10 CLM Best Practices for Digital Contract Transformation – Part 1
By David Parks
Contracts define your business relationships. That’s why managing them effectively is critical. It doesn’t matter if you’re in procurement, finance, legal, or sales – the effectiveness or ineffectiveness of your organization’s contract lifecycle management (CLM) directly impacts your success
This article is Part 1 of a two-part series that looks at 10 of the top CLM best practices. Each article will cover 5 of the 10 best practices necessary for an organization to truly achieve digital contract transformation (DCX). Digital contract transformation, a key factor in any broader digital transformation strategy, should be a top initiative for every organization that manages contracts.
Download our whitepaper Top 10 Best Practices for Contract Management for a more in-depth read of the complete list.
By implementing these CLM best practices you’ll be on your way to realizing highly effective contract management that enables you to shorten contract cycles, uncover hidden contract risks and opportunities, and automate your overall process to gain a competitive edge in your buy-side and sell-side contracts.
1. Use a cloud-based central repository to track, manage, and secure your contracts.
Many organizations store and track contracts in shared folders and spreadsheets. This makes it hard to gather information in and across your contracts. What if you want to search all your agreements for a specific clause? Or, maybe you want to view all agreements by contract type, but they are only organized by vendor?
Centralizing your agreements in a digital contract repository eliminates these issues and is one of the top CLM best practices. It keeps agreements organized and greatly reduces the risk of them being lost, overlooked, or accessed by the wrong individuals. You can also conduct a full-text search on all your contracts to quickly locate specific terms, clauses, dates, names, etc.
For more on how to deliver data-driven insights, download our Essential Guide to Unlocking the Power of Your Contract Data eBook.
2. Set automated alerts to avoid missed deadlines and obligation.
Missing contract obligations can result in serious financial and legal risks. Imagine missing the termination window of an automatic renewal you wanted to cancel and getting locked in for another year. Or, what about missing a certain condition that’s activated by reaching a contract milestone that would have made you eligible for a greater discount.
Setting up automated alerts and tasks is the perfect way to stay on top of these critical contract deadlines. No more manually tracking dates using filters and custom sorting in spreadsheets or setting reminders in Outlook or Gmail. And by using contract management software, you can tie these alerts to your agreements so as dates change, so do your alerts.
3. Create clause and template libraries to increase contract compliance and speed.
Drafting an agreement can be time-consuming when staff members are unsure if they have the proper and most recent language. This uncertainty is a liability to any company and hard to avoid when using a manual contract management system.
Creating shared and legal-approved clause and template libraries is key to increasing the productivity and compliance of any contract process. Clause and template libraries help assemble documents faster—while eliminating deviations from standard legal language. Documents can be automatically formatted based on the contract type, eliminating the need for any manual clean-up. You can also apply your organization’s business rules around which clauses to use under specific circumstances such as a contract value or local laws.
4. Maintain version control to avoid missing, duplicate, or incorrect information
Keeping track of all the edits throughout contract creation and negotiation is a difficult task when you are managing them manually. Not only do multiple people have a copy of the document at the same time, but they are making simultaneous changes that may or may not be tracked properly.
The key to effectively managing version control is to use a digital contract management solution that tracks changes by user and allows them to simultaneously review, redline, and approve contracts directly in the system. This ensures you avoid missing, duplicating, or using inaccurate data that can result from emailing back and forth and comparing different versions. Any changes, comments, accepts, or rejects are seen instantly which speeds things up.
5. Clearly define workflows for the entire contract lifecycle to automate processes and improve compliance.
There are many steps and stages throughout a contract’s lifecycle. To keep things moving smoothly, it’s important to have well-defined and documented workflows that follow your business rules. This ensures governance and compliance to your existing processes.
One of the keys to contract digital transformation is to create automated contract workflows that eliminate the need to manually track and facilitate each step required to request, draft, review, approve, and execute a contract. Workflows can differ by role, contract type, or by any data within a contract. Automated workflows enable optimized processes not currently possible when being handled manually. Some of the other CLM best practices – automated calendar reminders and email notifications – help accelerate your workflow processes.
Takeaway
The legal and financial risks associated with manual contract management are too great to ignore. By implementing these CLM best practices, you can make significant progress in achieving digital contract transformation for your organization. You’ll be able to improve your overall contract management effectiveness by digitizing all your agreements in a searchable, cloud-based repository, accelerate your contract cycles, avoid errors and missed obligations, and automate and optimize contract workflows.
Stay tuned for Part 2 of this article where I’ll cover 5 more critical CLM best practices. In the meantime, if you’d like to see some of these in action, please schedule a live demo of our intelligent contract management software.