INTRODUCTION
Contract lifecycle management (CLM) is the process to manage contracts digitally CLM is designed to streamline and automate various contract processes it is a process to digitize and automate the contracting to achieve greater efficiency and reduce cost. Stages included in the CLM process are initiation, authoring, process, negotiation, approval, execution, compliance, and renewal.
A contract is an important part of a business according to research 70% to 80% of business operations are governed by contracts and According to a KPMG survey; poor contract governance can result in losses of up to 40% of a contract’s value. Contracts help the business in maintaining its relationship with partners, employees, vendors, and customers. Contract lifecycle management is software, which manages contracts from initiation to its renewal. It is a process of managing contracts from creation to execution it helps with different types of contracts from suppliers to the customer It also maximizes the performance of the organization, and it helps businesses to reduce their financial risks. Research on world Commerce & Contracting shows that companies can increase their profit by 9% through good contract management. Companies that manage thousands of contracts for them Contract lifecycle management is a great software that’s why it is also known as a secret weapon of businesses because CLM reduces management costs by securing their data and helps them in maintaining compliance and avoiding costly legal actions. It uses AI-based technology, which controls the entire lifecycle of contracts it gives more control, and it reduces the risks, and errors Ineffective management of contracts can lead to trouble in the business on the other side good contract management can save the business from future litigation.
CONTRACT LIFECYCLE MANAGEMENT STAGES
Contract Request: It is the initial stage in which parties request a contract when parties are willing to enter into a contract then CLM software saves their request and saves essential information for the contract just as the name of the parties and important dates for the second stage.
Creation, Drafting: In the second stage contract, drafting initiates, which includes clauses, terms, and conditions in this stage the CLM, chooses a template for the contract and starts drafting the contract.
Negotiation: It is a stage where both parties negotiate with each other before signing the contract this stage involves many rounds of negotiations both parties negotiate on the clauses and terms and conditions mentioned in the contract.CLM feature makes negotiations easy because it provides real-time collaboration.
Legal Review, Approval: Once the parties approved the contract, then it comes to the legal team where the team reviews the contract when they approve this contract then it goes further to the next step in the contract lifecycle.
Execution: The approved contract then comes to the parties for signature then parties review the contract and sign the contract using either a manual process or online electronic signature here e signature of CLM comes into the role, which saves lots of time for the parties.
Repository: Once the parties signed the contract then it will be saved in the repository for future reference and renewals. According to a journal of contract management, there are 71% of companies struggle in finding their 10% of contracts. Aberdeen Group says reputed big companies have 78% of their contract in a central repository because it saves their time and makes it convenient.
Easy Search System: This function is for finding the relevant document easily without any difficulty it can retrieve the relevant document from the database easily it saves the time of the parties and it is a very important aspect of this process for preventing the parties from future troubles.
Contract Renewal: It is the last stage of the contract lifecycle in this stage when the contract reaches its end it needs to be renewed otherwise it will expire and then parties can face future problems or it can lead to financial losses as well.
HOW CONTRACT LIFECYCLE MANAGEMENT HELPS BUSINESSES AND ITS BENEFITS
It enhanced productivity by simplifying contract management it helps businesses in improving their efficiency. According to Goldman Sachs, automating contract administration can do significant improvement in contract management it can faster negotiation cycles by 50%, reduce erroneous payments by 75% to 90% and it can also cut operating and processing costs up to 10% to 30% which can be helpful for business. In-house counsels always face a problem when they manage contract Legal team struggles a lot while managing the complex and high volume of contracts on the other side CLM ease this process because it is an automated process. CLM features include e-signature, contract templates library, tracking status of the contract, central contract repository, and eliminating paper ink from contracting and analytics, which is helpful for businesses. It keeps track of all deadlines CLM is a tampered proof it prevents the contract from being tampered from any party it also reduces the expenses of the parties. It boosts business and audit efficiency and avoids risk because it leaves no lope holes for litigation and reduces compliance risk organization will have a view of all active contracts of their organization this software can organize all contract paperwork and make it easy to manage for businesses.
CONCLUSION
CLM is a new-generation technology it is a combination of people and technology that creates a strategic approach that saves time and money for the organization while reducing errors. Contract management manually through the folder, file, excel sheet, and cabinet storage is an old approach According to Gartner professional lawyers spend 25% to 40% of their time on that task which does not require their skills. While contract management through software is a new electronic approach to solving contract problems. According to Aberdeen research, Contract administration expenses can be decreased up to 25% to 30% with the use of automation, which can also save a lot of time and it can save countless person-hours. CLM is a business tool, which helps in managing contracts along with reducing risks.
Author(s) Name: Himanshu Bisht (Graduate, Maharshi Dayanand University)
