Contract lifecycle management

Contract lifecycle management (CLM) solutions help shift legal functions from blockers to business accelerators.

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Sale, transfer, license, service provision, partnership... Each project is framed and secured by a contract. A company's portfolio of contracts is very valuable as it significantly contributes to its development and, more specifically, to the growth of its turnover. 

Today, more than ever, it is essential to adopt a contract lifecycle management (CLM) solution to facilitate and optimize the contracting process, from inception to closing.

What is contract lifecycle management (CLM)?

Lifecycle contract management (LCM) is a set of digital tools used to manage all phases of the contracting process

With effective contract lifecycle management (CLM), your portfolio of contracts is more efficient:

· Costs related to manual processes are greatly reduced
· The contracts concluded are more profitable
· Projects are launched more quickly
· Contractual, financial and regulatory risks are under control

Contract lifecycle management (CLM)is part of the broader concept of contract management.

Indeed, contract management aims at optimizing the management of a company's contracts thanks to digital tools (a CLM solution, for example) but also through methods and processes (contractual negotiation techniques, regulatory monitoring etc.). 

Contract lifecycle management (CLM) is therefore one of the aspects of contract management. 

The 5 main stages of a contract

A contract, regardless of its type and content, is divided into five major cycles. 

The first phase: the creation of the contract.

You're in the early stages of a new project. A need emerges from the business (e.g. a sale, transfer or franchise) and, naturally, it will need to be contractualized. At this stage. a first version of the contract will be drafted by one of the parties.

The second phase: contract negotiation

The counterpart challenges the first draft of the contract. From here, both parties negotiate to create a contract that meet their respective expectations. Depending on the size od the project, this step can be long and require many round trips between each party.

The third phase: the signing of the contract

The negotiations lead to the conclusion of a final contract. For the contract to be legally valid, it now must be signed and approved by both parties. 

The fourth phase: the execution of the contract

The management of the contract lifecycle does not end with the signing of the contract. Once a contract is signed, each party must fulfill its contractual obligations for the duration of the contract. In case of default (non-performance, poor performance or late performance), the defaulting party is contractually liable and may be liable for damages. 

The fifth phase: the closing or renewal of the contract

In general, the contract commits the parties to a defined term. At the end of this period, they can choose to terminate it or to renew it if the need is still relevant.

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Contract lifecycle management (CLM) optimizes each stage.

Automate the creation of a contract 

Creating a new contract is time consuming. Without a contract lifecycle management solution, teams are starting from scratch. For example, they will need to:

· Manually enter the data related to the contractors (with the risk of error)
· Insert all the necessary clauses, depending on the contract in question

These time-consuming, low-value-added and repetitive tasks slow down the contracting process and, consequently, the launch of new projects. 

Instead, a good CLM solution allows contracts to be generated from a catalog of proven and compliant templates, which can then be adapted to the situation. 

There is also less risk of forgetting important clauses (e.g. GDPR clauses) or making mistakes related to the manual entry of information. 

This is a considerable time saver, especially when it comes to creating contracts that are frequently used by the company (e.g. confidentiality agreement, service contract, sales contract, assignment).

In addition, this relieves the legal team and gives autonomy to the operational teams who can launch contractual projects without support from legal.

Of course, these models are not set in stone and will evolve over time. The challenge is to be able to capitalize on the contractual work that has already been done in order to use it again at the appropriate time.

More effective negotiations for both parties

Negotiation is a crucial phase in the development of a contract. The challenge is to make the exchanges more fluid in order to reduce friction and reach the best possible outcome for both parties. 

With this in mind, successful contract lifecycle management solutions offer a centralized space to bring all discussions together in one place and eliminate unproductive email exchanges. Ideally, the platform will track all changes and revisions made to a contract. Everyone knows who changed what part of the contract and when. 

There is no longer any doubt as to which is the latest version of the contract since everyone is working on the same document

A more fluid validation process

CLM solutions offer digital tools, including electronic signatures, to simplify the contract validation process. 

With this process, there is no need to print the documents, sign them, mail them to the right person and then wait for the counterparty to do the same. Everything is done in a few clicks. By bypassing logistical problems, this solution can save you several days, even weeks, on the launch of your projects. 

As a bonus, the electronic signature is a very secure process, which guarantees the completeness of the document and the identity of the signatory. Since 2000, it has the same legal value as a handwritten signature.

Effective contractual execution

Each party must ensure that it meets its contractual obligations throughout the term of the contract. 

However, most companies generate a dozen or even a hundred contracts every month. Under these conditions, good contract management is essential if you're to find your way around and meet all your obligations. 

Today, CLM solutions offer high-performance archiving solutions.

Each contract and its annexed documents (amendments etc.) are filed in a dedicated folder. Anyone authorized is able to access it, in a few clicks, to quickly check a date, a deadline or a specific obligation.

Contract renewals always relevant

Contract lifecycle management tools schedule automatic reminders before the contract expiration date. This enables both parties to avoid tacit renewals when their needs are no longer relevant. 

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Financial Team

Keep control over your company's activity and monitor each major negotiation.

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