One of the principal challenges in adapting to the modern business environment is overcoming cognitive overload. We have greater access to information than ever before and our automated systems have the ability to churn out information at an ever-increasing rate. However, all this information can become bottlenecked.
Many businesses have large volumes of contracts and associated legal paperwork to process. Attaining maximum efficiency when dealing with the manual contract management processes can be difficult. A significant amount of time and effort goes into continuous contract awareness.
When making decisions that will affect the course of a business, contract managers need to have a bird’s eye view of the whole contract management process. Successfully balancing these two concerns is fundamental in determining whether a company runs efficiently or not.
The Lifecycle of a Contract
Every contract goes through a set of contract management stages within the course of its fulfillment:
- Template Authoring: Contracts are usually based on preexisting templates since it’s rare to have a contract be completely unique. Most organizations use a template library, which includes modules and tags that can be used in a building-block model. The process of contract design has a lot in common with software development.
- Contract Origination: Once the negotiation and approvals are done, the contract is generated from templates with details filled in. There may be little difference between two contracts except for the names, dates, and dollar amounts. Yet, a basis of rules for assembling the contract helps them stay in compliance with process controls that guard the company’s interests.
- Contract Finalization: The whole document is reviewed and agreed to by all involved parties. A new business engine is born, defining the mutually beneficial commercial terms whereby two businesses may cooperate through their respective obligations.
- Contract Execution: The terms of the contract must be actualized through project managers on both sides, who take the terms and apply them as tasks to fulfill. All of the terms, clauses, and conditions take effect through this process. The contract then becomes a mandate, commissioning the full power of the company to uphold its terms. A review is necessary at this point, to ensure the compliance of all parties to the contract’s terms. Performance oversight may be necessary to analyze the outcome of the contract and determine whether the company is getting the best possible use out of it.
- Contract Continuation or Termination: A contract can be an ongoing agreement that will continue indefinitely, or it can be written to terminate specified time when it is no longer needed. Sometimes, the parties involved can terminate a contract for artificial reasons like a breach or renegotiation.
- Contract Lifecycle Management (CLM), is the act of administering contracts from start to finish. Managing CLM is integral to managing the business itself given that legally binding agreements are the basis of all formal business conduct.
The Importance of Contract Visibility
Just as the information age brought us Google, a way to quickly access and efficiently discover information over the web, Evisort’s AI-based contract management solution provides an effective way to visualize, organize and report on contract information within an organization.
A powerful search & tagging capability lets you specify not only terms to search for, but also their contextual relevance to the key data points that you’re trying to retrieve. A capable search engine can find documents based on the presence or absence of a clause, reveal text within a provision, and conduct multi-level searches within a contract to show complex relations between terms.
A contract review feature makes it easy to compare all contracts at once for major differences in key clauses. This makes it easy to identify high-risk contracts quickly, saving time and money. The knowledge gained also allows for better negotiations.
Digesting this information and presenting it in a visually accessible way is also key. Once you can get an overview of key dates and deadlines as a graphed project summary using the dashboard feature, the information can be presented in such a way as to make it easy to spot crucial terms and communicate relevant points with the rest of the company’s team.
Communication is also an objective in contract management. While the people handling contracts might have legal and managerial expertise, it’s not always easy to demonstrate the important points of a contract to other team members, whose understanding is necessary for the contract’s fulfillment. Being able to break down data into project-ready goals helps to expedite contract fulfillment, reducing risks and removing inefficiencies.
Along with communication comes integration with other business software. By being able to easily import relevant information from disparate data systems into one centralized repository, the contract management system improves the flow of information between the core contract management team and the other personnel involved. Email alerts can be created to automatically inform relevant parties of key dates and deadlines in a contract’s lifecycle.
Important Questions to Ask in the CLM Process
In order to ensure a successful outcome from the CLM process, these are some of the key questions that should be asked early on:
- Should some contract management duties be delegated?
- What is the level of involvement for project managers in the CLM?
- Which stakeholders should have access to contract document information?
- What metrics should we use to gauge the performance of our contract management process?
- What is the response plan if the legal team spots a risk point within our contractual obligations?
- Should our review process be proactive or reactive?
- In what ways can we speed up or optimize the CLM process?
Depending on a company’s budget, there may be variables in how much effort the business can put into CLM. As the company scales, it may need to redesign its CLM process or allocate a percentage of their budget to a permanent contract management solution.
Goals of the Contract Lifecycle Management Process
Let’s condense the goals of CLM down to the important verbs:
- Define – Make clear the intentions of each company and construct contracts to dictate terms in such a way that both parties understand them to mean the same thing.
- Research – Review past contract archives and templates to compare to present proposals, and determine if the proposal is at least as good as past work, or perhaps how it can be improved.
- Communicate – Make contract data visible to everyone who needs to understand it, making sure that all concerned parties know their roles and the goals.
- Execute – Faithfully carry out the terms of the contract to avoid unnecessary risk.
- Monitor – Monitor projects to be sure they are meeting the contracts’ terms.
- Revise – Periodically analyze and assess what can be done differently in contract creation and execution to stay flexible to changing needs.
It does indeed sound simpler when you break it down. Going through these critical points will ensure your contract lifecycle management is an effective process and will not hinder your business with time-wasting bottlenecks.
Advanced contract lifecycle management software powered by artificial intelligence makes effectively managing contracts simple, not just for legal departments but for businesses in general.
Evisort’s AI powered automation does not just improve contract administration it ensures that you will never miss a contract renewal, and that audit trails and crucial steps in the contract can be tracked and located in seconds.
Interested in finding out more about Evisort’s AI powered CLM software and contract management solutions? Sign up for a free demo below.