Whether you’re running a small business or a multinational corporation, one thing is sure, managing contracts is a crucial aspect of your operations. In this article, we’ll dive into contract lifecycle management and CLM software features, pointing out the many benefits they offer.
What is Contract Lifecycle Management (CLM)?
Contract Lifecycle Management, often referred to as CLM, refers to the process of managing the whole contract lifecycle. This lifecycle consists of 7 stages, from drafting, through negotiations and signatures, to storing and analysis. Essentially, CLM is a way to handle all contract-related tasks in a more streamlined and efficient manner.
What is Contract Lifecycle Management Software?
Contract Lifecycle Management Software (CLM software) is a specialized online tool that helps businesses manage the whole lifecycle of a contract. CLM tools increase the overall productivity of a business by streamlining the complex process of contract management. They help with creating contracts, tracking them, organizing and storing them for easy access, and automating various aspects of the contract process. This can include sending notifications for important milestones or deadlines, signing contracts electronically, assisting with negotiations and changes, and more.
CLM tools include various features to support every stage of the contract lifecycle, helping businesses save time, reduce errors, and ensure compliance.
Contract Lifecycle Management Software Features
Now that we’ve introduced CLM, let’s dive deeper into the key contract lifecycle management software features.
1. Contract Creation and Drafting
One of the significant features of any CLM software is contract creation and drafting. Many CLM tools include an online contract creator, as well as a contract template feature. With contract templates, you can save a great deal of time for your whole company. Using templates also enhances compliance and allows the legal team to focus on more strategic tasks.
2. Custom Workflow Design
Another standout feature in CLM software is custom workflow design. This allows you to tailor your contract processes based on your unique business needs. With usability, drag-and-drop interfaces, and transparency in the drafting process, you can seamlessly create contracts with a few simple clicks.
3. Collaboration and Editing
One of the benefits of a cloud-based contract lifecycle management tool is the ability to facilitate collaboration and editing. An online editor allows multiple users to make real-time changes and track revisions in contracts. This is an excellent feature, especially for teams working remotely. Some tools also include a chat feature, fostering efficient communication among team members during the contract creation process.
4. Contract Approval Workflows
The approval workflow feature of a CLM tool ensures that contracts are routed to the right parties for review and approval. By ensuring the necessary oversight, this CLM feature not only saves time but also eliminates the risk of manual errors. It reduces the time spent in the contract lifecycle, which ultimately leads to faster contract turnaround times. Contract approval workflows also add an extra layer of oversight, ensuring all contracts adhere to company standards before signing.
5. Contract Execution and E-Signature
With most business operations moving online, the need for electronic signature capabilities has never been more critical. Currently, a large amount of contract lifecycle management tools include an electronic signature feature. It is recommended to choose a CLM system with an innate e-signature feature rather than use an outside signature provider. In the long run, this will help reduce costs and streamline the CLM process.
6. Contract Renewal and Deadline Management
The lifecycle of a contract doesn’t end with its execution. You need to stay on top of contract renewals, expiration dates, and amendments. At times, this can be challenging. However, with a CLM system, you’ll receive automated notifications of upcoming deadlines, enabling you to act promptly. Plus, the software makes it easy to amend contracts as needed, reducing the risk of contractual issues.
7. Cloud-based Contract Repository
A well-organized contract repository is at the heart of any good contract lifecycle management software. It acts as a central repository where all contracts are stored and can be easily retrieved. This feature also allows you to store different versions of a contract, so you can track changes and revisions over time.
Cloud-based repositories often come with advanced security features including data encryption and access controls. This can protect sensitive contract data from unauthorized access or data breaches.
8. Reporting and Analytics
Data-driven decision-making is crucial in today’s business landscape, and the contract management process is no exception. Contract reporting and analytics tools in CLM software provide insights into contract value, risk, cycle time, renewal dates, and more. This is invaluable for strategic planning and risk management.
9. Tool Integrations
Although CLM tools include many features of their own, you may need to integrate them with some of your other systems. Therefore, your CLM platform should seamlessly connect with other key tools in the organization like CRM, ERP, or procurement systems. This ensures a unified approach to managing contracts and enhancing productivity across departments.
10. Contract Compliance
Contract lifecycle management software features help to stay compliant with your contracts. Contract templates and clause libraries provide pre-approved, standardized language and terms that reduce the risk of non-compliance or misunderstanding. When templates and clauses need to be updated by legal, the whole company gets instant access to their newest version. Other features that assist in staying compliant are contract approval workflows, role-based access control, and high contract security.
Last but certainly not least, security is a fundamental feature of contract lifecycle management software. To make sure your CLM system is secure, look out for these features:
- role-based access control
- SSO and two-factor authentication
- audit trail
- data encryption at rest and in transit
- data localization
- external audits of the provider, such as SOC2
Understanding contract lifecycle management features and the functionality of CLM software can be a game-changer for businesses. CLM tools offer comprehensive solutions to manage contracts efficiently and effectively throughout their whole lifecycle. As you embark on your journey to explore CLM software, keep these features in mind to ensure you choose a tool that meets your specific business needs and helps your contract management process.