#9 Stages of Contract Lifecycle Management

November 4, 2024
#9 Stages of Contract Lifecycle Management

Contract Life Cycle Management (CLM) simply means effectively managing contracts or agreements and relationship between entities by properly planning all the contract management stages resulting in reducing, eliminating or mitigating financial, legal and procurement risks.

Critical Stages in Contract Lifecycle Management (CLM)

Following section explains about the #9 stages and best practices of Contract Lifecycle Management process.

Stage 1: Contract Request:

Contract Life Cycle Management starts with the Contracts Requesting process where one party requests for or initiates the contracting process and subsequently uses that information for drafting or authoring the contract document.This is usually the first step in Contract Life cycle Management.

Inputs:

Information on what the contract should contain and critical dates such as contract start date,end date and any milestones.

Outputs:

  1. Contract Request information is saved in the CLM Software System and visible in the contract management dashboard for further CLM stages.
  2. Audit Trails.

Stage 2: Contract Authoring, Review and Red lining, Contract Negotiation

In the Contract Authoring or Drafting stage , contract or agreement document is created or generated using CMx which includes all clauses, terms and conditions. It is usually in this stage Contract Approvers and Signing parties are determined and approver and signing details are captured in the contract document.

Inputs:

Contract Request Information.  

Outputs:

  1. Contract or Agreement Document, usually in Microsoft Word or Adobe PDF format saved in the document management solution.  

Stage 3: Approval and Lawyer or Legal Review

Agreement document prepared in previous step is submitted to internal or external approvers and then once they approve the document to proceed further, Contractual document moves to the next step in the CLM life cycle.

A structured approval process is crucial in ensuring that all necessary perspectives are considered, especially in larger organizations where the number of stakeholders can add layers of complexity. Each stakeholder may have access to different types of information, some of which might be confidential, necessitating careful management of permissions.

Incorporating contract management software can streamline this process. These tools allow legal teams to set up comprehensive review processes and assign specific permissions to designated stakeholders, ensuring that each person involved only accesses what they need. This approach minimizes risks and maintains confidentiality throughout the approval stages.

Additionally, introducing conditional logic can enhance efficiency. By requiring a base number of approvals before a contract advances, the process not only speeds up but also ensures that each stage of the contract lifecycle is thoroughly vetted.

Inputs:

Contract Document.  

Outputs:

  1. Contract Approvals from designated stake holders.

Stage 4: Execution or Agreement Signing

Contract document which is approved is sent to respective parties for signature either online or using manual process.

Inputs:

  • Contract Document with no signature.

Outputs:

  1. Contract Document with electronic signatures from all contracting parties.

After approval, obtaining signatures is a crucial step in the contract lifecycle. While traditional methods involve physical ('wet') signatures, electronic signatures have become increasingly popular due to their convenience and efficiency. However, electronic signatures must comply with varying jurisdictional laws, adding complexity to the process.

Contract management software simplifies this stage by automating signature requests and ensuring compliance with relevant regulations. This software is designed to seamlessly integrate with popular e-signature platforms such as Adobe Sign and Docusign, streamlining the entire process. By choosing a solution with integrated e-signature capabilities, you ensure a smooth transition from approval to execution, reducing delays and enhancing productivity.

Stage 5: Contract Database or Repository Storage

Once the contract document is signed, it is stored permanently in an easy-to-retrieve agreement database. Both contractual metadata and documents are indexed and saved for future reference. This meticulous organization is crucial for effective contract lifecycle management, ensuring that contracts and related materials are accessible whenever needed.

Proper storage involves more than just saving documents; it requires a robust system that allows for rapid and accurate searches. Contract management software plays a vital role in this process by creating collections with both standard and customizable search terms, enabling efficient retrieval based on specific criteria. Additionally, such software can generate comprehensive reports for various purposes, supporting strategic decision-making and ensuring compliance.

Incorporating these features not only streamlines contract management but also enhances the ability to manage and analyze contractual obligations efficiently.

Inputs:

Contract Document with Signature.

Outputs:

  1. Contract Document saved in document repository for future reference and accessible through contract API.

Stage 6: Records Management

This stage enables complete control of all critical business documents through reliable storage of records with backups and retention policy enforcement policies providing confidence that your critical records are in secure for global information management with high compliance.

Inputs:

Agreements, Contractual Documents.

Outputs:

  1. Compliance enforcement by safe storage in a Records Management System.

Stage 7: Easy Search and Retrieval

This stage enables business users to quickly search , apply filters and retrieve relevant documents from the contract system.

Inputs:

Contract Repository tagged with relevant keywords for easy search and retrieval.

Outputs:

  1. Search results of contract repository with relevant documents.

Stage 8: User Activity and Reporting

Every stage captures user activity logs, and the contract metadata and documents are properly indexed for easy retrieval. This stage ensures business users can quickly and efficiently retrieve and mine contract data to produce in-depth reports.

In the realm of contract lifecycle management, reporting is crucial. Key stakeholders, such as general counsel and legal teams, require detailed insights into the number and type of contracts stored. Understanding who accessed records, made changes, and when these actions occurred is vital for maintaining security and compliance.

Inputs:

  • Contract Repository containing agreements.

Outputs:

  1. Custom Reports: These reports are tailored to meet the specific needs of the business, allowing for precise monitoring and management of contractual obligations. They include:
    • Contract Volume and Type Reports: Essential for understanding the scope and nature of agreements in storage.
    • Access and Modification Logs: Track who accessed and altered contracts, providing transparency and accountability.
    • Compliance and Obligation Reports: Highlight issues such as late payments or non-delivery, ensuring prompt attention to potential breaches like ultra vires changes.

Additionally, contract management systems facilitate the creation of notification systems, aligning with internal processes to proactively manage risks and maintain compliance. With these capabilities, businesses are better equipped to navigate the complexities of contracts and ensure all parties meet their obligations efficiently.

Stage 9: Contract Renewal, Amendments, and Disposition

Once the contract reaches its end date, it must be renewed to stay in active status. If the contract is not renewed on time, it could cause financial risk for the parties involved in the contract.

Contract management software plays a crucial role in this process by ensuring efficiency and accuracy. These tools help legal departments navigate the renewal or disposition process by considering multiple factors such as the completion of obligations, adequacy of deliverables, competitive pricing, and the stability of the underlying business relationship. Such software can streamline these evaluations, making it easier to determine the best course of action.

Inputs:

  • Contract Document with a recent expiry date.

Outputs:

  1. Contract Document renewed to a later expiry date.

Moreover, contract management software allows for proactive management. It can handle amendments, renewals, or dispositions well in advance of the contract's end date, reducing the chances of oversight and mitigating potential financial risks. By automating reminders and tracking key contract milestones, these tools ensure that the process need not be a lengthy ordeal, allowing businesses to focus on maintaining strong and beneficial relationships.

What benefits and Return On Investment can be expected by using Contract Management Software?

Contracts play a critical role in any multi-party transaction, documenting terms such as critical dates, pricing, external/internal party information, and signatories. Losing visibility to your critical contracts and terms can lead to missed deadlines, penalties, overpayment for services, timely payments collection from external vendors, and much more, which has a high impact on your business operation and profit margin. It is essential for companies across all industries to better manage their contracts at an enterprise level. However, far too often, multiple business units within an organization have their own drives/directories or other data stores where contracts are kept. This can lead to confusion, disarray, and potential loss of critical information. Forward-thinking companies will smartly centralize their repositories with an efficient contract system that creates a single source of record for their enterprise-wide contracting needs, and CMx perfectly follows this vision.

To fully harness the power of contract lifecycle management (CLM), businesses must understand the stages involved and how each contributes to operational efficiency. Here’s how CLM software can enhance your business processes:

Centralized Repository and Access

  • Single Source of Truth: By centralizing contracts, businesses create a streamlined system that reduces confusion and ensures easy access to critical documents. This not only improves organization but also enhances visibility across the enterprise.
  • Robust Search and Retrieval: A robust search functionality within CLM software allows for quick retrieval of contracts, which is crucial for informed decision-making. Ensuring contracts are easily accessible means businesses can maintain solid relationships and act swiftly when needed.

Streamlined Negotiation and Approval

  • Efficient Negotiations: CLM software facilitates efficient contract negotiations by storing all relevant documents and positions in one place. This preparation is key to productive discussions and quick approvals.
  • Automated Approval Processes: Introducing conditional logic in review processes speeds up approvals by ensuring necessary checks are completed before moving to the next stage. This reduces bottlenecks and keeps the contract lifecycle progressing smoothly.

Risk Management and Compliance

  • Secure Data Handling: Effective CLM systems ensure that contract data is secure, backed up, and handled with appropriate retention policies. This minimizes risks such as data loss or unauthorized access, protecting the company’s interests.
  • Comprehensive Reporting: CLM software enables detailed reporting on contract statuses, compliance, and access logs. This transparency helps legal teams manage obligations and flag potential breaches early, ensuring ongoing compliance.

Execution and Storage

  • Integrated E-Signatures: As businesses increasingly rely on electronic signatures, CLM software that integrates with popular systems like Adobe Sign and Docusign ensures compliance across jurisdictions and speeds up execution.
  • Efficient Record Management: Once executed, contracts are stored securely and indexed for easy access. Automatic reminders for key events ensure ongoing management is seamless and efficient.

Renewal and Disposition

  • Proactive Contract Management: CLM software allows for the proactive management of contract renewals and dispositions, taking into account all relevant factors well before end dates. This forward-thinking approach supports stable and beneficial business relationships.

By leveraging these capabilities, businesses can significantly enhance their operational efficiency, reduce risks, and focus on high-value activities that drive performance. Contract lifecycle management is not just about managing documents—it's about optimizing the entire process to support your company's strategic goals.

The Role of Contract Lifecycle Management (CLM) for Legal Teams

Contract lifecycle management (CLM) offers innumerable benefits, particularly for general counsel and legal departments. These systems ensure that contracts, which are the lifeblood of any business, are managed with precision, enhancing the health and thriving potential of an organization. Legal departments, tasked with mitigating risk and ensuring compliance, find that CLM systems streamline processes, reduce manual errors, and bolster strategic goals.

Only some companies worldwide manage their contracts and contract processes really well. It helps to maintain order and efficiency in this critical area. Contract systems range from very simple databases that allow companies to search and find their contracts and track information (such as contract expiration dates and deadlines) to comprehensive CLM systems that automate the entire contract lifecycle, from the initial contract request through contract creation, signing, filing, and post-contract reporting. Some systems are primarily intended to support the procurement function, and others the sales contracting function, but increasingly these systems are being designed to handle all types of contracts.

Benefits Across the Organization

While a simple contract database or contract repository may suffice for companies with only a small number of contracts, more fully featured CLM systems add significant features and functions to help manage what, for many companies, is an increasingly complex and critical area. These systems are not only beneficial for legal departments but also for other key figures responsible for contract management, ensuring consistent and efficient operations across the organization.

With more contract solutions being offered as a cloud-hosted service (SaaS), the advantages of CLM systems are increasingly accessible even to smaller companies and law departments. An integrated system that applies business rules to manage contracts on a worldwide basis—from request through negotiation to filing in a central repository—allows people and systems within the organization to access, analyze, and act on contract-related information. This improves efficiency, consistency, reporting, and control.

By embracing CLM, companies can ensure that their legal departments, alongside other units, operate with enhanced visibility and control, ultimately supporting the organization's broader strategic aims.

Enhancing Business Relationships and Decision-Making

To truly impact business relationships positively, contracts need to be accessible. Accessibility is imperative not only for speeding up record management but also for ensuring solid business relationships. When contracts are easily retrievable, all parties involved can quickly verify terms and conditions, reducing misunderstandings and fostering trust.

Furthermore, leaders can make more informed and accurate business decisions if contracts are easy to access. Having immediate access to contract details enables decision-makers to evaluate options with precision, ensuring that they make choices that align with organizational goals and partner expectations. In this way, an efficient contract lifecycle management system not only protects the company from operational pitfalls but also strengthens its strategic position in the market.


Only some companies worldwide manage their contracts and contract processes really good. It helps to maintain order and efficiency to this critical area. Contract System ranges from very simple databases that allow companies to search and find their contracts and track information (such as contract expiration dates and deadlines) to contract lifecycle management (CLM) systems that attempt to automate the entire contract lifecycle, from the initial contract request through contract creation, signing, filing, and post-contract reporting. Some systems are primarily intended to support the procurement function, and others the sales contracting function, but increasingly these systems are being designed to handle all types of contracts.

In the realm of contract management, effective negotiation is paramount. One of the most critical benefits of advanced contract management software is its ability to streamline this process. These systems ensure that all necessary documents, positions, and intended outcomes are centralized, making it easier for teams to prepare thoroughly for negotiations.

  • Centralized Repository: By serving as a centralized repository, the software allows for easy access to all relevant materials, facilitating smoother negotiation workflows.
  • Amendment Management: The software also aids in managing requests and approvals for amendments, ensuring that all changes are documented and approved efficiently.

Powerful contract management solutions save substantial time on administrative tasks, freeing up resources for more strategic, substantive negotiation efforts. This efficiency translates into more effective and streamlined negotiations, allowing legal and procurement teams to focus on crafting beneficial agreements.

By integrating these comprehensive capabilities, contract management software not only automates lifecycle tasks but also enhances the negotiation process, making it a vital tool for modern businesses.

While a simple contract database or contract repository may be enough for companies with only a small number of contracts to deal with, more fully featured CLM systems add significant features and functions to help manage what, for many companies, is an increasingly complex and critical area.

With more contract solutions being offered as a cloud hosted service (SaaS), the advantages of CLM systems are increasingly available even to smaller companies and law departments.

An integrated system that applies business rules to manage contracts of the enterprise on a worldwide basis, from request through negotiation to filing in a central repository, and that allows people and systems within the organization to access, analyze, and act on contract-related information to improve efficiency, consistency, reporting, and control.

Contract Management Solution Optimization Advantages

  1. Make contracting process efficient and improve contract cycle time.
  2. Improve efficiency of contract lifecycle management process.
  3. Eliminate overhead associated with contracts.

Time Management and Resource Allocation Benefits:

  • Accurate time management for each contract stage ensures that deadlines are met and bottlenecks are minimized.
  • Appropriate workload allocation for each contract stage means tasks are distributed effectively, maximizing productivity.
  • Ability to spend more time on high-value activities allows teams to focus on strategic tasks instead of routine administration.
  • Better allocation of expensive resources, like general counsel time, ensures that expertise is used where it matters most.
  1. Getting Contracts Done effectively is important to streamline consistency of contracts and contract processes across the organization for due diligence and pro-actively managing risks.
  2. Risk Mitigation and better control of risk and revenue recognition issues.
  3. Improve enterprise-wide visibility of contracts and related information – team members have access to the information they need.
  4. Eliminate redundant entry of information.
  5. Increased Vendor and Supplier Compliance.
  6. Increased Legal Compliance by using common contract drafting tool and consistent terms and conditions.
  7. Legal compliance by effectively using Contract Management System can provide quick Return On Investment for your company. All of the project teams can use the same system for managing contract documents and metadata in one place, standardizing and optimizing Contract Management tasks and activities.
  8. Increased Spend Optimization.
  9. Most importantly, life of contract managers, procurement managers, legal professionals becomes easy since all are collaborating using the same tool throughout the organization.

By integrating these elements, contract management software not only streamlines processes but also enhances time management and optimizes resource allocation, ensuring that your organization operates more efficiently and effectively.

How Contract Management Software Integrates with Existing IT Infrastructure for Better Efficiency

Seamless Integration with Current Systems

Contract management software often comes with the capability to integrate smoothly with your existing IT infrastructure. This feature allows for a unified workflow, minimizing disruptions as you transition to or optimize the software. By working cohesively with your current systems, such as CRM or ERP solutions, the contract management software enhances efficiency without requiring extensive overhauls.

API Connectivity

Many modern contract management solutions offer robust API connectivity. This enables seamless communication between different software systems, allowing data to flow freely and processes to be automated. With APIs, you can sync contracts across various platforms, ensuring updates are consistently reflected everywhere in real-time.

Plug-ins and Extensions

Software providers typically offer plug-ins and extensions designed specifically for popular platforms like Microsoft Office or Google Workspace. These tools allow you to manage contracts directly from applications you already use daily. By doing so, teams can remain in their familiar environments while leveraging new functionalities.

Single Sign-On (SSO)

Implementing SSO means that your users can access the contract management software using their existing credentials. This integration not only enhances security but also improves user experience by reducing the number of passwords your team needs to manage, thus speeding up the adoption process.

Data Migration and Compatibility

Efficient contract management solutions often come with data migration tools that facilitate the transfer of existing contract data into the new system, either through native compatibility or by supporting standard data formats like CSV or XML. This ensures that you retain all historical data and maintain continuity without manual re-entry, saving both time and resources.

Cloud and On-Premises Options

Flexibility is key, and many contract management systems offer both cloud-based and on-premises deployment options. This allows businesses to choose the structure that best aligns with their current infrastructure and strategic goals, whether that's leveraging cloud scalability or maintaining on-site control for compliance reasons.

By leveraging these integration capabilities, contract management software can significantly enhance operational efficiency, streamline workflows, and improve the overall management of contracts within your organization.

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