-signature software like YouSign or Docusign, speeding up the process and enabling the employee to sign the contract remotely, but still safely and securely. - Monitoring and Compliance: Once the contract is signed, the terms must be tracked to ensure compliance and performance. CLM systems offer tools to monitor key performance indicators (KPIs), track obligations, and set reminders for critical deadlines.
Example: A retail company could enter a partnership with a supplier. The CLM System is able to automatically track delivery schedules, payment terms, and compliance obligations. Automated alerts would notify stakeholders if the supplier misses a delivery deadline or fails to meet contractual agreements. - Amendment and Renewal: Oftentimes, contracts need to be amended or renewed, especially in long-term relations. CLM systems can notify relevant stakeholders when a contract’s expiration date is relevant.
Example: A company could have to manage multiple service agreements with clients. When a contract approaches its expiration date, the CLM system automatically notifies the responsible person to review or renegotiate the terms with the result of never missing opportunities or ensuring no service interruptions. - Contract Termination or Expiry: Lastly, a contract could come to an end. It could either expire or get terminated. In this area CLM systems track all contracts and notify relevant stakeholders, allowing them to prepare for renewal, drafting a new contract, or a termination.
Example: A firm has a contract for a large project that is about to expire. With the help of the CLM systems, the legal and finance departments are automatically notified to handle the expiry. This ensures a smooth handover and compliance with final obligations.
Automate Your CLM with GAIA
With GAIA you can quickly generate legally binding agreements with the help of GAIA’s templates library or your own legal document structure. NDAs, Loan Agreements, or Employment Agreements can be created, reviewed, and signed within 2 minutes without needing a legal expert.
GAIA enables seamless, automated contract management with centralized and safe digital storage of your data. It reminds you of all necessary actions and deadlines.
Beyond that, at GAIA we are dedicated to educating our customers on their particular options as well as potential challenges, individualized to their unique needs at every stage of their company´s growth. Discover GAIA’s Contract Creation & Management to transform your legal processes. To find out more visit our product page or book a demo to personally talk to us.
Needless to say, GAIA integrates effortlessly a full CLM system within our other legal automation workflows. GAIA provides you with a full-suite legal management system that seamlessly integrates with your daily operations as a business. We constantly develop our services and incorporate the latest AI-driven features to ensure you are always supported by the newest technology.
Ready to learn more about how you can start you CLM with GAIA now?
Evaluate Your CLM Options Now
Transitioning to a digital contract management system not only saves you and your business time and money but also significantly reduces the risks associated with manual processes and human errors. These tools streamline contract administration, improve accuracy, and prevent costly legal disputes and compliance issues.
Prepare for a future where market adaptability and internal efficiency are not just goals, but necessities. By automating contract management, your business will be able to respond quickly to market changes and regulatory updates, maintaining agility and a competitive edge.
Begin by assessing your current contract portfolio and operational needs to identify the essential features your business requires from a contract management system now. Choosing the right CLM system will empower you and your company to manage contracts with ease and therefore set a foundation for success.
