Procurement Glossary & Terminologies
Contract lifecycle management
The process of tracking and managing a contract’s performance, compliance, and other success factors at every point of the document’s lifecycle, from execution to renewal or expiration, is known as contract lifecycle management (CLM). Robust CLM processes enable firms to keep a disciplined approach to managing agreements, reducing risk and improving the likelihood that binding contracts will function as intended. The contract proposal or request triggers the start of the management process, which continues through the provision of the promised good or service and contract renewal.
Stages of Contract Lifecycle Management (CLM)
Every contract management process starts with creating the contract. The contract’s writing and sourcing details are included in this phase. Here, businesses should consider how adopting templates or renegotiating from an earlier document version might save time and reduce errors. Similarly, procurement teams should think about how keeping draughts and templates in one place might simplify copying, editing, and adding new information, such as the supplier’s name, pricing, and product characteristics, to agreements.
Contract negotiation: Contracts may need to be negotiated with counterparties after they are created but before they are signed (i.e., the companies with whom you sign contracts). Both sides’ legal teams must be able to keep track of document modifications, comments, and versions during contract talks.
Contract Approval: As businesses grow, contracts frequently need approval from functional and regional divisions for various contract components. The manual method would be to review each contract, determine which departments need to approve it, and then distribute it to all parties for approval. Tools for managing the contract lifecycle automate and monitor the review process.
Contract execution: Contract execution has evolved into a very mobile and digital process. Software for managing the lifecycle of contracts should include pre-built connections with electronic signature services like Adobe Sign. These secure connectors help update the document and data back to the central repository throughout the subsequent execution by orchestrating the signing process in accordance with user-defined procedures. Incoming signed papers should be validated using QR codes in manual-signature workflows.
Contract Performance: Contract administration after execution has traditionally been outside the scope of digital solutions. This is due to the contract language, which makes it necessary for human managers to carry out contract actions. Nowadays, users of contract lifecycle management software can receive insightful performance data on all contract-related aspects, from legal to financial to sales and procurement. This is no longer the case, though. Software for managing the lifecycle of contracts contains a fully-featured analytics module that provides insights on data like cycle times, deviations, savings, risks, statistics on contract expiry and renewal, and procurement and sales metrics on income and cost.
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