Contract management, or contract lifecycle management (CLM), is an increasingly important topic for both legal and business teams globally. It's a valuable asset for all companies of all sizes, sectors and offerings.
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Simply speaking, contract management is a set of tools, processes and methods designed to optimize the management of each cycle in the life of a contract, from its creation to its termination (or renewal).
Each contract is divided into 5 major cycles:
Each of these phases has its own set of constraints and challenges. Contract management makes the contract lifecycle more fluid so that the project proceeds in the company's best interests.
Sale, transfer, license, service provision, partnership... Each project is framed by a contract. So it’s not uncommon for a company to generate dozens or even hundreds of contracts every month.
Not to mention, contracts are becoming increasingly complex. Regulations are constantly developing and companies are adding more and more clauses to protect themselves, limit the risks of litigation and comply with new laws. As a result, the number of contracts is booming and they are becoming longer - making it difficult to keep track.
Poor contract management can have serious consequences on a company's profitability. According to the IACCM (International Association for Contract and Commercial Management), poor contract management can reduce a company's annual turnover by 10%*.
This is where contract management comes in.
· With the right tools, teams spend less time on low value-added tasks such as data entry or information retrieval.
· They have a catalog of contract templates, available in a few clicks, which they can then customize with ease for each project.
· It is no longer necessary to start from scratch with each new contract.
· Specific tools such as electronic signatures and automatic reminders make the process more seamless.
· With less time-consuming manual tasks, projects are launched and deals are closed more quickly.
· Contract management provides greater visibility into performance and the proper execution of contract obligations. The risk of litigation for non-compliance with contractual obligations is drastically reduced.
· There are fewer costs associated with the manual process.
· The teams involved in the contract (legal, in particular) are freed from time-consuming tasks and have more space to anticipate contractual risks, as well as legal compliance issues.
· Legal teams are informed when each contract is expiring, which limits the risk of tacit renewals without reassessing the timeliness and relevance of the requirement.
· Relationships between contractors are simplified: smooth process, more productive exchanges, less back and forth by email.
· Each party conducts more efficient, more balanced and more productive negotiations, while respecting each other's interests.
· Internally, all the teams involved (legal, financial, commercial, etc.) communicate more easily and work together towards a common goal.
Contract management is based on the implementation of tools, generally digital solutions, but also methods to optimize the management of a contract, throughout its lifecycle.
Let's focus on the most efficient practices.
Digital tools are invaluable in the context of contract management.
The ideal solution is an all-in-one solution that offers features such as:
· A contract editor with a catalog of templates
· Collaboration tools
· Electronic signature
These tools enable better communication, internally or with co-contractors, and better organization. But it doesn't stop there.
Technology is not an end but a means to optimize the management of your contracts. To understand the contractual cycle in its entirety, methods must also be integrated.
It is necessary to master various negotiation techniques to facilitate exchanges, avoid deadlock and reach the best possible compromise for both parties.
Legislative and regulatory activity is increasingly dense. There is talk of legislative inflation. These new standards can have a considerable impact on your contracts. It is better to stay informed of these evolutions and to keep a continuous watch to avoid any surprises.
Every company faces financial, legal and contractual risks. It is essential to anticipate them before signing a contract.
For example, it can be useful to draw up a list of the risks specific to your activity and/or linked to the contractual situation. This way, it will be easier to foresee the wording to adopt if they arise.
The Contract Manager is the person in charge of defining, negotiating and monitoring the contractual commitments of a company.
They are versatile, often with an atypical profile halfway between the lawyer, the project manager and the salesperson.
Contract Managers will have:
· All the legal knowledge necessary to draw up a contract in due form and anticipate financial risks
· Good negotiation skills to reach a balanced compromise
· Project management skills to monitor the contract lifecycle (including visibility on performance, deadlines, etc.)
To accomplish their mission, they rely on the use of technological tools (such as contract management software, electronic signature) but also on specific methodologies and processes such as those mentioned above.
Source: Automation Transforming Contracts and Commercial Management, IACCM, 2017.