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What is CLM? — Contract Lifecycle Management Software

What is CLM? — Contract Lifecycle Management Software | Exari

December 20, 2017 Dahna Ori Contract Management  

What is CLM (Contract Lifecycle Management)?

The definition of a contract is simple: It’s an agreement between multiple parties in which one or more parties has an obligation (or several) to the others. The physical contract itself is just a record of that agreement, outlining all of the pertinent details.

The process of contracting itself is somewhat more complex, though. Developing a contract requires drafting the actual document (often through several stages of revision as specific terms are negotiated), negotiating terms and formally executing the contract — and then following through on the terms of the contract.

This whole process is known as the lifecycle of a contract and, like any other critical business process, it needs to be tightly managed, ensuring that every contract is thoughtfully drafted, signed, and operationalized. Welcome to contract lifecycle management, or CLM.

Unfortunately, in many environments, CLM is little more than filing contracts, where they will then  gather dust until someone needs to review the document. The result is often lost revenue, due to lost sales, breach of contract, and unnecessary risk. Just looking at sales alone, research from the Aberdeen Group revealed that using contract lifecycle management software not only reduced the length of the sales cycle and contributed to higher lead conversion rates, but also increased the number of sales professionals and teams who actually met their sales quotas. Not only that, but the report also revealed that CLM contributes to higher rates of contract compliance (69 percent) and more contract renewals (66 percent).

It’s important to note that he term “CLM” applies whether or not your contracts process is automated. There is complete contract lifecycle management software, like Exari, and there are standalone software systems that automate one or more steps. In either case, the steps to CLM are the same, and all are important.

The Steps to Contract Lifecycle Management

There are nine key contract management steps for efficiently managing the process:

  • Request: Every contract begins with a request. CLM makes this process simple and intuitive by immediately collecting a variety of important information to guide people quickly to the appropriate paperwork.
  • Create: Contract creation has two tracks: one for self-service documents for business users and another to help the legal department draft complex contracts. The self-service option includes an intuitive interview process that suggests the correct clauses for specific situations, allowing sales teams and others to develop simple, boilerplate contracts on their own, without waiting for the legal team to draft the document.
  • Approve: Companies need an approval workflow process to ensure that risky contracts are reviewed and approved by the right person. CLM solutions direct contracts to the right people, and allow visibility into the process for all parties.
  • Negotiate: The typical negotiator needs a toolkit that includes a checklist of issues for each type of deal. Should a negotiated clause fail to meet specific requirements, Exari Contracts will flag the clause for further review.
  • Sign: When the contract is final and agreed it needs to be signed by all relevant people, and the signed copies need to be stored. CLM that provides electronic signature options will speed up this process.
  • Capture: Proper CLM requires that all existing paper contracts be put into a central place. This can be challenging when contracts are stored in filing cabinets or on hard drives; a major advantage of CLM software is the immediate visibility into the valuable data stored within all of the organization’s contracts.
  • Comply: After a contract is signed, it’s vital to put processes in place to ensure compliance with your obligations. Failure to do so will likely trigger a contractual breach, with the risk of termination and exposure to substantial liabilities.
  • Manage: Automated tracking and alerts can eliminate the high cost of missing an important right or contract renewal. And for effective management of customer and vendor relationships, contractual data must often be linked to performance data and external reference databases.
  • Optimize: With more data, and improved insight into contractual terms and performance, a business can optimize its portfolio for better value, lower risk outcomes.

Contract lifecycle management is a key to effectively leveraging your organization’s contracts to maximize revenue and mitigate risk. By automating these steps using CLM software, you’ll also save time. To see contract lifecycle management software in action, click here to request a demo of Exari. If you still have questions about what is CLM and anything else, contact us today

Ball, Bryan. "Contract Management: How the Best-in-Class Maximize Their Potential." Aberdeen Group 20 Jul. 2017.

dahna

Dahna Ori is Exari’s Digital Marketing Specialist. Reach out on twitter @ExariDahna